Buying your first house can be a daunting task. How do you know if you’re ready? Where do you start? Who do you work with? Are there things you need to think about like, “What’s my credit like?” and “Does my credit score make a difference?” What kinds of programs and financing are there out there for First Time Home Buyers? How much money do you need to get started?
All great questions and things to consider when you are just starting out and thinking about buying a home in NH. First Time Home Buyers and almost every other home buyer benefits from the experience of a Buyer’s Agent. Why you ask? Because its a Buyer’s Agents job to guide homebuyers through the process of buying a home. Buyer’s Agents can make this process so much easier for any buyer. Not only do they educate you as to how to buy a home, but they help you save money along the way.
Working with many first time home buyers and teaching First Time Home Buyers Seminars for NeighborWorks and New Hampshire Housing and Finance Authority has taught me what First Time Home Buyers need to know and what kinds of questions they have as they go thru the process of buying their first, second or even third homes.
First, find someone you like and trust and meet with them to discuss the process. Where do you start? Ask friends who they worked with when they bought their homes. Did they like working with that agent? Did they trust the agent? Did they appreciate the information the agent shared with them throughout the process? Would they work with that agent again? If the answers are positive, then call that agent. If not, keep asking other friends and family members. Or attend a class like NeighborWorks in Manchester or Nashua. Talk to the agent that presents at the seminar. Keep talking to people till you find someone that you trust to look out for you, and consider your needs and requirements.
Once you find an agent you trust and want to work with ask your agent for recommendations as to whom they trust and work with for financing. Buyer’s agents and lenders can lead you through the process of getting preapproved. Buyers feel more comfortable when they work with a lender that can guide them through the process of getting preapproved. Don’t be afraid to ask lots of questions. That’s what lenders and buyers agents are there for. We do this all the time, but you don’t. So ask away. It’s how you learn. If the lenders don’t answer your questions, find another one. Just because you started with one doesn’t mean you have to stay with that lender. You can always ask your agent for another lender recommendation.
What if you want to buy a house but you know that you’ve had issues with credit in the past? Don’t let that stop you. Lenders work with credit counseling companies designed to get you ready to qualify for a mortgage. Many lenders even pay for the credit companies to work with you to improve your credit, often more quickly than you could do it on your own. So ask your lender about credit counseling companies and how they can get you ready to buy sooner.
When you are ready to meet with a lender you will need to provide them with certain documentation. Many lenders require similar documents. So gather together, 2 years of W2’s, 2 months of bank/financial statements (including any 401k’s or IRAs), 1-2 months of pay stubs, a copy of your driver’s license, and any proof of other income you might receive like SS, disability or a pension. Anyone that might want to finance with FHA financing must prove a SS card too. Veteran’s using VA loans need to proved a DD214 Form. Finally if your self-employed you will need 2 years of tax returns. It’s a lot to get together. But it will save you time and energy to get preapproved first.
Once you meet with your lender, they will be able to educate you as to what kinds of loans are out there that you might qualify for. They will be able to explain in more detail what the differences are in Conventional Loans, FHA loans, USDA or Rural Development loans. They can explain NH Housing programs & grants that are available. They will be able to walk you through the process of a VA loan. They will even be able to do a Cash Flow for you once you find that perfect house. That will show you how much you will need for closing costs and for a down payment. It will also tell you what your monthly payment will be.
So you’ve got you financing in order. What’s next? Talk with your agent about what you think you might be interested in. What kind of house or condo are you looking for? Where do you want to live? Are schools important to you ? Do you want to consider short sales and bank owned properties? What are the benefits or pitfalls of bank owned and short sales? What kind of financing is available for those properties?
Once you’ve sat down and discussed what you are looking for ask your agent to send you properties that meet your requirements. There are many programs that allow buyer’s agents to do that automatically on a daily basis.
When you find properties that you like and think can work for you, let your agent know you’d like to see them. She’ll schedule a time that works for everyone. Bring a camera, and paper and pens to write notes about the houses you see. You see so many that it can be very confusing, especially when just starting out. Your agent can point out issues with houses that might disqualify them from being financed the way you want to finance.
What happens next? What do you do when you find the house you love? You and your Buyer’s Agent will work to develop an appropriate offer. You will need a letter of preapproval to accompany your offer to the listing agent along with a deposit check. Then your Buyer’s Agent will negotiate with the Listing Agent and work to come to agreement so that both parties buyers and sellers are satisfied with the offer. Once you have an Effective Purchase and Sales your lender will want a copy of the listing and sales agreement.
Next comes the home inspection. Your agent will recommend someone to do your home inspection. Even veteran home buyers should have a home inspection to prevent you from investing in a home that needs more work than you are willing or able to do. Home inspectors will inspect every system in your potential house such as the heat, electrical, roof, water, septic, siding, decks and more. From the basement to the attic and roof. From the windows to the siding and foundation, the home inspector will inspect everything that is readily visible and will provide you with a written report about the house and it’s systems.
From there your Buyer’s Agent and you can choose to continue with the purchase or ask for some repairs to be made to the house. At the same time as your home inspection you should be contacting an insurance agent to make sure you can get insurance on your new home. You also need to check documents like the current deed and condo documents for easements and covenants. Your agent can assist with this.
Once the home inspection is completed satisfactorily, you will need to ask your lender to order an appraisal, one of the last steps in the process. The appraisal is different from the home inspection. The appraiser does look for safety issues, but to a lesser degree than the home inspector. Their primary responsibility is to the lender to insure that the house is both safe and more importantly worth the money that you want to borrow for a mortgage. Once the appraisal is done and Underwriting oks the loan, your lender will give the Clear To Close.
Yay! You’ve made it through the process and are ready to close on your new home. The Title Company which does that actual closing process will contact you and let you know how to proceed and will give you a HUD document which tells what you’ve prepaid, what you need to pay and what the seller’s paying. Your Buyer’s Agent can help you read through the HUD. Then you’re ready to close on your brand new home.
Wasn’t that easy? Not always. But a great Buyer’s Agent can make it easier to understand and negotiate through.
Now to recap.
- Find a Great Buyer’s Agent that you can trust to guide you and educate you through the home buying process.
- Work with a Great Lender that will help you with all your financial questions and any credit issues/concerns.
- Meet with your Buyer’s Agent to discuss the process and the kind of houses or condos you are interested in.
- Schedule showings with the agent. Bring your paper, pens and camera with you to your showings
- Make an offer based on recent home sales. Everyone wants a deal, including the buyer and seller. Make your offer one everyone can live with.
- Have a home inspection and negotiate any essential repairs. Remember asking for everything can kill the deal. Every home has some more minor repairs, especially if you’re not buying new.
- Order the appraisal. Check insurances. Review covenants, easements on the deed.
- Work with the lender, title company and your agent for the CLEAR to CLOSE. Your on your way to your brand new home.
- Congrats you’ve done it. Now go out and buy some furniture and move in. ENJOY!