Steps to Buying a House for the First Time

Buying your first home is both challenging and rewarding.

Owning a home may be a dream you've had for a long time. At times, it may seem that dream might never become reality. However, after months or years of saving money and many hours spent searching the market, you may finally be ready to become a homeowner. Buying your first home is a significant step, and owning a home is a major responsibility. Plan carefully to ensure you can handle it financially.

Instructions

1. Arrange to meet with a credit counselor. A credit counselor can review your finances and help you decide how much you can afford to spend on a down payment and on mortgage payments. For information about free credit counselors near you, contact the Department of Housing and Urban Development (HUD) at 800-569-4287 or visit HUD.gov.

2. Understand your credit score, which is critical in determining how much money you can borrow and its interest rate. A credit score of 620 or above typically is sufficient to acquire a mortgage loan to purchase a home. If your score is below 620, consider raising your score by paying down debts before attempting to buy your first home.

3. Search for homes in your price range. Use multiple resources. Enlist the aid of a real estate agent who can show you homes in your area. Look for homes yourself using online resources, such as Realtor.com and ForSaleByOwner.com.

4. Have the homes you're considering inspected. Homeowners, particularly first-time homeowners, may not know what to look for when considering a house. A professional inspector can examine the foundation, windows, siding, roof, plumbing, heating, electrical work and other areas of the house to ensure everything is functioning properly. The inspector charges a fee.

5. Gather the information needed to apply for a loan. You will need identification, the previous year's tax forms, your last bank statement, proof of employment, proof of income, a written estimate of how much the house you want is worth, and whatever other information the lender requests.

6. Find a lender. This is usually a bank, mortgage broker or credit union. Apply for a loan with more than one financial institution and compare rates and fees. Understand if and when rates can rise for each loan and how much they can rise. Be sure the lenders have preapproved you for the loan, not just prequalified you, before you start comparing. You may want to have preapproval for a loan before you begin your house search.

7. Make an offer on the home. Use the listed price of the home as a base and add information from the inspection, the value of other homes in the neighborhood, and the length of time the home has been on the market as guidleines for your offer. You may choose to bid lower or higher than the listed price depending on your level of interest and the competition from other potential buyers. Determine the amount you are willing to pay if the initial offer is rejected by the seller.

8. Shop around for the required insurance. This typically includes title insurance and homeowner's insurance and sometimes more. Consider the amount and type of coverage being offered, the cost of that coverage and the reliability of the insurer.
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9. Make necessary payments to your escrow agent. The escrow agent is the third party involved in the transaction between you and the seller, and he or his company handles funds until all conditions are satisfied by seller and buyer. Once documentation is provided that all terms of the agreement have been met, the escrow can be closed. At that point, the escrow agent transfers the deed to your name.

References

• USA Today: Buying Your First Home Can Be Intense
• Real Estate abc: Your Escrow and You
• Salary.com: First-time Home Buyer Tips

Resources

• Department of Housing and Urban Development
• Realtor.com
• For Sale By Owner.com