Buying your first home is an exciting time, but it can be overwhelming too. There are a lot of steps to take and legalities that have to fall into place in order to complete the process. One of the most critical stages for first-time homebuyers is closing. Today we are going to talk about some tips for first-time homebuyers.
Before you close on your new home, you should create a checklist to make sure you have taken the necessary steps so that you can sign your last documents, receive your keys, and celebrate becoming a first-time homebuyer. Take a look at the tips below to get on your way to new homeowner bliss.
Secure Mortgage Pre-Approval
If you’re not purchasing a house using cash entirely, you’ll need loan approval before closing on a home. One option you have is to get preapproved.
In this process, a bank will analyze your financial health and credit rating, otherwise known as your credit score, to determine how much money you’re capable of borrowing. Your credit reports will be pulled before starting. This includes in debt you have on credit cards.
You will be required to provide a handful of documents to verify your finances, such as pay stubs, tax returns, and W-2s. This will tell you how much you can spend on a home and streamline the house-hunting process. In the case that there is heavy competition when you want to put in an offer, a preapproval can give you the upper hand compared to someone without pre-qualification from a lender.
This will also determine your interest rate, your monthly mortgage payment, and the type of loan you are eligible for. You could be eligible for a VA loan if you are a veteran, an FHA loan, a conventional loan, or more. If you don’t have a big enough down payment you will most likely have to pay private mortgage insurance.
Understand Home Buying Costs
You now know how much you can spend when you buy a house, so next, make sure you get familiar with and budget for the typical homeowner expenses and fees. Factor property taxes, insurance fees, and HOAs into your monthly expenses when deciding how much house you can afford and your final purchase price.
On top of that, factor in down payments and closing costs. These can require tens of thousands of dollars, so cushioning your savings account is a necessity before signing any documents. Remember to consider both of these costs alongside the monthly payment you’re prepared to make in order to determine how much you’ll be spending upfront, and how much you’ll spend monthly from here on out.
Get A Home Appraisal
Completed by an unbiased professional, a home appraisal is completed with an overall assessment of the home to ensure that the home is contracted at an appropriate price. The appraiser will use the condition of the home, location, recent sales of similar properties in the area, and other market trends to determine its value.
Getting this done will decrease the likelihood of you overpaying for the house, and make lenders more comfortable providing you a certain loan amount. These are an additional fee, yet they strengthen your decision to put in an offer and close on the correct contract details.
Get An Inspection
It is critical that you receive a thorough inspection before you close on your new home. Even if you worked in an inspection contingency, you may want to have a second look at the property. Having a second inspection, even if you already had one, can help to catch any defects that may have potentially gone unnoticed the first time around. Therefore, you would be able to address the seller on the results and potentially make adjustments before closing.
Protect Your Home
Owning a home is a big responsibility. There are many protections you may need in order to secure your investment down the line. It’s important to look into various types of homeowners insurance to determine what you may need. Homeowners insurance can help protect your property from fire, safeguard your possessions from theft, and save your bank account from liability.
Depending on where you are purchasing the home, earthquake insurance or other necessary types of coverage may be necessary. In addition, major home systems can be expensive to fix or replace. See if a home warranty is included in your purchase contract. If one is not transferred over, you may want to choose one to save money if something major needs to be replaced.
Meet With Your Realtor
Before closing on your home, take a moment to schedule a meeting with your realtor. Taking the extra time to go over everything and asking your realtor questions before closing can make all the difference. Even if you and your realtor have met several times before, it can be especially helpful to have a meeting specifically regarding your closing. Here, any of your concerns can be addressed and squared away.
Most contracts in a home transaction contain contingencies. These are conditions that need to be satisfied before closing on your property. Most of the time, these consist of anything unsettled related to the inspection, appraisal, or financing on the buyer’s end.
If any red flags surface throughout the home inspection or if the home is appraised at a lower value than contracted, you can back out of the deal according to these contingencies. On the other hand, if financing flops, the seller can also back out of the sale should the buyer not meet the contract standards in the time period allotted.
Schedule A Final Walk-Through
Before you close, you will want to set up a final walk-through. Talk to your real estate agent to arrange a time when both of you can spend an hour or so taking a final look at the home. The house should be empty at this time, which will allow you to see anything that could potentially be out of place.
Have Your Documents In Place
On closing day, ensure that you have brought all the correct documents you need to make the big day go smoothly. You will need certified bank checks to cover costs that have not been paid, such as any outstanding documents needed for the title or mortgage.
Closing on your home does not have to be stressful. As long as you have your checklist in place and have educated yourself accordingly, you can go in with the preparation you need for a successful home closing. You should be excited and proud for completing this important milestone in your life! When you buy a home it’s a great step forward for the rest of your life.
We hope these 9 tips for first-time homebuyers help you find your new home in St. Louis.