First Time Home Buyer's Guide

Purchasing a home, especially for the first time, can be extremely overwhelming. Along the course of your transaction, you will receive help, guidance and a lot of information to help you make an informed decision on the home that you're going to be purchasing and to keep track of all the details. These include your real estate agent, lender, home inspector as well as title and escrow.

You will want to make sure you connect with the real estate agent that you choose. This person will be researching homes that best meet your needs. You're not going to want to spend a lot of time running house to house and realize your time has been wasted because your agent doesn't understand what you're looking for.

Your real estate agent can also help you determine how much you can afford. It's always best to stay within your financial comfort zone as far as your monthly payment (payments will consist of principle, interest, 1/12 of annual property taxes and 1/12 of your annual hazard insurance premium). It's best to not always count on future raises, etc as life can change quickly and those financial windfalls may not come through as planned. You will also want to remember that those windfalls can be used to update your home, buy new furniture or add on. This is a lot better feel than being strapped every month by your house payment.

You will need to be approved with a lender for a home loan before placing an offer on a home. Your real estate agent can help you locate a good lender or ask around for referrals. It's good to talk with a couple lenders as each may have their own programs to offer. There are also many first-time homebuyer programs available.

Your lender will pre-approve you based on several factors including employment and credit history (FICO Score). They will issue a letter of pre-approval including an approved loan amount and a statement that the property will also need to be approved. This is usually done by an appraisal of the property.

When you find your Dream Home, your agent will help you negotiate the terms with the seller. Once the terms are agreed on, you will hire a home inspector to inspect the home from the roof to crawlspace to make sure the home is in acceptable condition. Just remember that a home that's lived in will not be in new condition or put back to new condition. This is something your agent can help with once the inspection is done. You can ask the seller to do repairs that are necessary, but the seller is not obligated to do them. This is another negotiation period.

Around the time the home inspection is being done, the lender will order an appraisal to determine the market value of the property. The appraisal must come in at least at the agreed purchase price. If it doesn't, you have the option to walk away from the transaction, negotiate a new price with the seller or come up with the price difference yourself (bring in add'l $ to close).

Once the lender is happy with the appraisal, loan documents can be ordered and are sent to the escrow department. Escrow is a neutral party in the transaction that closes the deal. They take instructions from the buyer's side and well as from the seller's side and transfers buyer's funds and the seller's title to the property.

You will sign all your loan documents at the escrow office one to two business days before the actual close of escrow (agreed date in the contract). The close of escrow is when the documentation is actually recorded, funds disbursed to the seller and keys given to the buyer.

At this point, buyer has legal possession of the property and can start moving in!