So you’ve decided it’s time to join the ranks of homeownership. Paying rent to a landlord or living in Mom’s basement just isn’t cutting it anymore. But you’re a First Time Home Buyer PA – you’ve never purchased a home before.
How to Proceed?
Like any new venture, it makes sense to do some homework, and then lay out a plan. Of course, in this age of instant info via the internet, you can start viewing info and photos online at any time from the comfort of your couch. But before you start driving around looking at homes, figure out how you’ll handle the financial end of things.
Most people, and especially a First Time Home Buyer PA, don’t have the cash necessary to buy a home and therefore need a mortgage loan. And in order to provide a loan, lenders first require these basic items from a borrower:
- A suitable credit score (proof that you’ve properly handled debt in the past).
- Proof of established income vs ongoing debt (you have enough money each month to pay the loan after paying your other debt).
- Proof that you have accumulated sufficient cash to cover your down payment and closing costs related to your loan and home purchase.
- Various financial documents such as recent federal tax returns, W2 statements, pay stubs, bank statements, etc.
Once you’ve chosen a lender, met their requirements, determined the best financing program for you and received a mortgage pre-approval letter, you’re ready for the next step – select a real estate agent to represent you. You may have spoken or met with an agent already. And perhaps that agent helped to put you in touch with your lender. But now it’s time to get into some homes for sale and real estate agent can make that happen.
Experience is key here
A real estate transaction is complex and very likely the most expensive purchase you’ll make in your life. Think carefully before deciding to “help out” your cousin Louie who just got his real estate license or deciding to work with your friend’s wife who “does real estate part-time at night and on weekends”. A good idea: ask for an agent referral from someone you know who recently bought or sold a house.
It’s important that you understand some basics about how the industry works. When most people decide to sell a home, they hire a real estate agent to list, market, show, negotiate and close on the sale. That agent is called a “listing agent”. As a buyer, you are not obligated to contact or work with a seller’s “listing agent”. In fact, most buyers hire their own agent to help and represent them – a “buyer’s agent”. But the commission, or compensation, that the seller pays their agent is shared with your agent if a successful closing occurs. In other words, you choose and hire your agent but the seller pays your agent.
Making a List
Before you and your agent start viewing homes, work up a list of your Would Like to Haves and your Must Haves. Again, homework and a plan. If you are a First Time Home Owner PA family consisting of wife, husband, daughter and son, you might like to have a 4 bedroom home but you must have at least a 3 bedroom home. No need to look at 2 bedroom homes (too small) or 5 bedroom homes (too big and perhaps too pricey). Other important factors to consider: architectural style of house, interior features, yard size, neighborhood, school district, etc. And of course, you have your loan info already in-hand so you know what price range you are working with.
Look Under the Hood
When you’ve decided on a home to purchase, trust your agent to guide you through the complex maze that is the agreement of sale. You’ll need to decide on an offer amount, a closing date, other important timelines, the exact details of your mortgage contingency, what home inspections make sense for you, municipal matters, title company details, and various other terms built into your agreement. And you’ll need a plan on how to negotiate all of these terms with the goal of reaching an agreement with the seller.
Once you’ve reached such an agreement, again, trust your agent to make sure you are meeting your obligations and that the seller is meeting their obligations. If all goes as designed in the agreement, you will be sitting at a closing table in about 6-8 weeks signing a lot of papers, spending a lot of money, and eventually gathering up the keys to your new home! All the best to you in your home search and home purchase journey!
The author, Rick Sheppard, is a licensed real estate broker in Collegeville PA and a 30 year veteran of the real estate trenches. He knows a lot because he’s seen a lot. If you have any questions about this or any real estate related topic, feel free to contact Rick at [email protected] and he’ll do his best to answer your questions