First-time homebuyers

Once you decide you want to buy a house, the best first step you can take is to talk to a HUD-certified housing counselor. A certified housing counselor is a local professional who has received extensive training and is certified by the U.S. Department of Housing and Urban Development (HUD) to help homebuyers in your area.

The counselor will help you:

1. Set up a budget.
2. Check your debt ratios to understand how much home you can afford.
3. Develop an action plan to become mortgage ready.

Getting mortgage-ready may take some time, so it is important to take this step this first. If you want to prepare for your appointment, KOFE offers some free resources and calculators that can help.

First-time homebuyer program

If this is your first time buying a home, you also have the opportunity to complete a first-time homebuyer program. This HUD-approved program helps you learn what to expect and how to move through the rest of the home-buying process quickly without cutting corners.

At the end of the homebuyer program, you earn a Certificate of Completion, which could be necessary to qualify for many down payment and closing cost assistance programs that may be available in the area you want to buy.

Important! You could be a first-time homebuyer without realizing it!

Choosing a real estate agent

For first-time homebuyers, the value of a reliable real estate agent cannot be understated. They will be your primary source for locating homes, getting professional opinions on properties that fit within your price range, and ensuring your make the most cost-effective purchase.

Realtors® are intermediaries between buyers and sellers. They are responsible for communicating offers and counteroffers between each party, along with any questions each party may have. They are also responsible for making sure you know all the requirements to complete the sale, with home inspections, appraisals, and closing dates – all key factors of a purchase.

Some crucial tips to be aware of:

• The Seller in 99 out of 100 cases will pay the buyer’s agent commission. That means you get their expertise for free.
• Agents have a network of other professionals at their disposal, such as home inspectors, contractors, appraisers, and title companies. While you should trust your agent, it should be noted that vetting any of these professionals on your own is highly recommended.
• Look for an agent that specializes in the area you want to live. They will know the finer details of the area other agents may not.

Finding the right home

One of real estate’s most important principles is, “location, location, location.” It’s a significant factor in determining what you can afford, your commute to work, and the amenities available to you. While housing sites like Zillow or Redfin can give you a good idea of what you’re looking for, the Multiple Listing Service, or MLS, has the most up-to-date information available about properties.

The Multiple Listing Service is a database established by cooperating real estate brokers to provide information about properties for sale. This service is only available to those with an active real estate license to protect sensitive information a seller may not want public.

Working with a real estate agent gives you access to the MLS. They can find properties that fit the wants and needs you have in a home. Once you find a property that you are interested in, a showing is the next step you can take. You have a few ways to go about viewing a property aside from the standard private 1-on-1 viewing with your agent.  However, these types of private showings are often the best way to get an intimate feel of the property.

Another way to view homes is during an open house. Open houses are like the garage sales of homebuying. Hosted by the listing agent, they are normally held the first weekend the home is on the market to drive up interest in the property.

You can also do a virtual tour, where the listing agent goes to the home and takes videos of the property. This can be a popular option for out-of-state buyers, but it is recommended to see the house in person before deciding.

Making an offer

Once you found a place to call home, an offer will need to be prepared for the seller. This will include several things:

1. Mortgage preapproval letter or proof of funds (if you’re buying cash)
2. Offer price
3. Escrow or “good faith” deposit

This is another step where working with an agent is beneficial because they will help you prepare the offer. Remember Once your offer is submitted, the seller and their client will review all offers they have received. Counteroffers are common, as well as outright rejection. A higher offer may have been put in, or another buyer may have offered more money down as a down payment, or even certain contingencies (small but important details such as the closing date or inspections) to entice the seller into accepting another offer.

Once you have an offer be accepted, you will be officially “under contract.” Certain deadlines must be met such as the inspection and appraisal periods. These deadlines can change depending on the conversations with the seller’s agent.

After the offer is accepted, you usually cannot back out of the deal without losing your “good faith” deposit. This money will be considered compensation to the seller for any money that may have been lost after taking the property off the market. There are exceptions, however. If something comes up during the appraisal or inspection, or a contingency outlined in your offer is triggered, then the money may not be forfeited.

Understanding appraisals

Once the negotiations have concluded and the offer is accepted, an appraisal will be one of your first steps in the closing process. Appraisals are used to determine whether the home’s contract price is appropriate given the home’s condition, location, and features.

Should the appraisal come back at the contract price or above, the transaction moves forward. However, if the appraisal comes back lower than the contract price, it can hold up or ruin the deal.

Since the appraisals protect the lender’s interests, once you are under contract, they will order the appraisal. You will often pay the fee for this, which can cost several hundreds of dollars. The licensed appraiser, under regulations from the Uniform Standards of Professional Appraisal Practice or USPAP, will take account of the interior or exterior of the property, the neighborhood, and recent comparable sales, generally made within the last 6 months. Other things included in the appraiser’s report are:

• Map showing the property and comparable sales used
• Exterior property sketch
• Square footage calculation
• Photos of the front and back of the house, as well as the street
• Front exterior photos of the comparable properties
• Market sales data, public land records, and tax records that were used to determine the fair market value of the property

The importance of a home inspection

Once your offer has been accepted, you will also order a home inspection. While you have the option to forgo an inspection, it could become a costly error. Inspections provide the opportunity for you to identify any major issues with the home before finalizing the deal. Should any major defects arise, you can back out of your offer without any penalty (within the specified inspection period in your offer).

A standard home inspection will generally take around 3 hours, in which the inspector will take note of:

1. Whether any problem is a major defect, minor defect, or a safety issue.
2. Which or if any items need replacing, repairs or service?
3. Items that are good for now but need to be monitored.

Inspections vary in price, but are usually a few hundred dollars, but make sure to consider that the cheaper the price the more probability that something could be missed. Spending a little extra can go a long way, as higher-priced inspectors will even tell you about routine maintenance that should be performed, which can be an excellent thing for first-time home buyers.

Unlike appraisals, you and your agent can and should be present for the inspection. This will give you real-time access to the inspector should you have any issue you need more clarification on. A home inspection cannot tell you everything that might be wrong with the home, and most inspectors aren’t specialized in every aspect of a home. Should they see something that could arise concern, they will tell you about it, but it is up to you to spend the extra money on specialists that can check

• Termite damage
• Inside pipes or sewer lines
• Plumbing
• Foundation of the house (If the crack can’t be seen without pulling up the floor, the inspector can tell you for sure)

TIP: If you see something wrong with the home, prior to making an offer, it’s a good idea to include that in the contract. Chances are that the seller knows about the defect but would rather have you pay for it after the fact.

If the home passes inspections and the appraisal, then once your mortgage is approved, you will head to closing. At closing day, you will sign all your paperwork and then receive your keys!