Gig Harbor Homes

Buying Your First Home?

Buying Your First Home

Buying Your First Home

Congratulations! You are thinking of buying your first home. We know this is a big decision for you with a lot of unknowns. Many first time home buyers will contemplate the decision for years before taking any action, even a first step. Our research indicates that once a first time home buyer does take the first step, they purchase their first home within three months. The following information will help feel comfortable about taking your first step.

Step 1

Finding the right home

You’ve probably already been using the Internet to search for homes, financing options and home buying information. You will find many of those resource links included here. We also encourage you to contact a Realtor at the very beginning of your quest and put that Realtor to work for you. He or she will help you find what you are looking for in a home, in the area you want, and at a price you can afford. When you find a home that you want to make an offer on, your Realtor will research the market and let you know if the price if fair. He or she can help you negotiate an offer and advocate on your behalf throughout the process.

A Realtor can help take the mystery out of the purchase of your new home and show you the ropes. There are hundreds of little details in buying a home and some of the details that are not so little-like property lines, easements, earnest money and the time allowed for home inspections (to name a few). Don’t worry, you will be involved throughout the process and if you have any questions along the way, do not hesitate to ask your Realtor.

How much is this Realtor going to cost?

It doesn’t cost a dime to call a Realtor and talk about your home quest. This is that first step we talked about. As far as total cost, there are many business models and compensation approaches real estate agents use when representing your buyers. Many agents work on commission and will be paid a percentage of the home sale price once the seller receives payment. Some agents work on a flat fee or other compensation model. Call a Realtor and ask what he or she charges and ask what services he or she will provide.

Ask family, trusted friends and coworkers for Realtors whom they have worked with and who they recommend. Your real estate agent is likely to ask you to sign an agreement to work only with them. This is a very common request if the agent is being paid a commission at the closing of the sale. Without the agreement, an agent could spend countless hours with a buyer finding the perfect home, only to have the buyer call another agent at the last minute to write the purchase agreement. Look over the agreement and discuss the length of time of the agreement and what it takes to cancel the agreement, if desired.
Note-not all real estate agents are Realtors, so be sure to look for the trademark Realtor or the Realtor logo when choosing your agent. That logo indicates they belong to the National Association of Realtors and have committed to a higher level of education, training and a strict Code of Ethics.

Is the market ready for you?

Every market in Washington is a little different but, in general, now is an excellent time to purchase your first home if you find the right home at a fair price. At the time of this printing, interest rates, on fixed mortgages are at historic lows. If you want to know what a percentage rate can do to a monthly payment, go online and search for a mortgage calculator and plug in some numbers. You will be amazed.

The real estate market is a much more balanced market today with buyers finding many more properties to choose from. That wasn’t the case over the past few years. Greater selection means the chances are better you will find the right home for you with the amenities you are looking for. Right now, it is a buyer’s market and that is good news for a first time home buyer (you)!

Will prices go down further?

Well, that is the big question isn’t it? Some people are getting good deals out there right now because some sellers are motivated and need to sell today. However, in general we do not think we all see across the board dips in prices. Here is why:

1. Washington has an extremely strong economy: unemployment is under 5 percent and, according to the Washington State Office of Financial Management, we are projected to add another 2 million residents in the next 12 years.

2. Washington had few subprime loans in danger of foreclosure so, contrary to what is happening in some states, we have many fewer “distress sales” or foreclosures.

3. The historic low mortgage rates are turning the market around. If you are renting, you are not alone. There are thousands of people just like you who want to buy a home and are just waiting to see what the market is going to do. As these people enter the market, supply will go down and the market will heat up.

Step 2

Determine how much home you can afford

Are you ready to buy your first home?

If you saved some money for a down payment and you anticipate living in that home or condo for three to five years, the answer s almost always yes. It is time for you to start building your own wealth instead of contributing to somebody else’s with your rent payments. In most all cases, the interest portion of your mortgage payment and your property tax payments are tax deductible. There are also some financial assistance programs for first time home buyers (see the resource section or ask your Realtor).

Step 3

Shop for a loan & research first time home buying programs

Help with your down payment

There are many federal programs and dollars available to assist first time home buyers. The people who receive this money learn about the programs and apply for assistance. Get on the computer and start with the HUD site www.hud.gov.

Basically, Down Payment Assistance Providers (DAPs) are government agencies that are developed to help you-the first time home buyer. The most common and available DAP is a FHA (Federal Housing Authority) loan. FHA loans are becoming more popular and recent changes in FHA loans have expanded the number of people and properties that qualify. The federal government knows that the first time home buyers are good for the local and national economy. Find out today if you qualify for one these programs, which are funded by our tax dollars. You Realtor will also help you interview and discuss your loan options with qualified mortgage people.

In some cases, you can get an FHA loan for as little as 3% down. Many first time home buyers don’t realize you can also use up to $10,000 from your IRA to purchase your first home. In many cases, you can use gifts or loans from family members as long as you disclose this information to the lender.

Financing

There are many great programs for the first time home buyer. You will want to spend some time talking with a loan officer to find the loan product right for you. This is another one of those “first steps” you need to take. It costs little or nothing to determine if you can buy a home right now and what price range you should be looking at. Most first time home buyers are surprised at what they learn and wish they had started the process a long time ago.

You Realtor will help you find financing. He or she may refer you to a financial institution they know works well with first time home buyers. Of course, you can pick a lender yourself. Choose a lender as carefully as you choose your Realtor. Take the time to interview and ask questions.

Lenders and Financial assistance programs look at three things when you apply for a mortgage: your debt-to-income ratio, your down payment and your credit score. If you pay your bills on time, do not carry a lot of debt and have a down payment needed for the loan program, you will be fine. Getting pre-qualified by your lender is an important first step in actually starting to look for you first home, and you will have real negotiating power when you do find the right home.

Step 4

Decide on a home & make an offer

Well, this is a giant step isn’t it? By now, you know how much you should spend on a home. Your Realtor will help you find the best home within your budget, and together you will make a written offer that details the amount of the offer and the conditions of the sale. If the seller “counters” your offer, you may need to negotiate until you both agree to the terms of the sale. Your Realtor can advocate on your behalf at your direction during these negotiations. You will be very much a part of all the decisions, and your questions will be welcomed by your Realtor.
Step 5

Get home inspected

Make your offer contingent on a home inspection. Talk to your Realtor and agree on a reasonable length of time for the inspection and include it into the offer. An inspection will tell you about the condition of the home and can help you avoid buying a home that needs major repairs, or help you negotiate with the seller to have the repairs made before you buy the home.

Step 6

Shop for homeowners insurance

Lenders require homeowners insurance to cover collateral for the loan (the home). Shop around as you would for any insurance coverage. Consult with your Realtor if you have questions.

Step 7

Complete the transaction & move in

You are now ready to complete the transaction. This is called “settlement” or “closing”. Closing is where you need to read and understand the documents you are signing (many home buyers don’t). Ask if you don’t understand any part of the document. There are no dumb questions when it comes to a purchase of this size.


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