Buying Your First Home
Buying first home is really something special, it's where you
move from the realm of renters to that of a proud homeowner.
It can be more than a little exciting, though being nervous
about it and getting cold feet is usually mixed right in there
too.
Nothing compares to that feeling after you've gone through
the whole process from finding that home that's just right, to
making your offer, negotiating and writing up all the paperwork,
getting a loan and then finally, they hand you the keys to your
new home. That's right. Your home. If you want to paint
the walls pink with green spots or pull your car up onto your
lawn to wash it you can go ahead and do it, after all, there's
no landlord telling you what to do.
The whole process can be pretty complicated from start to
finish, so here is a brief outline of how it all works
so you know what to expect (here in Utah anyway, things will
vary to one degree or another in other states of course).
One thing you need to understand first though that many first
time buyers don't understand is how real estate agents work.
In virtually all cases having a real estate agent help you buy a home doesn't cost
you a cent. Here's how it works, when
someone signs up with a real estate agent to list their home for
sale they agree to pay a percentage of the sales price to the
agent they sign up with to sell it for them (normally this is
6%, but it could be more for certain properties depending on the
circumstances).
How the agent that helps you buy a home gets paid is the listing
agent shares the commission with them for bringing the buyer
(you).
Confused yet? Lets give you an example: say I was
your agent and we find that perfect house for you, it's listed
by Realtor Bob who has a signed contract with the sellers that
they'll pay x% commission to him when their house sells.
Bob offers y% for any real estate agent that represents someone
who buys the home. If you didn't have an agent, Bob would
get the full x% commission as that's what's the contracted
amount is, you'd have to handle the headaches all yourself and
live with the potential of unwittingly making a big home buying
mistake because you don't have someone 'in the business' working
for you in your corner. You really do need
someone in your corner making sure you're properly taken care
of, whether this is your first home or your tenth.
That leads right into the buyer's agency contract.
You want one of these things, believe me. It's a two-way
contract that protects you just as much as your real estate
agent. What it is is a contract between you and your
chosen real estate agent that makes them officially your agent
and legally bound to work for you in your best interests.
Not having this contract is not a situation you want to be in,
you always want to make sure your agent is working for your best
interests and this is the best way to do so! Now of course
this is a two-way contract so you have to agree to some things
as well, namely that you'll use them for the purchase of a
property in your area within a specified period of time (usually
6 months).
Once you have an agent (or possibly even before), but before
you actually start seriously looking at homes you'll want to
talk to a loan officer to get pre-approved on what you want to
or can afford as there's definitely no sense in looking in a
price range you can't pay for. If you don't have someone in
mind most agents will be able to recommend a few good loan
officers they've had good luck with in the past.
After that is when you need to get down to the business of
actually finding your home. Your real estate agent will
help you search through what's available, setup appointments to
go see them, etc. When you find the home you like it
becomes time write up the offer, again your real estate agent
will help you through this process, they'll explain the contract
to you but you should still take the time to read over
the entire contract yourself.
You'll also be expected to turn in what's called earnest
money to your real estate agent at the time of writing up your
offer. Earnest money is just like what it sounds like,
money you put up to show that you're actually serious about
buying the house. It's not actually deposited in a special
trust account at your agent's brokerage until the offer is
accepted, but they have to have it in hand. If you back
out of an accepted offer without meeting the specific
requirements set out in the contract, you stand to forfeit this
money to the sellers of the home for the lost time and effort
you put them through. $500 is pretty standard earnest
money for anything under about $200,000.
At this point the sellers will either accept, reject, or give you a counter
offer. If you get a counter offer this where the
negotiating process comes in, your real estate agent will of
course give you their opinion but in the end you have to decide
what the house is worth to you and at what point you'll just
walk away and find a different home.
When you do get an accepted offer, it's time to move from the
pre-approval status to actually getting the loan on your new
home which includes getting an appraisal on the house done among
other things. At the same time, along with picking a title
company, you'll want to get a home inspection
done, even, or maybe especially, if it's a new construction
home. There's a zillion different specialists that come
work on a new house doing all the various things from
electrical, to plumbing, to who knows what and everything
doesn't always get done perfectly unfortunately. In
virtually every case, you really do want a home inspection done
for you.
When it comes time to finally sign all the papers and close
on your new home you'll go do it at the title company you picked
out. By now, the title company will have researched your
home and made sure there's no unpaid liens on the property
(loans with the house as collateral, usually the loan on the
house, but there can be other things as well sometimes).
They issue you something called title insurance guaranteeing
this, if they're wrong, they have to pay it off
themselves, so they're very careful about this.
After you sign all the papers it usually takes 2 or 3
business days, sometimes longer or, if you're lucky, less for it
to fund and record. Which just means the sellers get their
money and it gets recorded with the government that you're the
new owner.
Finally, this is the point that you've been waiting for, you
get the keys to your new home. Whew, what a process to go
through, but it really is worth it to move up from just renting
to being a home owner.
If you have any questions, don't hesitate to ask us
through our contact page.
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