How to prepare for buying your first home.

Buying your first home can feel overwhelming at first; you don’t know where to start and the process is completely new, which can make for an intimidating situation. Worry not, this brief guide will provide you with the foundational information you need to move forward with confidence. Read on to learn more about the key steps to successfully purchasing your first property.

1. Get pre-approved

2. Establish your “must-haves” and start your search

3. Submit a comprehensive offer

Get pre-approved

All buyers, including first-timers, must establish a purchase price they are comfortable with in order to begin their property search.  The best way to do this is to work with a lender and obtain a pre-approval.  If you don’t already have a lender you plan to work with, your agent should be able to provide a referral; most agents have preferred lenders that they work with on a regular basis which can help streamline and expedite the process for you. 

The pre-approval process is often the largest hurdle that first-time buyers face; not because the process is particularly challenging but because of the fear of rejection if they are not approved to purchase their dream home. The reality of the matter is that lenders WANTS to loan you money (that’s their job!) and a good loan officer is going to work with you to achieve your goals, whether that is an immediate approval or a plan to get you there. After your loan application is approved your lender will supply your agent with a letter of pre-approval and then it’s time to go shopping.

Pre-approval Checklist

Start your search

As a first-time buyer you will work with your agent to establish parameters for homes that you might be interested in buying.  These parameters include but are not limited to:

• price

• location

• baths/beds

• school district

• home type

it is important to note that when searching for your home the more specific you can be the better. The biggest mistake I see many first-time buyers make is having criteria that is too broad; it makes it difficult to compare properties that you may be interested in and identify which provides the greatest value for the price.  Determine what’s important to you, be specific and intentional and only see the properties that match your criteria.

Make an offer

You found THE house and you want to make an offer. This experience will depend greatly on the current market conditions in your neighborhood. In a hot market you may be competing against several other offers which can force price to go above list, whereas in a slow market, your offer may be at or below the list price and include things like seller paid closing costs.  When you submit an offer to a seller you are submitting it in the form of a purchase agreement that lays out all the terms of your offer.  These terms include but are not limited to:

• purchase price

• earnest money

• financing type

• down payment amount

• closing date

• inspection elections

• closing costs

A good agent will have you well prepared and comfortable with all the potential offer terms so that you can submit a proposal that makes sense for your unique circumstances.

To learn more about the different terms which may be included in a purchase agreement, visit our glossary of common offer components. 

Offer Terms

Composing an offer to purchase is not a one-size-fits-all exercise. There are many considerations that you can choose to include to structure the transaction in a way that makes sense for you financially and personally. I have outlined a number of the most common terms that buyers choose to include in their offers to give you a sense of what types of things you can consider when tailoring your purchase agreement.  

• Purchase price - the amount that you are offering to purchase the property for.

• Earnest money - typically 1% of the purchase price of the home and is due two business days after a seller accepts your offer.  This money is held and credited back to you at closing.  Earnest money serves as sort of insurance of your intent to execute on the offer that you submitted.

• Financing type - each lender will have a portfolio of loan products available to prospective borrowers that will help them best meet the needs of any specific borrower including the down payment required.  The three most common loan types are:

  • conventional 

  • FHA

  • DVA

• Home inspections - home buyers can choose to include or forgo an inspection in their offer An inspection allows you to bring in a home inspector to give your prospective new home a thorough evaluation.  The cost associated with the home inspection is the responsibility of the buyer and usually ranges in price from 400-$900 .  It’s important to note that if the inspector finds something that impacts your decision to buy the home you can cancel the purchase agreement and have your earnest money returned. 

• Closing Costs - Closing costs are approximately 3% of the purchase price of the home, are due at closing and may be financed in full or part by the sellers as a term in the purchase agreement. These costs include but are not limited to:

  • loan origination fees

  • title fees

  • tax prepaids and proration

  • insurance prepaids and prorations