First-Time Home Buyers Guide
How I only pay $640 a month for my home!
with taxes, homeowners insurance and flood insurance!
As a realtor, it's my job to get my client the BEST DEAL POSSIBLE and work hard for you.
Some realtors want to make as much money as possible and will push their clients into homes they "can't afford".
I enjoying working with first-time homebuyers and helping them save as much money as possible. Even if it means less money for me.
"Seeing a first-time home buyer establish themselves, not only in a new home, but in a financially stable position, is what makes my job worth doing." - Chelsea O'Keefe, The Florida Real Estate Girl
Below I will share the exact steps I took to purchase MY first home, and the steps many of my happy first-time home buyers took as well.
Step 1: Find an agent
What is a buyer's agent?
A buyer’s agent will guide you through the home-buying transaction and be at your disposal for any questions or concerns.
What does a buyers agent do for me?
- Find the right property
- Negotiate the offer
- Recommend other professionals
- Help overcome setbacks
DO I NEED TO PAY A BUYERS AGENT?
A buyers agents works for you and is paid by the sellers agents. So you get all this help for FREE!
Step 2: Prep for Approval
One of the first items you must obtain in order to purchase a home is a mortgage pre-approval letter. You will acquire this letter through a bank or private lender (see step 3 for more info on lenders). This letter shows how much house you can afford and it also shows sellers you have the ability to purchase their home.
Two of the biggest factors in obtaining a pre-approval letter is having a good credit score (650+) and low debt-to-income ratio, also known as DTI (the debt-to-income ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments).
Apps to download
Step 3: Find the perfect Loan
The bank I used for my First-time Home Buyer loan was Suncoast Credit Union, and here's why...
1: Low interest rates (3% range)
Why do I want a low interest rate?
The interest rate on the loan is how much money you have to pay the lender for giving you a loan. We always want that number to be as low as possible. It is also the number that will affect your monthly payment the most. So, lower the rate, the less money you pay!
2: Only 3% down required
Why is 3% a good number for first-time home buyers?
Most lenders require 5% of the total cost of the loan to be paid up front. That means if you want to buy a home for $200,000, you will need to come up with $10,000. A lot of first-time home buyers will find it hard to come up $10,000, not to mention you will also have to pay closing costs (find out how you don't have to pay closing costs in step 4). Now, I am sure you are asking, well why wouldn't 0% down be the best, here is why. The more money you put down, the less your monthly payment is and you will pay less interest on your loan in the long run. I would always suggest to put at least 3% down. If you can't do it, either wait and save more money, or look for a home in a lower price range. You never want to over extend yourself.
3: No private mortgage insurance (PMI)
What is private mortgage insurance (PMI) and why would I need it?
While most first-time home buyer loan require a lower down payment, it usually results in having to pay for private mortgage insurance. Mortgage insurance protects the lender if you can’t repay your mortgage. It is charged to your monthly bill and is typically between $70-$100 extra a month. The rule of thumb is that if you put down 20%, then you wont have PMI. If you can't come up with 20% in the beginning, then once you have payed 20% of your loans PRINCIPLE not interest, your mortgage insurance will go away.
FHA loans used to be a great option for first time home buyers because of it low interest rate and 0% down payment. BUT even when you pay off the 20% of your loans principle, you still have to pay PMI... FOREVER!
So you just saved close to $100 a month!
4: Closing cost assistance (If you qualify)
Suncoast will pay up to $1000 in eligible borrower closing costs.
What if I do not qualify and can't afford to pay all my closing costs?
When you put an offer on a home, you can request the seller pay your closing costs. Sellers will pay buyer closing costs for a few reasons:
1. The buyer has made an offer that exceeds the sellers expectations, so the seller is willing to accept a small loss.
2. The sellers home has been on the market for a longer period of time than normal, so they are more open to negotiating closing cost coverage.
3. The seller needs to sell their home fast, so they are more open to closing cost negotiations.
Step 4: Find the perfect home, at the perfect price
When it comes to searching for a home, it is important to have already completed steps 1-3 BEFORE you start looking.
If you do not, you may find yourself looking at homes you cannot afford. You could also find yourself falling in love with a home that you may be able to afford, but in order to make a strong competitive offer, you will need to have an pre-approval letter in hand.
Why does a seller want to see my pre-approval letter? A pre-approval letter shows the seller you are able to actually purchase their house.We would like to believe everyone is honest and truthful, but in some situations, that is not the case.
The MLS Advantage
MLS (Multiple Listing Service), is a home searching program that all realtors use to help their clients find the perfect home. It has highly specific search options that allows agents to find your dream home in just one click. So having a realtor on your side is important when it comes to saving time in your home search. It also shows newly listed homes faster than Zillow and Realtor.com.
Once we find the perfect home, it's time to make the perfect offer!
Step 5: Making the offer
Once we find the home you love, we need to make an offer the seller will love. Here are the most important factors in making and strong offer:
1. Price- Not too high, not too low, but juuuust right. Your agent will recommend a price based on a few factors:
- Current Market Value - Your agent will run a market analysis on the home, comparing the list price to other similar homes that have sold in the area.
- Active Days on the Market- If the home has been on the market for a longer time period price becomes more negotiable.
- Realtor-to-Realtor Information- Your realtor will speak with the sellers agent and acquire inside information on the sellers wants and needs for an offer.
2. Escrow- When you put an offer in on a home, you will make an escrow deposit. An escrow deposit is put into the title companies escrow account and is considered "Good Faith" that you will purchase the home, as long as there are no major issues. Putting a larger amount of money in escrow shows that you are serious about buying their home.
3. Timeline- Your offer will contain a closing date that you select. A typical closing is between 30-45 days. If for some reason you need more time to close on your home, your offer is potentially not as strong as someone else's.
4. Contingencies- All offers contain inspection, title, appraisal and financing contingencies that protect the buyer from making a bad investment. Some buyers will include additional contingencies within their offer, typically costing the seller time, money or both. Too many contingencies make your offer "less appealing" to a seller.
5. Financing- While most first-time home buyers will not have $200,000 in cash lying around to buy a house, it is good to realize that there are other buyers out there that do. Cash buyers will always have a leg up on a buyer with a loan, because cash buyers do not have to jump through as many hoops in order to purchase a sellers home. You can however stand out from the crowd by having a conventional loan compared to a FHA loan (see more about FHA loans here). Conventional loans do not require as much as FHA loans, so they are more appealing to a seller. (Suncoast loans are conventional loans)
I will make sure that your offer is as strong as possible to give you the best chance of getting your dream home!
Step 6: Inspections
When your offer has been accepted you will have time to make inspections on the home. You will need a home inspections (including a 4 point), a WDO inspection (Wood Destroying Organisms) and possibly a wind-mitigation report.
A typical inspection takes two to three hours depending on size and layout. During this time, the house is examined from the ground up and from the outside in.
What Does a Home Inspection Cover?
- Attic, including condition of insulation
- Basement or crawl space
- Ceilings and interior walls (general condition)
- Doors and door frames (general condition)
- Floors (general condition)
- Heating and cooling systems
- Interior electrical systems, including wiring
- Interior plumbing systems
- Structure, interior and exterior
- Windows (general condition)
Why a Home Inspection Matters
When you are serious about a specific home for sale, an inspection can help give you the confidence you need to buy it. A home inspection also gives you knowledge about any potential home repairs. Armed with your report, you can either negotiate needed repairs as part of the sale, or plan how to budget to make the repairs yourself after close. And remember, you can and should attend a home inspection. Buying a home is potentially the biggest investment of your life. The inspection step is your opportunity to watch and learn about your purchase first-hand. Findings should be provided in the form of a comprehensive inspection report which includes an objective evaluation of the condition the home, clearly outlining any existing defects and potential problems.
How much does a home inspection cost? Between $200-$500 (it depends on the size of the home and different reports that may be required)
A Wood Destroying Organism (WDO) inspection informs sellers, prospective buyers and lenders about any termite infestations and damage to the home due to wood pests and wood rot.
Why do I need an inspection for wood insects? The soil, humidity and temperatures of Florida combine to make it the perfect environment for termites and wood rot to thrive. The damage they cause is not always visible on the surface. Also, a Lender may require a “Clean WDO” as a condition of a loan.
What does the WDO Inspection report? The inspection includes a check for termites, other wood destroying insects, and wood rot.
How much does a WDO inspection cost? Typically between $50-$100. I take care of the costs of the WDO for all of my clients. My gift to you!
Step 7: Surveys and Appraisals
What is a Survey?
A property survey begins with defining the boundaries of a plot of land. This clarifies the size of the property, and where the land begins and ends.
Why do I need a survey?
Here are a few reasons a land survey can help prevent problems:
- Possible encroachments on your potential property can become bigger issues down the road. For example, a neighbor’s fence, wall or even a building could be on the property.
- A property corner could be missing.This would be an issue if you ever plan on putting up a fence. You will need to know exactly where your property line is located. If you don’t, you could possibly build on your neighbor’s property and end up with the financial burden of having to remove and rebuild the fence in the correct location.
- Possible property line or property corner disputes. A survey can reveal if there’s any property line or property corner disputes with the property.
- A land survey will help protect your investment. A survey can reveal the exact property dimensions, size and location of the home on the property, as well as any other improvements on the land, such as a driveway that may be crossing a property line.
- It is also required by most title companies and lenders.
How much does a survey cost? Between $250-$500 (paid at closing)
What is an Appraisal
A home appraisal is an unbiased estimate of the true (or fair market) value of what a home is worth. All lenders order an appraisal during the mortgage loan process so that there is an objective way to assess the home’s market value and ensure that the amount of money requested by the borrower is appropriate. The appraisal can include recent sales information for similar properties, the current condition of the property, and the location of the property, i.e., insight as to how the neighborhood impacts the property’s value.
Your home sale is contingent on the home appraising at or above the sales price. If it comes in to low, the buyer and seller will renegotiate, meaning they may have to come down and/or you may have to come up in price. A realtor will help you navigate this situation if it arises.
How much does an appraisal cost? Around $500 (Paid at closing)
Step 8: Closing Time!
WE MADE IT!
The final steps to being a homeowner are as followed:
- Have the downpayment and any other costs wired from your bank to the title company. (Instructions will be given and it can be done over the phone or in person)
- Call the utility companies to get power and water ready to be switched over and turned on. Your agent will get you the company info
- Final walk through. You and your agent will do one final walk through on the day of closing to insure everything is up to par with your new home. Your agent will schedule this.
- Signatures. After the walk through we will go straight to the title company and sign all the documents and...
I will hand you the keys to your brand new home!