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  • Writer's pictureMilan Kangrga

First Time Home Buyers: Tips & Tricks to Navigating the Journey into Homeownership

Updated: Sep 22, 2023

So, you're toying with the idea of ditching your landlord and becoming your own boss in the world of homeownership. Ah, the American dream! But hold up—when is the right time to take that monumental leap? If you find yourself in a constant mental tug-of-war between "let's do this" and "what if I mess up?", then buckle up, friend. You're not alone, and this blog post is tailor-made for you. The market's twists and turns should inform your strategy, not paralyze your decision-making. Homeownership is more than just a box to tick off; it's a cornerstone of your financial legacy. So, let's make sure you're geared up with the insider tips and foundational knowledge that turns first-timers into savvy homeowners. From grabbing that golden ticket called a pre-qualification letter to finding a real estate agent who's worth their weight in gold, we'll guide you through it all. Ready to go from commitment-phobe to homeowner? Let's dive into this journey, shall we?


Is Now the Right Time to Become a Homeowner?

If you're pondering the leap into homeownership, you might be wondering if now's the time to act or if it's better to hang tight in your apartment. Ever heard the old Chinese proverb, 'The best time to plant a tree was 20 years ago. The second best time is now'? Well, becoming a homeowner is a lot like planting that tree.

There's always something stirring in the housing and mortgage markets that could give you pause. It's crucial to weigh these factors, but remember, the market shouldn't determine your success; it should only guide your strategy.

Taking the plunge into homeownership is a major stride toward financial freedom and wealth building. The best way to nail it is to dive in as soon as you can, equipped with the know-how to navigate the market. This way, you're set for success, no matter the market conditions.


Where to Start?

Once you're ready for homeownership, your gut might say, 'Start house hunting,' because let's be honest, that's the fun part.

But the real first step to becoming a savvy homeowner is to get educated. To do that, you'll want to meet with a mortgage advisor. They set the stage by providing a pre-qualification letter, which is basically your golden ticket into the homebuying game. But more on that later.

A mortgage advisor will walk you through the loan options that are on the table, especially tailored for first-timers like you. They'll use easy-to-grasp comparisons to bring you up to speed on how to tackle the current market. And knowing how to read the market is your secret weapon for homeowner success.

Now, what's the next move? Locking in the right Real Estate Agent. This is a game-changer. The agent you pick can be the difference between a homebuying journey that's a headache or one that's smooth sailing. We'll talk more about what to look for in a Real Estate agent a little bit later.


Why is the Pre-Qualification Letter Your Golden Ticket?

Getting pre-qualified is not only the best way of educating yourself on all options available to you, but it's also how you show all parties involved that you are a serious buyer. Below are 5 reasons why getting that golden ticket is where you should always begin.

1) Getting pre-qualified means getting educated on all of your options. Through the pre-qualification process, your mortgage advisor will go over all of the options that you qualify for so that you can ultimately choose which options make the most sense for you and your specific situation. Being an educated buyer gives you a huge leg up.

2) Part of being an educated buyer means saving yourself from disappointment. I can't tell you how many times I have seen people fall in love with a home in a certain price range only to find out that they don't qualify for a house in that price range. When you get pre-qualified, your mortgage advisor will show you what price range to shop in based not only on what you qualify for, but also what you are comfortable with. An educated buyer goes house hunting while knowing three key price points. The max they qualify for, the range they are most comfortable with, and the range they are willing to stretch to for the "perfect house".

3) Beyond being an educated buyer, getting pre-qualified can prevent many headaches throughout the process. Part of the pre-qualification can include verifying things like income, assets, and credit. Getting this part out of the way early in the homebuying process ensures that there won't be any issues when it's go time.

4) Having that golden ticket shows the seller that you are not messing around. When you do find the right house and are ready to make an offer, you will want to include a copy of that golden ticket with your offer to show the sellers that you have done the ground work already, and the odds of your loan falling through at the last minute are slim to none.

5) It is also important to show your Real Estate Agent that you are a serious buyer. Remember that Real Estate agents don't get compensated for the mere act of showing houses. They get compensated with a percentage of the transaction once it closes. As a direct result, they will often need to prioritize clients that have this golden ticket over clients that do not. This means that if you want your Real Estate Agent at your beck and call, and to show you all of the houses that you want to see on your schedule, this golden ticket is your way in.


Choosing a Real Estate Agent

In the world of real estate, the phrase "it matters who you work with" has never been more true. Your choice of guide through this market can very well determine your success as a homeowner. Ultimately, you want to find a Real Estate Agent and Mortgage Advisor that will work as a team to hold your hand and guide you through the homebuying process. Here are some compelling reasons why I believe that working with a local Realtor and lender places you in the most advantageous position:

1) Local Realtors and lenders possess an in-depth understanding of the local market, property values, and prevailing economic trends. Such expertise can guide you toward the right loan products and provide advice tailored to specific neighborhoods or types of property.

2) They are acutely aware of local regulations and county-specific documentation requirements, ensuring the process aligns with local standards. This attention to detail reduces the risk of last-minute complications in the homebuying journey, which could delay or even prevent a closing altogether.

3) Local lenders and Realtors typically adopt a more personalized approach, taking the time to understand their clients' distinct needs and circumstances. This leads to more customized mortgage solutions and efficient problem resolution.

4) Local Realtors and lenders are generally at your disposal seven days a week, at any hour. Whether you have a quick question late on a Sunday evening or require an in-depth, face-to-face discussion, their availability can transform a potentially stressful process into a streamlined experience.


What To Expect Through Out the Home Buying Process

Pre-qualification: Arming yourself, not only with that golden ticket, but also the knowledge of an educated buyer. This process will include meeting with a Mortgage Advisor to discuss your situation, your goals, your wants, and your needs. You will complete a credit application, and your mortgage advisor will be able to use a side by side presentation to help you choose the best options for you and your situation.

House Hunting: The fun part! Spending days and evenings looking at houses online. Going to open houses and private showings to visualize whether or not you can see yourself living in each home. While narrowing down which areas and checkboxes are most important to you, until you find the right home.

Making an Offer: Once you find the right home your Real Estate Agent and your Mortgage Advisor will work together to help you structure an offer that is best for you while also giving you the highest chance of getting your offer accepted.

Under Contract: Once you, and the seller, agree to terms and your offer is accepted you are now under contract. Most contracts have a 30-day closing period; however, this can vary based on different circumstances.

Closing Period: During the closing period everyone works toward getting you to a smooth and on time closing. Your real estate agent will help you with things such as completing a home inspection and negotiating any necessary repairs. Your mortgage advisor will be working on getting the appraisal done, as well as getting all paperwork through underwriting.

Closing Day: The big day! This is the day you will sign all of the paperwork to close the transaction as well as pay your cash to close. This is generally done at the title office, though it is possible in certain circumstances to arrange for a remote closing with a mobile notary. Your Real Estate Agent and Mortgage Advisor will generally be present to help answer any questions as the final paperwork is being signed. And of course to celebrate with you once it's all said and done.


Important Terms/Phrases to Know

Down Payment: The initial, upfront portion you pay when buying a home.

Closing Costs: Fees paid at the end of the home-buying transaction. On average the closing costs will amount to 3-6% of the loan amount and these fees can include things such as the appraisal, escrow funds, discount points, etc.

Cash to Close: All monies due on closing day, generally including both your down payment and closing costs.

Seller Concessions/Credits: When makin your offer on a home, you can negotiate seller concessions. This generally a credit given by the seller to be paid toward your closing costs as to lower your total cash to close.

Interest Rate: The cost of borrowing money, expressed as a percentage.

Annual Percentage Rate (APR): The cost to the borrower as an annual percentage. This cost includes the interest rate as well as other finance related fees such as discount points.

Discount Points: An upfront cost/fee you may pay to lower the interest charged on your monthly payments.

Fixed-Rate Mortgage: A mortgage with an interest rate that doesn't change.

Adjustable-Rate Mortgage (ARM): A mortgage with an interest rate that can fluctuate throughout the term of the loan based on market conditions.

Home Inspection: A thorough check of a property's condition.

Appraisal: An evaluation of a home's market value. This is done by an unbiased third-party. Neither the buyer, seller, Real Estate Agent, or the Mortgage Advisor have any control over the appraiser. In fact, the Mortgage Advisor is not even aloud to communicate with the appraiser, until after the appraisal is completed and submitted.

Escrow: A third-party account where funds are held before they're transferred to finalize a home purchase.

Homeowners Insurance: Insurance that covers potential damage to your home. When using a mortgage to purchase a home, a homeowners insurance policy will be required.

Private Mortgage Insurance (PMI): Insurance that protects the lender if you make a down payment of less than 20%. It is important to note that PMI only applies to conventional loans. FHA and VA loans do not require PMI, however FHA loans have their own version of it.

Loan-to-Value Ratio (LTV): The ratio of your loan amount to the home's value. For example, if the home's value is $100,000 and your loan amount is $90,000 then your LTV is 90%.

Debt-to-Income Ratio (DTI): A measure of your ability to pay back the loan based on your income and debts. This ratio is calculated by dividing your total debts by your total gross income. For example, if you have $1,000 in outgoing monthly debt and your gross income is $4,000/month then your DTI is 25%.

Earnest Money: A deposit showing the buyer's good faith in a transaction. This deposit is generally 1% of the purchase price. It is usually due within a couple days of going under contract, and will be applied toward your cash to close on closing day.

Contingency: Conditions that must be met for a home sale to go through.

Title Search: A review of public records to ensure the seller is the actual owner of a property and that there are no liens against it.

Underwriting: The process of evaluating the risk of insuring or lending to you.

Equity: The difference between your home's market value and the balance of your mortgage. For example, if your homes market value is $300,000 and your mortgage balance is $250,000, then you have $50,000 in equity.



And there you have it, folks. From pondering if it's the right time to finally gripping that set of house keys, the journey to homeownership is a winding road filled with crucial decisions. But remember, you don't have to navigate it alone. With the right team of experts by your side—from mortgage advisors to a killer real estate agent—you're already ahead of the game. Becoming a homeowner isn't just about escaping the rent cycle; it's about planting a seed for your future, watering it with knowledge and strategic choices, and watching your financial legacy grow. The market will always ebb and flow, but armed with the golden ticket of pre-qualification and a well-crafted strategy, you'll be navigating like a pro in no time. And when you finally sign that dotted line on closing day, you'll realize that every step, every query, every moment of doubt was worth it. After all, you're not just buying a home; you're investing in a lifetime of possibilities. So what are you waiting for? Your keys to the castle—your future—are just a decision away. Until next time, happy house hunting!

Contact The Wealth Captain Today!

Whether you just have a question or would like to get started on your home buying journey, click the button below to contact me.


The Wealth Captain

Mortgage Advisor | NMLS#2428833

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