Purchasing your first home can feel like a rite of passage. It’s a part of the American dream that you might have always imagined as part of your future, so once you’re ready to make it a reality, you want to do it right.
There’s a lot that goes into buying a home, whether it’s your first, or you just haven’t owned a home in a while, but having the best resources and information will help you have a successful experience.
You can use this First Time Home Buyer Guide to help you through the process of purchasing your first home.
Who is a First Time Home Buyer?
When you hear about being a first home buyer, it’s often associated with someone who has never purchased a home. That can be true. Many first time home buyers have never owned a home, but that’s not the only category of people who fall into the first time buyer field.
Here are some of the conditions in which you would be considered a first time home buyer:
- You never owned your primary residence.
- You haven’t owned a principal residence for three years.
- You only owned a home with your former spouse while married.
- You owned a primary residence that didn’t have a permanent location like a mobile home.
- You owned a principal residence that doesn’t comply with building regulations and can’t be brought to code for less than it’d cost to build a new home.
If any of these conditions fit you, or you feel that your circumstances might mean you’re a first time home buyer, you want to reach out to your lender to see if you’d qualify.
Benefits of Being a First Time Home Buyer
However you qualify as a first time home buyer, there are benefits in doing so. Here are some ways that being a first time buyer can make it more affordable when you purchase.
Flexible loan program
The FHA home mortgage is a federally backed mortgage program designed for those who would typically not meet the conventional loan requirements. You can qualify with a lower credit score, a smaller down payment, and more flexibility in the overall qualifications. This is often a go-to home loan option for first-time buyers.
Lower down payment
The average price of a new home sold in the US in 2019 was $381,900, so a 20% down payment would require you to have a $76,000+ down payment.
Many first time home buyers can’t afford this, so they might opt for an FHA loan which has a 3.5% down payment. In this situation, it would bring the down payment requirement to $13,000+.
However, if that’s still a struggle, there are tons of grants and state and federally backed down payment programs to help make it more affordable. Many first time home buyers can purchase a home for $0 out of pocket.
The First Time Home Buying Process
There are five overarching steps in purchasing your first home. If you break down every individual requirement, it might feel more overwhelming, so looking at it as a five-step process can significantly reduce the stress and apprehension that sometimes comes with purchasing a home.
Step 1: Find a home
The first thing you want to do is find a home that you like. You can work with a realtor who will help you locate homes that fit your needs and budget. While on the search for your home, be sure to consider the neighborhood, how it will fit your family/lifestyle a few years down the road, and whether you can afford the maintenance/renovation projects it might need based on its current conditions.
There might be interest from multiple buyers in the property, so be sure to work with a professional who can stay in communication with the selling agent and seller to increase the likelihood that you’ll get the home you want.
Step 2: Get financing
Once you have the home you want, you need to secure financing. Some buyers will get a pre-qualification or pre-approval before they start their search. This is recommended if you’re in a competitive market, or to just make you more competitive when you’re ready to place an offer on the property.
Beyond your pre-approval, you also want to start looking at your other financing options. As we mentioned, you can get an FHA mortgage, which only requires a 3.5% down payment, or another first time home buyer program that requires a lower down payment or no down payment.
Be sure to check out any grants and down payment assistance programs you might be able to qualify for.
Step 3: Make an offer
It’s helpful to submit your pre-approval with your offer because the seller is more likely to take your offer seriously. You should talk to your real estate agent who will help you determine how much you should offer on the property.
Step 4: Get a home inspection
Next, you have to get your home inspected. This is to protect your purchase by ensuring you get a quality home and protect your lender by ensuring they are providing financing for a property that meets all of the required regulations. If the inspection reveals any issues, you can decide to withdraw your offer or negotiate a lower price.
Step 5: Close on your new home
Once your loan has passed the underwriting process, your offer has been accepted, and your home has passed inspection, it’s time to close on your property. During the closing, you will need to bring any money due on your end, such as your down payment and closing costs, if applicable, and sign the documentation for the purchase of your new home.
When you complete these five steps, you will officially be a homeowner!
Whether you are looking to purchase a home within the next few weeks, few months, or few years, the Belco team is here to help you prepare for a successful home purchasing process.
Check out our additional home buying resources:
Mortgage Loan Process: A Step-By-Step Guide