Steps to Buying a House for the First Time

The steps to buying a house for the first time might seem complicated—particularly if you’re a home buyer trying to purchase real estate with no prior experience. Between down payments, credit scores, mortgage rates (both fixed-rate and adjustable-rate), property taxes, interest rates, and closing the deal, it’s easy to feel overwhelmed. There’s so much at stake with a first home!

Still, if you familiarize yourself with what it takes to buy your first home beforehand, it can help you navigate the real estate market with ease. So let’s get started!

Ready to buy a house? Follow these steps to buying a house for the first time

In this step-by-step guide, you’ll learn what it takes to buy your first home, from beginning to end. Whether it’s your first time in the real estate market or you’re an experienced homeowner who wants to brush up on your skills, this is everything you need to know about how to buy a house.

Step 1: Start saving a down payment

One of the most important steps to buying a house for the first time? Figure out your finances. Buying a new home (particularly for the first time) requires a mortgage, where a lender fronts you the money and you pay it back over time. However, in order to get a mortgage, you’ll need some sort of down payment.

So how much do you need?

Ideally a down payment on a mortgage should be 20% of the home’s price to avoid added fees, but if you don’t have that much of a down payment, don’t worry. A mortgage down payment can be as low as 10%, 5%, or even 0% for certain types of mortgages (e.g., VA loans or a USDA loan).

If saving up a downpayment is a real challenge, find out everything you can about government programs. A HUD home is a property owned by the U.S. Department of Housing and Urban Development. They require lower down payments for eligible participants, and often sell at below market prices.

Step 2: Check your credit score

Did you forget to pay off a couple of credit cards? Unfortunately, it’ll affect your credit score.

In addition to having a down payment, a first-time home buyer will need a decent credit score. This three-digit number is a numerical summary of your credit report, a detailed document outlining how well you’ve paid off past debts like for credit cards and college student loans.

A lender will check your score and report in order to estimate the odds that you will deliver your monthly payment, too.

In turn, the lender will use this info to decide whether or not to loan you money, as well as how much and at what interest rate. If a lender sees some late payments on your credit cards or other blemishes in your credit report, this can lower your odds of getting a loan with a great interest rate, or perhaps even jeopardize your chances of getting any loan at all.

So it’s essential to know your credit score, and take steps with those overextended credit cards and high-interest debts to bring your credit score up to snuff.

Step 3: Get pre-approved for a mortgage

Another one of the most important first-time home buyer steps? Seeking pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies.

Each mortgage lender will scrutinize your financial background—such as your debt-to-income ratio and assets—and use this info to determine whether to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range. And that’s good, because a purchase price that’s beyond your financial reach will make you sweat your mortgage payment and puts you at risk of defaulting on your loan.

As a buyer, just keep in mind that mortgage pre-approval is different from mortgage pre-qualification. Pre-qualify, and you’re undergoing a much simpler process that can give you a ballpark figure of what you can afford to borrow, but with no promise from the lender. Getting pre-approved is more of a pain since you’ll have to provide tons of paperwork, but it’s worth the trouble since it guarantees you’re creditworthy and can truly buy a home.

Step 4: Find a real estate agent

Want a trusty home-buying guide by your side? Most first-timers will want a great real estate agent—specifically a buyer’s agent, who will help them find the right houses, negotiate a great real estate deal, and explain all of the nuances of home buying along the way.

The best part? The agent’s services are free to first-time home buyers (because the seller pays the sales commission).

Note: There is a subtle difference between a real estate agent and a Realtor^®; the latter is a member of the National Association of Realtors® and adheres to a code of ethics. Consider having a Realtor additional insurance that you’ll get the help you need to ace the process.

Step 5: Go shop for a home!

This is the fun part! As a home buyer, you can peruse thousands of real estate listings on sites such as realtor.com, then ask your agent to set up appointments to see your favorites in person.

Since the sheer number of homes can become overwhelming, it’s best to separate your must-haves from those features you’d like, but don’t really need. Do you really want a new home or do you prefer a fixer-upper? Make a list of your wants and needs to get started, and whittle down your options.

Step 6: Make an offer

Found your dream home? Then it’s time to make an offer to the seller. Be prepared to write a check to the seller—it’s called “earnest money,” and it’s different than the deposit.

Here’s more on how to make an offer on a house that a seller can’t refuse.

Step 7: Get a home inspection

A home inspection is where you hire a home inspector to check out the house from top to bottom to determine if there are any problems with it that might make you think twice about moving forward. Think: termites, faulty foundation, mold, asbestos, etc. Sure, a lot can go wrong, but rest assured that most problems are fixable.

Step 8: Get a home appraisal

Even if you got pre-approved for your home loan, your lender will want to conduct a home appraisal. This is where the lender checks out the house to make sure it’s a good investment. It’s similar to a home inspection, but for your lender.

Step 9: Head to closing

Closing, which in different parts of the country is also known as settlement or escrow, brings together a variety of parties who are part of the real estate transaction, including the buyer, seller, mortgage representative, and others.

Closing is the day you officially get the keys to your new home—and pay all the various parties involved. That will include your down payment for your loan, plus closing costs, the extra fees you pay to process your loan.

Closing costs can be sizable, averaging anywhere from 2% to 7% of the home price.

Step 10: Move in!

Done with closing? Got your loan? Congratulations, you’ve officially graduated from a home buyer to a homeowner! See, the long-term process of buying a first home wasn’t so scary after all, right? Now it’s time to kick back and enjoy the many benefits of becoming a homeowner.

Experts in Residential Real Estate in Orlando

If you are BUYING or SELLING real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Homebuying ‘Rules’ You Should Break

It’s been a mad, mad world the past few years, and that very much includes the real estate market. But the times, they are a changin’—yet again. And the good news for potential homebuyers is that the “anything goes” rules of the COVID-19 pandemic housing market frenzy are lifting.

While we have yet to reach homeostasis—where buyers and sellers have equal power—there are signs of a more balanced real estate exchange.

In fact, even with rising interest rates and inflation, a recent survey by fintech mortgage lender Lower found that nearly 6 in 10 potential homebuyers (56%) felt that right now was the right time to buy a house.

How is that possible? While higher interest rates mean some potential buyers will find themselves unable to qualify for a mortgage, this cooling demand benefits the buyers who are still out there, giving them m

ore options—and a little more negotiating power.

Granted, exactly how much power buyers have will vary by location—certain stubbornly hot markets will remain a struggle. But the prevailing winds are blowing a bit more in favor of buyers these days. As such, many of the crazy rules you were hearing (and likely following) during the past two years of real estate pandemonium no longer apply.

To help you reset for this new world, here are some of the pandemic-era real estate rules that are now OK to break.

1. ‘If you love a house, you have to make an offer immediately’

During the pandemic, if you hesitated on a house, someone else would very well scoop it up on the spot. Today, however, there may be a little more time to think before you make an offer.

“In the past couple of years, you’d need to put an offer in within hours of seeing a home,” says Elizabeth Sugar Boese. “And while inventory is still low, there are a lot more homes available on the market than throughout the pandemic since 2020. This has provided buyers an opportunity to actually shop around.”

Realtor.com® Chief Economist Danielle Hale agrees, saying that homes are taking longer to sell this year than last. (Listings currently linger 50 days—7 days longer than a year earlier.)

“In general, you likely have more time to make an offer, although that’s certainly not a guarantee,” says Hale. “If you’re on the fence about a home or its asking price doesn’t quite fit your budget, you might want to keep an eye on it, and if it doesn’t sell right away, you may have some room to negotiate with the seller.”

In fact, Boese recently worked with clients who fell in love with a home.

“We wanted to put an offer in right away, but also wanted to buy it for less than list price—so we waited a month,” says Boese.

After a month, it was still on the market, which meant her buyers could also break another cardinal pandemic rule.

2. ‘Prepare to pay way over the asking price’

Boese’s clients were eyeing a home listed for $1,100,000—though their budget was $1,000,000. While lowballing by $100,000 would have been laughable a year earlier, Boese knew it could work today, so they gave it a try.

“We explained that the market had shifted, the home needed a lot of updates, and we were willing to do the renovations but also had an eye on several other properties,” says Boese. “The sellers accepted without any counteroffer, and it appraised for the list price. Instant $100,000 equity.”

This story proves that buyers no longer need to pay over the list price to get the house. In fact, Realtor.com data shows that the share of homes with price cuts has reached nearly 20% today, up from 11% a year earlier.

“With the housing market shifting, it’s really not necessary to go all in on a home in an effort to win the bid, unless it’s in an area that is still hot,” says Jason Gelios, author of “Think Like a Realtor.” “In fact, currently I have more buyers offering less than the asking price because there aren’t many

buyers.”

3. ‘Once you’re pre-approved for a mortgage, you’ll know what you can afford’

During the pandemic, interest rates were at historic lows. So when people got pre-approved for a mortgage, they could probably assume it would hold once they found a home they wanted to buy.

Today, however, the wild volatility of mortgage rates means that what homebuyers could afford to buy could vary from one week to the next.

As a result, Hale recommends regularly “stress-testing” your budget by running the numbers on a wide range of possible mortgage interest rates so that you can be prepared no matter what happens.

“Recent mortgage rates have been moving up and down enough to impact home shopping budgets in a big way,” says Hale.

In other words, pre-approval is no guarantee; make sure to check again at current interest rates before making an offer that is within your financial reach.

4. ‘Waiving contingencies is worth the risk to get the house’

During the peak of COVID-19, many homebuyers were waiving contingencies left and right. From forgoing home inspections to adding appraisal waivers, buyers were putting themselves in a risky position just to win a bid on a home.

“At the height of the pandemic, one of our buyers—an older single lady—was in fierce competition with other buyers for a small cottage that was over 100 years old, and we advised her she would have to waive all inspections and contingencies in order for her offer to be competitive,” says Colleen Gustavson Brownell. “She did exactly that and ended up with the winning contract.”

Fortunately, in this case, the property proved not to have any major issues.

“The risks this buyer had to take in order to buy her dream cottage luckily worked out in her favor,” says Brownell. “But under normal circumstances—such as today’s rapidly shifting market—we would rarely advise any buyer to waive home inspections because there is too much risk involved.”

Contingencies not only protect homebuyers, but can also bolster their borrowing power.

Tan Tunador, a senior loan officer with Atlantic Coast Mortgage, in Loudon County, VA, recently worked with a couple who couldn’

t qualify for a mortgage without selling their current home.

“I asked them why they didn’t make their offer contingent upon the sale of their home, and they had no idea that they could even do that today,” says Tunador.

The couple submitted a new offer with the home sale contingency, which was enough to get the deal done.

“For more than two years, we’ve seen no home sale contingencies,” Tunador explains. “Now, my team has six loans in process with this contingency.”

5. ‘Don’t dare ask a seller for concessions’

During the pandemic, asking a seller for concessions probably meant losing the deal. But now that mortgage rates have topped 6%, asking for a little financial help is no longer verboten.

“The pandemic rule was ‘do what the seller wants.’ But now, more and more buyers are asking for price concessions, closing cost assistance, and scenarios buying the interest rate down,” says Tunador. “In the DC metro area, we are seeing homes sit on the market longer and buyers not being afraid to ask for concessions or price discounts.”

6. ‘You’ll need 20% down on a conventional loan’

High down payments were one of the ways potential homebuyers won competitive bids during the pandemic. That left some extremely qualified buyers who were being more conservative with their funds in a tough spot.

For example, during Chicago’s red-hot market, real estate agent Brian Kwilosz had highly qualified buyers who could afford to put down 20%, but preferred to put down just 5%, allowing them plenty of funds left over for renovations later on. They ended up losing several bidding wars.

“Finally, we had the lender issue an additional approval letter stating they were qualified for a 20% down conventional mortgage and were just as qualified as our competition,” says Kwilosz.

That did the trick: “They successfully purchased the home with 5% down,” he says.

Fortunately, today’s homebuyers don’t need to take such extreme measures to prove their worth to sellers.

“During the pandemic, sellers were not even considering lower down payment conventional loans, let alone FHA or VA,” says Kwilosz. “Now, we are having much more success getting our VA and FHA buyers under contract.”

Experts in Residential Real Estate in Orlando

If you are buying or selling real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.