It’s on nearly every American’s bucket list. It’s something we all dream of and in many cases expect to happen at some point in our lives. Buying your first home. It’s a huge decision and doesn’t go as simply as all the reality TV shows love to portray. There are many steps in the process and hiccups that can happen that you won’t see the family endure on TV. Let’s take a look at the steps for a first time home buyer in the Tri-Cities.
1. Are you ready to purchase your first home?
In many cases the question is whether it makes more sense to rent or buy. It’s fun to think of owning your own home, but it might not always be the right timing. Ask yourself these questions:
- How long is your current job projected to last? If you’re working a one year contract and not sure it will be renewed, buying a home might not be the right plan.
- How long will you be living in your current city? If you know for a fact you won’t be staying in the Tri-Cities for more than a couple of years, whether due to college, a job, or other circumstances, then renting could be the best option. According to redfin.com, it takes 5-7 years to recoup the cost of buying a home. Of course, this depends on the market you live in.
- What is your relationship status? While this might be a personal question, it’s an important one. If you think a current relationship might eventually lead to moving in together or marriage, maybe hold off on buying a home until things are more certain.
2. Check your credit score
No one wants the heartache of finding their dream home and then heading to the bank for a loan only to find out your credit score is in the dump. According to experian.com, it’s a good idea to check your credit score once a year. If your identity has been stolen or there’s a forgotten doctor bill sent to collections, you’ll want to know as soon as possible.
According to quickenloans.com, the minimum credit score to qualify for a conventional loan is 620, while the minimum credit score to qualify for an FHA loan is 580.
3. Do the math – how much house can you afford?
Oftentimes when a couple or individual sits down to do the math on buying a home, they only look at the cost of a mortgage vs rent. There are other monthly and yearly expenses to keep in mind that come along with home ownership. Here’s a few:
- Lawncare (including purchasing a mower, weed wacker, fertilizer, etc.)
- Irrigation assessments
- Water, Sewer, Garbage
- Broken appliances
- Broken Fixtures
- Sprinkler blow-outs
- Homeowner insurance
- PMI (if getting an FHA loan)
- Fence Repair
- HOA assessments
- Keeping up with HOA requirements (painting house or fence for example)
- Heating and cooling bill (likely to increase with more square footage)
The list goes on and on. Maybe your landlord was paying for water, sewer, and garbage and you didn’t even know that was a bill that came every month! Make sure you think of all the expenses that come with owning a home and include that in your monthly budget. The last thing you want is to move into your brand new home and realize you’re “house poor”.
4. Find a Realtor (we’re always available)
Using a professional Realtor in the Tri-Cities will give you more buying power and bring several benefits to the table, such as:
- Market insights – they should be able to give you a brief synopsis of how the market in the Tri-Cities is doing, specifically in your price range.
- Offer Price – a competent Realtor will do a comparative market analysis of similar homes that sold in the area of the home you’re looking to buy. Based on that analysis they will be able to guide you in a firm offer.
- Negotiating Power – they will know how and when it’s appropriate to counter-offer or meet in the middle with contingencies.
- Tri-Cities Knowledge – At Powell Real Estate Group, all of our Realtors have lived in the Tri-Cities for at least 10 years. We know the schools, the neighborhoods, the shopping, and the market. You can trust us to guide you to the right home.
- Professional Experience – Our Realtors at Powell Real Estate Group have a combination of 25 years of experience. Even if you’re using one of our newer Realtors, they will be supervised and carefully guided by our owner and Designated Broker, Chris Powell.
5. Shop for a loan – get pre-approved
It’s so important to get pre-approved for a loan before you start shopping! There’s nothing more devastating than finding your dream home only to realize you don’t quite qualify for the mortgage. Shop around for different lenders and find the best deal for you. We’re a fan of Derek Robinson at Community First Bank in Kennewick, but be sure and do your homework before choosing anyone.
6. Start shopping!
The fun part.
Now that you have your pre-approval letter in hand, your monthly budget calculated, and your Realtor from Powell Real Estate Group on speed dial, you’re ready to start shopping! Head over to our property search, put in your filters, and you’re set! We can help you get set up to receive any new listings that meet your criteria by email automatically.
When viewing homes, it’s important to stay as unattached as possible until the keys are in your hand. We realize this is nearly impossible, but it will prevent heartache throughout the process.
7. Submit an offer
After all the steps outlined above, it’s finally time to make that offer. Once you find the house that fits your checklist, we will help you submit the most appealing offer possible.
If your offer is accepted right away, you’re under contract! If the sellers make a counter offer, you might go back and forth a few times before settling on agreed terms and contingencies. Once both parties have signed and agreed, you’re under contract. It is very convenient and in our opinion vital to have a Realtor on your side throughout the negotiation process. We will help you get the best deal possible.
8. Submit your earnest money
Earnest money is the amount of money a buyer is willing to put forth to show their sincerity and commitment to purchasing the house. The amount of earnest money is listed in the buyer’s offer and is usually about 1% of the purchase price. Upon mutual acceptance, the earnest money is typically delivered in the form of a cashier’s check or personal check to the title company being used in the transaction. It will be held there until closing, where it will be applied to the loan.
If the deal falls apart due to the buyer’s actions, the seller will keep the earnest money.
9. Get an inspection
Next on the list, inspection! There aren’t many cases a first time homebuyer will waive an inspection. It’s an opportunity to see what condition the home is in and if there are any big ticket fixes that need to take place. If the proper contingency is in place, a poor inspection will allow a buyer to walk away without losing their earnest money. It also opens up the door for further negotiations about what needs to be fixed before closing.
10. Get an appraisal
An appraisal is done in order to let the lender know the market value of the home. The lender doesn’t want to lend more than what the home is worth or it puts their loan at risk. If an appraisal comes back higher than the agreed upon purchase price, that’s fantastic news. It means you’ll be moving into your home with instant equity and you’re getting a great deal. If an appraisal comes back lower than the agreed upon purchase price, the lender will not loan the full amount. You will either have to re-enter negotiations to bring down the price, or bring more cash to the table to make up the difference.
11. Wait for the title search
The title search might be unfamiliar to most first time home buyers. Once the home is under contract and the inspection and appraisal are done, a title search will be done on the house. The title company will look to see if there are any individuals or companies that have any rights to the property. It will need to be free and clear before closing. In order to protect themselves, a lender will require you to purchase title insurance in case of any future claims on the property. This is a one time fee. Most title companies recommend the buyer purchases their own title insurance as well to protect against any future claims on the property. This is also a one time fee, assessed at closing.
12.Go to the final walkthrough
After all repairs are completed and it’s almost time to close, you’ll be able to do a final walk through with your Realtor. You can observe and make sure repairs were done properly and as agreed upon. The lender will want to have documentation of the repairs as well.
The most exciting step in the process, closing day! You will officially sign for your mortgage loan, sign more papers than you ever thought process, and have ownership transferred into your name. Congratulations! We hope to be the Realtor by your side on this fantastic day.
If you’re ready to start the process of buying your first home in the Tri-Cities, we’ll be thrilled to get your call. Call or text us today at (509) 563-2224.