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It’s an awesome feeling when you’ve decided to buy your first piece of Real Estate, isn’t it? We know that purchasing real estate can sometimes be a little complicated, especially if you’ve never been involved in a purchase or sale before, so we’ve put together this handy First Time Real Estate Buyer’s Guide to help you navigate your first home purchase. We want to be sure you are well-informed and feel confident making all the right decisions!
Before you even begin to look through listings of properties, it is best to find out exactly how much you can spend on a house. You will want to talk to a lender to get pre-approved for a mortgage. There are a few options on where to get lending:
Regardless of which type of lender you choose, they will request specific financial information from you such as your current income, job history, and credit history. They might also ask how much per month you are comfortable paying for your mortgage and how much cash you have to put down. This information enables the loan officer to calculate a monthly payment and overall mortgage amount that will fit your need. (You must also consider that taxes and insurance will be due every month so that will be factored into the mortgage preapproval also). They will generate a pre-approval letter that states for what amount you’ve been pre-approved. This amount is based on the information you provide them.
Your pre-approval is good for a certain amount of time, so be sure to get this done when you are ready to purchase something and not too far in advanced. If anything in your personal situation changes, like you get a new job for an example, you will need to get new approval. The advantage to having a pre-approval is that it makes you a more attractive buyer to the seller. If you and another person are both trying to purchase the same property, and you both offer the same amount, but the other person’s offer is contingent on them getting a mortgage and you are already pre-approved for your mortgage, the seller is much more inclined to go with you than the other person because you are a much less risky option.
There are several types of mortgages available and there are certain restrictions with each one. There are conventional mortgages, Federal Housing Administration (FHA) loans and Veteran’s Affairs (VA) loans. Each loan has specific qualifications and limits so it is best to use a mortgage professional to navigate the differences. This person can help you find out if there are special programs that you may qualify for, being a first time home buyer (there are some out there that can help with down payment assistance, among other things).
Once you are pre-approved it is time to decide what type of property you would like to buy. Are you looking for a house, condo, townhouse, or villa? How many bedrooms and bathrooms do you need? One story or 2 (or more)? Is a garage or pool a must on your list? Do you desire a large backyard, or would you like something small? This is also the time to consider what areas you would like to live in. Something near the city or further out? Do you like small neighborhoods or lean more towards a large community? What type of neighborhood do you see your future home in? Any preferences you have will help your realtor narrow down the list and find a property you will love to call home. Your realtor can also help with some of these decisions too. Although ultimately it will be your decision, he/she can help you to narrow down some options. (For example if you desire a large yard, living in the city may not be an option.)
Once you know how much you can spend and what type of property you would like to purchase, it’s time to line up your realtor. Some people think that they can save money by purchasing homes themselves without a realtor. This is not true.
As a buyer, you have no obligation to pay your realtor for their time and for all the work they do on your behalf during a real estate transaction. Realtors get paid commissions only when the sale of a property closes, and this money comes from the seller of the property. Because this is how real estate works, you can see why it’s very unfair to ask more than one unassociated realtor to work for you at the same time, because only one realtor will end up making the commission and the other person won’t get paid for all the work they did for you. Just like realtors get reputations for being good or bad, so do buyers and sellers! You want to be sure you are fair and transparent when working with your realtor, as you don’t want realtors not wanting to work with you again in the future because you were not a good client as a buyer.
If you work with a team, like the Heffernan Team, then it’s a great thing to have two realtors working for you. Why? Because unlike two realtors who are not associated with one another, a realtor team work for the same company and will end up splitting the commission at the end, so you get two people working for you and no one is cheated out of payment. This is the best scenario if you can find a good team. Team Heffernan has a great reputation and so we get many people coming to us to buy Tampa real estate because we can do more work for them than a single realtor.
The advantages of working with a realtor are numerous. Realtors are licensed with the state and know all current laws and regulations concerning home buying. They can answer any questions you may have and make the process a lot smoother for all parties involved. (If they cannot answer the questions, they will know where to find that answer and seek it out for you – at least the good ones will). They know their local communities very well and can offer insights and other facts that will help you make better buying decisions and make you happier with your new purchase. They can offer advise if you get conflicting information from different vendors (like say, your bank and your insurance company). In short, they are an amazing resource and give you a great advantage over trying to purchase a home on your own.
A good realtor is worth their weight in gold because they can save you a lot of time, money and hassle. When you are looking for a realtor, make sure that they meet the following criteria:
You can read about Team Heffernan in the About Us section to find out how we meet this criteria, along with checking out testimonials from our clients on our Testimonials page and our Vendor Partners on our Real Estate Businesses and Services page. And of course, you are always welcomed to Contact Us, either by email or phone.
After meeting with and talking with your realtor, they will start searching properties for you. Most realtors use a search service called “The Multiple Listing Service” (or MLS for short) to search through homes currently on the market. There are many other sights that list homes for sale (Zillow, Realtor.com, etc.) but the MLS is the most accurate and current listing available. Once your realtor finds properties that meet your criteria, they will present them to you and work with you to finalize a list. Once that list is finalized, it’s time to house hunt!
Your realtor may meet you at properties, or may pick you up and drive you to them. It’s best to let them know ahead of time which you prefer. It is also a good idea to be punctual to all appointments. A lot of times homes you are viewing are owner-occupied. The home owners take time out of their schedule to set up a showing and then leave the house so you can view it discreetly. If you are looking at many houses in one trip, it will be very easy to get off schedule if one party is late.
While previewing homes, please be polite and considerate of others people’s homes and privacy. Yes, you can open closets to see their size, but be courteous and don’t open dresser drawers! It is also a good idea to look past furnishings and décor of homes and try to get the real dimensions and feel of the actual house. Sometimes you may have to look past clutter and other things and envision a house completely bare and how you would furnish and decorate it yourself. Many GREAT homes have furnishings and decor that may completely put you off or be dirtier than your liking, but if you form your opinion based solely on those criteria, you may be passing up a fabulous opportunity! It’s also a good idea to bring along a tape measure or camera to record different rooms or features of the house. (If you want to take pictures of an occupied house, please ask for permission first.)
Sometimes people find the home they want on their first trip out. For others, it may take longer. How long the process takes depends on the amount of inventory available and how well a home fits your criteria. A good realtor will have the patience to work under both circumstances. Remember, realtors do not get paid (commission-paid by seller) until the deal closes. Most realtors will show as many houses as it takes to get the deal done and put their clients in a home they will love. If you happen to go by an open house without your realtor, be sure to let the hosting agent know that you are represented and already have an agent. (You could hand them their card, or tell them their name.)
Once you find the home you want, it’s time to put an offer in. Your realtor will guide you through this process.
Your realtor will show you recent comparables (comps) of homes that have sold, or are on the market in that area so you have a good feel for what the house is really worth. Many people have unrealistic expectations of what the prices of houses are when they are looking for one, so it’s best to know exactly how much similar houses have sold for and are on the market for, so you understand realistically what it’ll take to purchase the house you want. This is important in a market that is in fast growth or decline mode too, so you can factor that into the equation when coming up with your offer, as well.
When you come up with a figure you are comfortable with, you will sit with your agent and fill out a contract. There are 2 contracts Florida licensed realtors use for the sale and purchase of a property. One is a standard contract, and the other is an AS IS contract. There are a couple of differences in these two contracts, the main thing being that one offer may be contingent on home repairs being made (if needed). Your realtor will go over all the terms of the contract to make sure you have a clear understanding of what you are signing. The contract will then be sent over to the listing agent, and they will present the offer to the sellers. The sellers will reject, accept or counter the offer. Once the buyers and sellers come to an agreement on price and terms, both parties will sign a new contract with all the new terms on it.
Sellers will also request earnest money to be placed in an escrow account with a title company. This is a small deposit that will be held in a neutral account (neither parties has access to it). The money placed in escrow will go towards the buyer’s costs at closing. Now you have an executed contract to purchase a home, this is when the real work begins. This contract will also have a closing date on it (usually 30-45 days from execution). This is the date set to get all inspections and other requirements fulfilled. This will be the day you “buy” the house and get the keys.
Now that you have a signed contract for purchase in hand, you are ready to actually execute the agreement and go through all the procedures required (both by law and for your own protection) to execute your contract and get ready for your closing (when ownership of the property legally transfers to you).
This is the time you really get to know your loan officer. The loan officer will request a copy of the executed contract. They will also request a lot of your financial information. They will need past pay stubs, credit card and debt information, job history information and other information in order to secure the loan. The main thing here is to be diligent and timely in returning the items they request. You would hate to lose a home because the deal took too long (Although contracts can be extended).
During this time you will also complete a home inspection. The home inspection is usually paid for by the buyer at inspection. The cost of a home inspection varies with the size of the house: the more home there is to inspect, the more expensive the home inspection. The home inspection should be done by a licensed professional home inspector. They will go through the property with a fine tooth comb. They inspect electrical, plumbing, structure, roof, cooling and heating units and all other systems of the house. They will do a thorough inspection to find out if there are any defects with the house. This inspection is usually completed within 15 days of an executed contract (this is the inspection period). The inspector will send a detailed report with all of their findings. If there are major defects there are a couple of options for the buyer. The seller might make the repairs, the seller may credit a dollar amount to the buyer to do the repairs, or the seller may not make any repairs. The buyer has the option to walk away from the deal if they cannot come to a mutual decision (Earnest money will be returned to the buyer – there is a clause in the contract that protects the buyer in this instance). Once all goes well with inspection and any problems are remediated, the deal moves forward.
Unless you are paying for your home in cash, you will be in constant communication with your mortgage person to see how the loan is moving forward. Your lender will order an appraisal from a licensed appraiser (again paid for by the buyer, although this is usually put into closing costs and not directly paid out of pocket). This will give you an opportunity to see what a mutual 3rd party appraises the home for. This is an unbiased evaluation of the monetary value of the property.
Also during this time the title company (usually) will order a survey of the property. This is a report that is completed by a licensed surveyor. The surveyor will visit the property and measure boundaries of the property, location of the property and any encumbrances on the property. You will get a copy of the survey at closing; it’s always good to know exactly what you are buying.
During this time you will also shop around for homeowner’s insurance. You lender will have certain coverages that you will have to carry on the property. If you do not have an insurance agent, your realtor will be able to recommend some trusted agents in the area. During this time the title company will also be checking to make sure the title is clear on the property. This is to ensure there are no liens, debts or open permits on the property. The property cannot close unless all these are remediated.
Now it’s time to buy the house – closing day is here!
Before closing, your lender will send you a report that lists all the costs associated with closing your loan. You will have a chance to go over this report and see if there are any discrepancies. Your loan officer will answer any questions you have regarding these costs, but your realtor can also help you make sense of the report.
The day before closing, or even the morning of closing, your realtor will take you through the property for one last inspection. This is called a “Walk Through” and it is to ensure that the house is in the same condition as it was when the purchase contract was signed and executed by you and the seller. You can inspect the home one last final time before the seller signs over ownership. If there are problems, your realtor will work with you to make necessary arrangements to reschedule the closing and address the issues, though doing so may require you to go through most of the purchase process all over again. Closings are rarely postponed because of walk-through issues as most sellers don’t want to go through the hassle of an additional sales process and are careful to leave the house in good condition. Postponements are usually done only as a result of major problems (like demolished walls or large cracks in ceilings or foundations) and not for small issues that are the result of reasonable wear and tear, especially during a move (like nicked doors or paint).
The actual closing of the loan and transfer of title is usually done at the title company (although sometimes they have mobile titles that can come to you). At the title company you will go through all the terms of the loan. There are usually a very large stack of papers that go through all the details of the purchase and repayment of the loan. Both the sellers and buyers will have forms to sign. The lending institution will also wire money into various accounts to pay off fees and the seller (or their mortgage company). Once all documents have been signed and monies have been transferred you are officially a homeowner! It is quite a process so it is important to pick professionals that you trust and are working towards your best interest.