I’m a big fan of “how to” guides. I love it when a guide lays out steps that make sense in real world conditions. Below I offer a quick reference, or “how to guide,” for buying your first home.
Step 1: I want a home — what do I do now?
So you have decided it is time to grow up and buy a home. Before you go out and begin looking at places, find out what type of financing you can afford. You have a couple different routes to take.
You can call a mortgage broker and they will collect information from you, present information to several lenders, then present loan options from multiple lenders to you.
Alternatively, you could go to several different banks yourself, speak to loan officers at the banks and pick the best loan for you The latter option involves more legwork, but it also allows you to get a better understanding of loan products. In addition, you usually save money doing the work yourself. However, if time is of the essence and you do not have any time to spare running around to different lenders, go down the mortgage broker route.
Step 2: I have my pre-approval! Now what?
Once you have a pre-approval letter, you need to make some decisions. Buying a home involves a lot of variables, many of which we will not cover. However, what you want to figure out is how much space you need, where you want to live and how much money you want to spend. Some issues, such as schools, may be more important to you than space.
You have to figure out what your priorities are and make a list of them. Remember to be flexible on some items. You may find a condominium in a great school district, but it may only have one bathroom, when you wanted two. Remember the small differences, if you buy a house, you will have to maintain the property. If you buy a condo, you will not have to maintain the property yourself, but will have to pay condominium fees, which could lower the overall loan dollars you can borrower from a lender.
Step 3: Show me my new home!
Once you have figured out what you want, you need to find a realtor to help you. You can purchase a home by yourself, but a realtor is a trained professional who helps people just like you purchase homes, day in and day out.
Ask your friends for a reference or drive around the area you want to purchase a home and stop at open houses. Most realtors are local experts on a real estate submarket and are worth talking with. Once you have found a realtor you like they will usually grant you access to the online MLS, which lists properties, for your specific criteria. You can also check out websites such as craigslist.org for listings.
Step 4: I found my future home! It must be mine!
If you have located the home you want, you want to take a step back and make sure you are not too emotionally vested.
Make sure you purchase a home that meets your criteria and is within your price range.
With that said, it is good to have your mind made up — now you can use the pre-approval letter and have your realtor make an offer on your behalf.
It is important when you make an offer to listen to your realtor, but do not do anything that makes you uncomfortable — such as making an offer that is too high for you. Remember, after the novelty of owning a home wears off, you will be stuck making a mortgage payment for the next 15 to 30 years, or until you sell the property.
Step 5: They accepted my offer!
Your offer has been accepted, now it is time to open escrow with a deposit — usually 1 to 3 percent of the purchase price. You need to go to your mortgage broker or loan officer and begin the financing or loan process.
Getting a loan is a long process, but if you have a solid mortgage broker or loan officer helping you, it can be a pleasant experience.
Step 6: My loan is approved. Now what?
Once your loan is approved you need to take care of last minute details — such as a final walk through and placing the rest of your down payment into escrow.
Step 7: My loan funded, escrow closed ...
If your loan funds and escrow closes, that means title has recorded a grant deed in your name and you are officially the owner of your first property. Congratulations!
Mike Heayn is a Washington Mutual multi-family loan consultant. He can be reached at (310) 428-1342 or michael.heayn@wamu.net.
