First Time Home Buyer’s Guide
For most of us, buying a home is easily the most expensive decision we will make in our lifetime. Although buying a home is a huge commitment, it does not always have to be hair-pulling, gut-wrenching stressful. In fact, buying a home should be looked at as an exciting, enjoyable and life-altering journey in which we all should look forward to. Just like with many other important decisions we make, being prepared and having a good plan set in place can make this process much easier and enjoyable. Let’s discuss the key steps involved in the home-buying process and establish the key action plans so that you can be fully prepared and excited to start your home search.
Step 1) Decide if you are ready to buy a home
Although being a homeowner is great for many, depending on your situation, it is not for everyone. Your financial situation, your lifestyle and your short term plans on where you think you’d like to live, all should be considered when deciding if you are in the right position to be a homeowner. Buying a home is a huge financial obligation. You will need to have a sizable amount of money to put down for a down-payment and to cover closing costs (we will discuss in further detail in step 2). You also need to have good credit in order to qualify for a loan to purchase a home as well as a good paying job. When deciding whether or not to buy you should find a reputable lender and loan officer who can walk you through the financial aspects of your home purchase.
Step 2) Find a reputable lender and loan officer
Unless your one of the few lucky people that have enough money to buy a home all with cash, you are going to have to take out a loan to pay for your home. With that said, you will need to find a reputable, honest and hardworking lender and loan officer that will assist you with your loan process. It is strongly recommended that you get pre-approved for your loan before you even start your home search. Why? Well, a couple reasons really: It is crucial to know your buying power so that your expectations are set straight. If you start looking for a $550,000 house during your home search, only later to find out you only qualify for a $450,000 purchase you can expect that your criteria will have to change in some aspect and compromises will need to be made. Also, a seller will not accept an offer without a pre-approval. It seems it happens all too often where the house of your dreams becomes available when you least expect it and are least prepared. If a home is priced right and in demand it can very will receive an offer in a matter of a day or so. Getting a pre-approval that quick is not always possible so it pays to be prepared and get a pre-approval before you even start your home search.
3) Find a Reputable Real Estate Agent
Good realtors can be an invaluable asset to one’s home-buying process. A realtor can be the key difference in having your home buying experience be remembered as a fun and enjoyable endeavor or as a bad nightmare that you desire to forget. It is important to find a good realtor that will be resourceful and one who will best advocate and represent you during the process. They should be someone who has local real estate experience so you can get more accurate information of the area you think you may be looking to move to. Some qualities and characteristics a good realtor typically posses is one who is a punctual, good communicator, organized, strong negotiator, honest, loyal, hardworking and who is flexible with their availability. It is important to gain trust with your realtor as they should tell you their honest opinion, no matter how good or bad the information may be. They should be able to guide you through the entire process and educate you on the market so you are best prepared.
4) Figure out your criteria in your home search
We would all like to have an unlimited amount of money so we can have someone build our dream home and be ready to move in next week but unfortunately this is not reality. Many of us have different reasons why we are considering to move and therefore have a different criteria from one another. Maybe you are moving because you have young children that will be beginning school, or maybe your job is relocating you to the area and you want to be within close proximity, or maybe you just adopted a child and need an extra bedroom and more space. Whatever the reason you should write down your reasons for moving which will make it easier for you to then also write down your list containing your criteria. You should list them down in order of your priorities so you can easily identify the more important aspects of what you would like in your desired home. Go over your criteria with your realtor so that they can then go over what options are available based on different areas.
5) Place an offer on your next home!
Before placing an offer on the home you will need to get an understanding on an estimated market value of the property. Your realtor should send you “comparables”. Comparables are properties that have recently sold within the last 6 months that are most similar to the property you plan to purchase. These are properties that are most similar in size, style, condition, etc. This will give you a much better idea so you can compare of what other similar properties have recently sold for in the immediate area. Based of this information you can be much better prepared to calculate and decide on a purchase price you would like to offer. Once you know the price you would like to offer the sellers you should then be ready to prepare your offer so that you then can submit to the sellers for review. You realtor will go over all the specific documents and addendum that may be appropriate including the Standard NJ Sales Contract which will be needed in order to officially submit an offer in writing.
6) Congrats, your offer was accepted! Now what?
Once attorney review is concluded both parties (buyer and seller) enter an “under Contract” phase. During this phase the parties are in a binding contract and typically no other offers are allowed to be negotiated. Most of the time the buyer typically would now hire a home inspector to preform a general home inspection on the home he/she is buying. The home inspector will perform a full inspection of the property you plan to purchase. This is a very crucial part of the home buying process so it is important to hire a home inspector that is knowledgeable and reputable. The inspector will go through each room of the house and point out any “defects” that are found. It is important to note that although inspectors are licensed professionals they are not specialist in each area. If there is an area of concern noted during the inspection he/she may recommend you hire a licensed specialist to further investigate or address the area of concern. Some defects that may be considered major or safety concerns may be negotiated to have the seller repair or provide a credit at closing that would cover the cost of the repair. However, this would need to be addressed case-by-case. Your realtor and attorney will be able to guide you through the inspection negotiations.
7) Appraisal, Survey and Title Search
Your lender will order an appraisal on the home you plan to purchase. A licensed appraisal will physically walk through through the property and compare the home with other similar homes that recently just sold. They will use that information to determine the market value of the home you plan to purchase. A survey refers to the process of locating and measuring a property’s boundary lines to determine the exact amount of land that a homeowner owns. A survey will also locate and measure any easements or encroachments on a property, which will be noted on a home’s chain of title. Buyers have a property surveyed after making an offer to make sure any issues with easements or encroachments are documented and resolved before closing. The title company will conduct what is called a title search of the property. During the title search, the title company looks for any outstanding mortgages, liens, judgments or unpaid taxes associated with the property, as well as any restrictions, easements, leases or other issues that might impact ownership.
8) Walk through and closing
Congratulations, you made it to closing day! Before closing you should call the utility companies of the property to have the service changed in your name. Also, the day of the closing you should walk through the property to make sure the property is in “broom swept” condition and that all utilities that were functioning during the inspection and/or fixed after inspection are also in working order. Once the walk through is complete you can then proceed to the closing. You will be instructed to bring whatever is required for the closing which may include but not limited to: a formal government ID, certified check owed and due at closing. Your attorney and settlement company will go over all the appropriate documents for your review and signature. There are many documents that will need to be signed so be prepared. Once all necessary documents are reviewed and signed by both parties and funds are received by the settlement agent then, congrats, you're officially a homeowner!