Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. Home ownership is the best “accidental investment” most people ever make. But, when done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. Equity buildup, value appreciation, and tax benefits stand out as solid financial reasons to buy a home.
Base your decision to buy on facts, not fears.
- If you are paying rent, you very likely can afford to buy.
- There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run.
- The lack of a substantial down payment doesn’t prevent you from making your first home purchase.
- A less-than-perfect credit score won’t necessarily stop you from buying a home.
- The best way to get closer to buying your ultimate dream home is to buy your first home now.
- Buying a home doesn’t have to be complicated – many professionals will help you along the way.
2. Hire your agent.
The typical real estate transaction involves at least two dozen separate individuals – insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, bankers, title researchers, and a number of other individuals whose actions and decisions have to be orchestrated in order to perform in harmony and get a home sale closed. Your real estate agent is responsible to expertly coordinate all the professionals involved in your home purchase and to act as the advocate for you and your interests throughout.
A buyer’s real estate agent:
- educates you about your market;
- analyzes your wants and needs;
- guides you to homes that fit your criteria;
- coordinates the work of other needed professionals;
- negotiates on your behalf;
- checks and double-checks paperwork and deadlines;
- and solves any problems that may arise.
3. Secure financing.
While you may find the thought of home ownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment.
From start to finish, you will follow a six-step, easy-to-understand process to securing the financing for your first home.
To finance a home:
- choose a loan officer (or mortgage specialist);
- make a loan application and get pre-approved;
- determine what you want to pay and select a loan option;
- submit to the lender an accepted purchase offer contract;
- get an appraisal and title commitment;
- and obtain funding at closing.
4. Find your home.
You may think that shopping for homes starts with jumping in the car and driving all over town. And it’s true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long. If weeks go by without finding what you’re looking for, the fun can fade pretty fast. Looking for your home begins with carefully assessing your values, wants, and needs, both for the short and long terms.
Ask yourself these questions:
- What do I want my home to be close to?
- How much space do I need and why?
- Which is more critical: location or size?
- Would I be interested in a fixer-upper?
- How important is home value appreciation?
- Is neighborhood stability a priority?
- Would I be interested in a condo?
- Would I be interested in new home construction?
- What features and amenities do I want? Which do I really need?
5. Make an offer.
When searching for your dream home, you were just that – a dreamer. Now that you’re writing an offer, you need to be a businessperson. You need to approach this process with a cool head and a realistic perspective of your market. price, terms, and contingencies (or “conditions” in Canada) are the three basic components of an offer.
Price: The right price to offer must fairly reflect the true market value of the home you want to buy. Your agent’s market research will guide this decision.
Terms: These are the other financial and timing factors that will be included in the offer.
The basic categories in a real estate offer are:
- A schedule of events that has to happen before closing
- Conveyances, or the items that stay with the house when the sellers leave
- The real estate commission or fee, for both the agent who works with the seller and the agent(s) who work with the buyer
- It’s standard for buyers to pay their closing costs, but if you want to roll the costs into the loan, you need to write that into the contract. And sometimes the seller will give you a credit (sometimes called a seller subsidy) at closing to help cover some of your costs.
- The home warranty covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this, or you can purchase a home warranty yourself.
- The earnest money deposit protects the sellers from the possibility of your unexpectedly pulling out of the deal and makes a statement about the seriousness of your offer.
6. Perform due diligence.
Unlike most major purchases, once you buy a home, you can’t return it if something breaks or doesn’t quite work like it’s supposed to. That’s why homeowners’ insurance and property inspections are so important.
A homeowners’ insurance policy protects you:
- against loss or damage to the property itself;
- and liability in case someone sustains an injury while on your property.
The property inspection should expose the secret issues a home might hide so you know exactly what you’re getting into before you sign your closing papers.
- Your major concern is structural damage.
- Don’t sweat the small stuff. Things that are easily fixed can be overlooked.
- If you have a big problem show up in your inspection report, you should bring in a specialist. If the worst-case scenario turns out to be true, you might want to walk away from the purchase.
The final stage of the home buying process is the lender’s confirmation of the home’s worth and legal statue, and your continued credit-worthiness. This entails a survey, appraisal, title search, and a final check of your credit and finances. Your agent will keep you posted on how each if progressing, but your work is pretty much done.
You just have a few preclosing responsibilities:
- Stay in control of your finances.
- Return all phone calls and paperwork promptly.
- Communicate with your agent at least once a week.
- Several days before closing, confirm with your agent that all your documentation is in place and in order.
- Obtain certified funds for closing.
- Conduct a final walk-through.
On closing day, with the guidance of a settlement agent and your agent, you’ll sign documents that do the following:
- Finalize your mortgage.
- Pay the seller.
- Pay your closing costs.
- Transfer the title from the seller to you.
- Make arrangements to legally record the transaction as a public record.
8. Protect your investment.
Throughout the course of your home-buying experience, you’ve probably spent a lot of time with your real estate agent and you’ve gotten to know each other fairly well. Don’t throw all that trust and rapport out the window just because the deal has closed. In fact, your agent wants you to keep in touch.
Even after you close on your house, you agent can still help you:
- handle your first tax return as a home owner;
- find contractors to help with home maintenance or remodeling;
- help your friends find homes;
- and keep track of your home’s current market value.
Home maintenance falls into two categories:
- Keep it clean: Perform routine maintenance on your home’s systems, depending on their age and style.
- Keep an eye on it: Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.