Guide to Buying Your First Home
1. Organize Your Finances
Congratulations! You have decided to make the move toward owning a home! The first step to buying your home is to establish how much money you will need to have saved and what you can comfortably afford to borrow. It is important that you have saved up enough beforehand to cover any costs that you may incur such as a deposit for the house, legal fees, title fees, survey fees, moving costs, plus the purchase of any furnishings you may need for your new home.
Before you can start house hunting, you will need to find out how much you can comfortably afford to borrow and pay back each month. Our Mortgage payment calculator will help you get a preliminary idea of your budget. Your loan officer will be able to help you determine exactly how much house you can afford. For your first meeting with the loan officer, you will need to bring your last two months' pay check stubs, last two years’ tax returns, most recent two months’ statements from all asset accounts (checking, savings, retirement, etc.), and verification of other income (child support, alimony, etc). If you are self-employed, you will be asked for your business accounts for the previous three years. Your loan officer will also need proof of your identity and address.
Your loan officer will complete a full review of your current income and expenditure and discuss your short and long term financial goals. This will help them determine how much mortgage you can comfortably afford to repay. After being pre-approved for a loan, your loan officer will recommend which loan program is best suited to your needs and issue a pre-approval letter that states this information.
2. Start House Hunting
Now that you know how much you can afford to spend on buying your home, you can start house hunting. Contact a Realtor, check local newspaper and websites for details of properties for sale within your price range. Visit as many properties as you can and don't be afraid to go back for a second look or to visit at different times of day. Draw up a checklist of features you are looking for before you visit and take a camera with you. Take notes and pictures during the visit. It is very difficult to remember all the good points (and some of the not so good ones), once you have left the home. This way you can draw comparisons between the properties that you see and make an informed decision.
3. Make an Offer
When you have found the property you want, the next step is to make an offer. It is important to establish whether the price includes carpets, curtains, light fixtures, appliances and such items; if not, you may want to ask the seller to make a list of items to be sold separately.
To make your offer, tell the real estate agent that you wish to buy the house and how much you are prepared to pay. If the seller does not accept your offer, further negotiations may occur, or you may decide to choose a different house. When your offer is accepted, you will receive written confirmation from the real estate agent, however, you are not legally obligated to purchase the house at this stage.
4. Arrange Your Mortgage
Now that you have chosen your property and agreed on a price, you should make another appointment with your loan officer and arrange for your loan application to get underway. Your loan officer will go over all payment details, and answer any questions you might have.
Once your application has been completed and processed, your loan officer will be able to confirm if your mortgage has been agreed 'in principle' subject to final checks of your employment, income and credit status. An appraisal of the property will then be done to substantiate the agreed upon sales price. Your loan officer will keep you up to date during this process.
5. Real Estate Appraisal and Home Inspection
Before the Lender can agree to your mortgage, they will obtain a property appraisal, which will help them to decide whether and how much to lend on the property. You will be given a copy of the appraiser's report, but it may not provide sufficient information to help you to decide to go ahead with the purchase. For your benefit, you may want to consult with a home inspector. A home inspection is important in analyzing the condition of such things as the electrical wiring, or to investigate the extent of any suspected dampness/water damage.
6. Mortgage Offer
When all of the checks are completed and everything is satisfactory, you will receive a 'mortgage offer' which is a formal document confirming that your mortgage loan has been agreed. The mortgage offer includes a full illustration of mortgage costs and terms. A copy will be sent directly to your real estate agent who will then be able to finalize the purchase on your behalf.
7. Exchange of Contracts
When your real estate agent has completed various inquiries about the property, such as checking the seller's title and examining the contract, and is happy with the mortgage offer, you will be ready to 'exchange contracts'. Your real estate agent will ask you to sign the contract and pay the deposit. Your signed contract will then be sent to the seller's real estate agent, who in exchange will send back an identical contract signed by the seller. This is the 'exchange of contracts' that legally binds you to purchase the property. If you pull out at this stage you would lose your deposit. Once contracts are exchanged, a date for closing on the purchase can be agreed.
8. Insurance
You are required to have an adequate home owner’s insurance policy for the property in place from the exchange of contracts.
9. Preparing To Move In
With the closing date set, you can now obtain quotes from moving companies. Don't forget to inform the gas, water, electricity, and telephone companies of the change in ownership. Arrangement should be made for meters to be read and services reconnected.
10. Payment of Closing Costs
Shortly before the completion date, your real estate agent will ask you to sign the final documents, and will request the mortgage loan money from your lender. You will then be asked to pay the balance, legal fees, and any other closing costs that apply.
11. Completion
Once all of the formalities have been completed you can collect the keys and move into your new home, joining the millions of others who are enjoying the benefits of home ownership.
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