First Time Home Buyer 101. How to buy your first house. What you need to know when buying a house.
This video is for those looking to buy your
first house. I’ll simplify the home buying process for first time home buyers, I’m
going to break down the house buying process to give you a better understanding
of what to do when you’re ready to buy a house. This video will teach you the
correct order when buying a house.
#1. You’ll
need to get pre-approved for a loan. The bank will tell you how much house you
can afford & what your monthly payment will be. Also, if you make an offer
on a home, the seller will want to see your loan approval.
To
buy a house, you’ll need to have a decent credit score. You’ll need money for a
down payment. The minimum would be 3.5% for an FHA loan. If you’re in the
military, you can get a 0% down VA loan. There are also down payment assistance
programs like government grants. You’ll want to be prepared to pay closing costs.
These are fees the bank will charge to do your loan.
Closing
cost typically add up to about 3% of the sales price of the house.
You’ll
also need to prove to the lender that you have a good job & that you’ve
been with the same company or at least in the same industry for at least 2 years.
They’ll want to see proof or documentation of your income so the bank can
confirm what type of home you can afford. This doesn’t have to be just the
money you receive from a job, it can also include things like, disabilities,
child support, & etc.
Buying
a house is a HUGE financial obligation. The last thing I want is for you to buy
a home & then end up losing it & all of the money you’ve put into it.
So, I’m going to give you two scenarios where you may want to hold off, even if
you qualify to buy a house. Here we go. #1, if you have a lot of debt, in most
situations, I would tell you NOT to buy a house yet. Always, get rid of your
dept before buying a home.
#2,
don’t buy a house if you don’t have money in the bank. I’d recommend a minimum
of 3 months of living expenses, but 6 months would be ideal. Life sometimes has
a way of surprising us. Often people will lose their job after closing on their
home. You’ll want to be able to make that monthly mortgage payment & buy
food & etc while you search for other employment. More often, you’ll have unexpected
home repairs. Unless you’re buying a new construction home, I’d almost expect
the unexpected to happen. This could be things like the water heater or furnace
going out. Maybe a leak in the roof. Really, a million things could go wrong. I’m
not trying to scare you. I just want to make sure you are prepared. This is why
I chose to really focus on the NHC industry & why I often recommend building
a home instead of buying existing. If you’re not sure if you want to buy a new home
or go existing, check out my video, Building a House
vs. Buying an Existing Home. I’ll put a link to this video below.
How
do you find a good lender? Well, you could ask friends & family if they had
a good experience using someone or you can ask a RE professional. Realtors
prefer to use lenders they can count on & we’ve all worked with lenders who
have dropped the ball. So, when you ask an experienced RE agent, who they’d
recommend they should be able to give you 2-3 solid options.
#2. You’ll
want to find an experienced realtor. Most buyers don’t understand that when you’re
buying a house, a realtor doesn’t cost you anything. When someone list their
home with an agent they agree to pay that brokerage a specific percentage or price.
They will pay that fee rather you have representation or not so you might as
well save yourself a lot of time & money buy hiring a professional. But
remember, just because someone has their RE license, it doesn’t mean they are a
professional. You’ll want to hire someone who can guide you through the whole
process from finding the right house to negotiating the best price & then
of course through the process until you close on the home. Buying a house is
probably the largest financial decision you’ll ever make, so you’ll want to make
sure you hire a true professional, someone with experience.
Before I continue, can I ask a quick favor? Will you please give
this video a thumbs up? I would appreciate it more than you know & that
thumbs up will help others see that this video is helpful. Thanks. Ok,
continuing with…
#3 Start your home search. If you’re looking
for the quickest easiest rout to finding the perfect house, contact your
Realtor & tell them exactly what you’re looking for, then let them do the
research & send you the list of homes that fit your criteria. Before you contact
your Realtor or start looking at houses online, carefully decide what features
are most important to you. This will be things like location, size of the house
& the homesite. Bedrooms, bathrooms, the garage & etc. Write down your
wants & needs & send that list to your RE agent. Your Realtor will send
you a list of houses that are Currently available for sale. One
of the biggest frustrations for buyers is finding homes online that say they
are for sale when they’ve actually sold. Unfortunately, a lot of the big RE search
engines out there, like Zillow, are not very accurate. Also, just as a side note,
it is important to understand your local market. Are you in a buyer’s market or
a sellers’ market? If you’re in a buyers’ market, you can take your time & submit
offers below the asking price. In other words, there’s a better chance you’ll
get a deal & you can patiently wait for the right house to come along. If
you’re in a sellers’ market you’re going to need to be aggressive in your search
& if you find a house you like, you’ll want to put in an offer as soon as
possible. Often in a sellers’ market, when a home is listed, it will get multiple
offers in the first day or two so just be prepared for that. That means there’s
a high probability you’ll miss out on the first house you submit an offer on. It’s
just part of the normal RE buying process. You may end up putting in 3-4 offers
before finally putting a house under contract. Understanding the market will
protect you from disappointment. To improve your chances of getting the house
you want, rather you’re in a buyers or sellers’ market, you’ll want to be aggressive.
When you find a house or houses that you’d like to see, contact your RE agent to
set an appt. I recommend getting out to see the houses a soon as possible, but a
lot of sellers will want a 24 heads up. Why? Because it’s really hard to keep
your home in showing condition especially if you have kids & pets. It’s
kind of like asking a girl on a date. You’ve gotta give her some heads up so
she has time to get ready. She’ll want to put her best foot forward & when
people sell their homes; they feel the same way. Long story short, for the most
part, you’ll want to be prepared to see homes the following day, but you can
always ask to see the house sooner if there’s a home or two you’re desperate to
see. No matter how bad you want the house, you cannot appear to be eager or desperate.
If the seller notices, you’ll lose all negotiating power. There’s a certain protocol
you want to follow when you’re tour homes. When you’re done with this video,
you may want to watch 10 Things you never say when
buying a house. I’ll put a link below. Once you’ve found a house that
you love, it’s time to write up an offer. Your agent will guide you through this
part of the process. My one piece of advice is if you really love the home
& if you feel the price is fair, do NOT submit a low-ball offer. My brother
& I received some horrible advice from an inexperienced Realtor & we
submitted a low-ball offer on his recommendation for an investment property
that would have made a crap load of money for us. When the seller saw our offer,
he refused to sell the home to us. It’s really hard to look back at that missed
opportunity & all the money we lost out on. It’s ok to ask for some closing
costs or a small discount, but keep in mind, the more you ask for the lower
your chances are of getting that house. Also, when you submit an offer, be
prepared to leave an EM deposit. Usually this is between $1,000 to $5,000. The
dollar amount usually depends on the price of the home you’re buying &
market conditions. The EM shows the seller you’re serious & it’s important
to know that if you cancel, you could lose this money. I’ll talk more about
this later & teach you how to protect that deposit.
#4 Under contract. It’s super exciting when
you hear the words, “Your offer has been accepted.” But don’t celebrate yet
& this is why it typically takes 30-45 days for a house to close from the accepted
contract date. You’ll have a due diligence time period to make sure the house
is worth what you’re paying. The lender will have the home appraised to make
sure it’s valued at what you’re paying. You’ll also want to do a home
inspection. The home inspection in a must on any existing home, particularly if
the home is older. The inspector will give you a detailed report on the
property. As you look the list over, you may find something unacceptable. It might
make you sad or angry. But before you decided to cancel, you can actually
submit an addendum to the seller asking them, to repair or replace the item or
items you have an issue with. Even if there are some minor things you can ask
the seller to fix them or instead ask for a small price reduction & fix the
items yourself. Usually, if you’re fair in what you’re asking the seller to do,
they’ll do what it takes to keep things moving forward on the sale of their
home. If you can’t come to an agreement, you can cancel & get your EM back
so long as you’re within your due diligence period.
I
also feel like I should remind you not to buy anything major at this time,
especially something like a car. Yes, I had a client do this & without the
help of her parents, she would have lost the house. The bigger mistake I often
see is people get excited to for the new home & go buy a bunch of furniture
usually on credit to be delivered after the house closes. This could also put
you at risk of losing the home. Just wait to buy anything you don’t need until
after the house is closed & do NOT open a new credit card. All of this
leads me to…
#5
Closing on the home. Step #5 actually takes us back to step #1. Before you can
close, the lender will confirm you are still good to go. Since the process from
getting your loan approval to closing on a home usually takes 2-4 months or up
to 9 months if you build a house, the lender will want to confirm you’re still
employed by the same company. They’ll want to see how much money you have in
your bank & your investments. They could even ask for things that don’t
really make sense, but once again, it’s part of the process & it will all be
worth it in the end. Just remember to get the information they request as quick
as you can to keep the process moving forward. This is called the final
approval. If for some reason the lender is struggling to get you a final loan
approval & you need more time, you can ask the seller to extend the closing
date & the due diligence time period. Usually the seller will extend the closing
date but not always the due diligence period. If this happens, you’ll need to
make the decision to move forward or cancel to make sure you get your EM back.
So,
now that you’ve made it through this whole crazy process. It’s time to actually
close on the home & make it yours. This means you’ll meet with an attorney or
at the title company. The lender will tell you exactly how much money you’ll
need, to close on the home. They’ll tell you how they’d like that money to be
received. These days most require you to wire the money from your bank to
theirs. If that’s the case, be sure to call the company you’re working with
right before you wire the money & right after to make sure it’s been received.
Recently, there’s been a lot of wire fraud & if you get fooled, you will
lose all of that money & the house. Some victims of wire fraud have lost hundreds
of thousands of dollars & it’s heart breaking to see. Please use extreme caution
so this doesn’t happen to you. Be prepared to sign a lot of documentation
basically saying that you will pay the bank back & that you understand that
if you don’t make your payments, they could take the house away from you. The
pile of paper could be an inch thick & you’ll sign in dozens of different
locations. Once again, it’s all part of the process. I have a few different
videos to help you through the closing of your home so you know what to do
before & after you move in. I’ll put links to my recommended video below.
If this video has you feeling uneasy or nervous, don’t let it dampen your spirit.
Buying a home is the safest & best investment most people ever make &
it’s a lot better than paying rent. If you are renting, consider this. #1 in
this market with these crazy low mortgage rates rent is often more expensive
than the cost to buy a house. And, #2 you could be putting that money each
month toward buying a home. After 30 years of paying rent you’ll have nothing
to show for it, but after 30 years of making house payments, you’ll have hundreds
of thousands of dollars in equity which should allow you to retire in style.
When
it comes to getting keys to your new home, remember that it needs to fund &
record with the city before the sellers will give you the keys. Depending on
certain factors, like location you could receive keys at closing or you may
need to wait a day or two. Your Realtor should be able to give you a realistic
expectation for getting your keys.
Is there something in this video that
really stood out to you as being helpful? If so, what was it? Please let me
know by commenting below. If you have questions or if I left something out,
please help the community by leaving a remark below as well. Sincerely, I want
to hear from you. If you know someone who’s ready to buy a house, be a friend
by sharing this video with them.
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