Buying your first home is both exciting and intimidating. It's likely the largest amount of money you've ever spent, and you want to ensure you know exactly what to expect. Understanding the process and having the right team to assist you will help you embark on this journey with confidence.
When determining your budget for a new home, consider the following:
Down payments typically range from 3.5-20%, but it can be as low as 0%, depending on your financing. If you put down less than 20%, you’ll need Private Mortgage Insurance (PMI), which protects the lender if you can’t make your payments. PMI usually costs between $30-$70 per $100,000 borrowed. In 2023, the median down payment for first-time buyers was 8% according to the National Association of Realtors.
Many state, county, and city governments offer financial assistance for qualified buyers including grants, second mortgage loans and tax credits.
It's important to surround yourself with the right people when making such an important decision.
Pre-Approval: Before you start looking, get pre-approved for a mortgage. This shows sellers you’re a serious buyer and gives you a clear idea of your budget. Pre-approval letters usually expire within 30-90 days, so time your search accordingly.
Loan Application: You’ll need to fill out a loan application and provide documentation such as W-2s, credit reports, tax returns, bank and investment statements, and proof of any supplemental income.
Your real estate agent will help you determine a fair offer based on recent sales, the condition of the house, and what you can afford. The offer includes the price, target closing date, fees, and contingencies. It’s common for sellers to counter your offer, so be prepared to negotiate.
After your offer is accepted, you’ll need a professional home inspection to uncover any potential issues. A home inspection contingency should be part of your offer.
Your lender will also order an appraisal to ensure the home’s value matches the loan amount. If the appraisal is lower than expected, you might need to renegotiate the price or cover the difference yourself.
The closing process, or settlement, typically takes 30-45 days. During this time, your lender will outline your portion of the closing costs, which usually range from 2-5% of the purchase price.
Closings often take place at a title company and will involve various fees, including the application fee (if applicable), credit report, loan origination, government recording, appraisal fee, title insurance, survey, attorney fees (if required), and home inspection (unless paid at the time of service).
You’ll also need to pay the first year of homeowner’s insurance and initial escrow payments for property taxes and insurance.
Once all paperwork is signed, you’ll receive the keys to your new home. Congratulations—it's time to start making memories!
Buying your first home can be a complex process, but with the right preparation and support, you can navigate it successfully. Happy house hunting!
Loans subject to credit approval