Your First Home: A Step-by-Step Guide to Confident Homeownership

What an exciting time!!! Purchasing your first home is a HUGE milestone, but the process can seem daunting to first-time home buyers. With meticulous planning and a step-by-step approach, you can navigate this journey confidently. Here’s an in-depth guide to help you become a homeowner.

1. Saving for Your Home

Financial Preparation:

• Down Payment options: Most conventional loans require 3-20% of the home’s price as a down payment. For FHA loans, it can be as low as 3.5%. VA and USDA loans may require no down payment. There are many great down payment assistance programs that I can tell you about that can soften the blow for your first home purchase! 

• Closing Costs: These usually range from 2-5% of the home’s purchase price and include lender fees, title insurance, and taxes.

• Emergency Fund: It is important to ensure you have savings set aside for unexpected costs, such as repairs or moving expenses.

Strategies to Save:

• Create a strict monthly budget and set aside a portion of your income.

• Cut non-essential expenses, like dining out and subscriptions.

• Explore down payment assistance programs if eligible.

2. Understanding Mortgages and Loans

Types of Loans:

• Conventional Loans: What you hear about all the time- best for buyers with strong credit and a significant down payment.

• FHA Loans: Great option for buyers with lower credit scores and smaller down payments.

• VA Loans: Awesome benefit exclusive to military members and their families, offering favorable terms including $0 down options.

• USDA Loans: Only available for homes in rural areas with low-income eligibility requirements.

Getting Pre-Approved:

Getting your pre-approval done shows sellers you’re a serious buyer and helps you understand your borrowing limits. To achieve this, you have to gather documents like proof of income, bank statements, and tax returns to provide to your lender. Having this all handy will expedite the process. In Denver, a pre-approval letter is essential before writing any offers!

Choosing a Loan type

You will need to decide between a fixed-rate mortgage, which keeps payments consistent, or an adjustable-rate mortgage (ARM), which may offer lower initial rates but can fluctuate over time. Your lender can help guide you through your options here.

3. Defining Your Needs

It is essential to create a checklist of essentials to guide your home search:

• Location: Consider proximity to work, schools, shopping, public transportation, and anything else you need to be close to.

• Size: How many bedrooms and bathrooms do you need?

• Features: Do you need a home office, storage space, or a yard for your pet?

• Flexibility: Focus on structural qualities rather than cosmetic details, like paint or flooring, which can be updated later.

4. The Home Search

Hiring an Agent:

Hiring a great real estate agent can help you from the beginning to the end! They can not only help you identify suitable properties, negotiate effectively, and handle the paperwork, but they also usually have a list of inspectors, lenders, insurance providers, electricians, cleaners, and everything in between to make sure you are completely taken care of! The right agent can make the process enjoyable, stress-free, and even FUN! 

Viewing Homes:

• Take notes and photos of each property to help you remember things about them you don't want to forget.

• Try to visually check the condition of the roof, foundation, plumbing, and electrical systems to the best of your visual ability, but know that if you proceed with writing an offer, that you will be hiring an inspector to thoroughly inspect it from top to bottom!

• Do research about the neighborhood’s safety, schools, and amenities. Your agent can provide you with places to find out all of this information!

5. Making an Offer

When you find the right home, you will be ready to submit an offer with your agent’s guidance.

• Competitive Pricing: Research comparable homes in the area to make a fair offer. A great real estate agent will provide you with a list of recently sold comparable properties in the neighborhood.

• Contingencies: You will always want to include clauses for inspections, financing approval, and appraisal.

• Earnest Money: This deposit shows your commitment and is defined by the sellers and listing agent. A wonderful real estate agent will let you know what this is for each home before you even see it.

6. Inspections and Appraisals

Home Inspection:

A professional inspector will assess the home’s condition, identifying potential issues like water damage or faulty wiring. Depending on the findings, you may renegotiate the price or request repairs. This is where it is crucial that you have a good real estate agent that has a list of trustworthy contractors to get you accurate quotes if concessions are requested or the price is renegotiated. 

Appraisal:

Every lender will require an appraisal to confirm the home’s market value matches the loan amount. 

7. Closing the Deal

What to Expect on Closing Day:

• Review all final documents, including the Closing Disclosure and mortgage terms.

• Bring a government-issued ID, proof of homeowners insurance, and certified funds for closing costs.

• Conduct a final walkthrough to ensure the property is in the agreed condition.

Key Closing Costs:

• Title insurance fees.

• Recording and transfer fees.

• Prorated property taxes, homeowner's Insurance, and homeowners association (HOA) dues.

8. Securing Homeowners Insurance

Why It’s Essential:

Homeowners insurance protects your investment from risks like hail, fire, theft, or liability issues.

Ensure your policy covers:

• Dwelling and personal property.

• Liability for accidents on your property.

• Additional living expenses in case of temporary relocation.                                                                                                                                                          

I have a lot of great insurance agents I can refer you to!

Consider bundling policies, like auto and home insurance, for additional discounts.

9. Budgeting for Additional Costs

Monthly Costs:

• Mortgage payments (including principal, interest, taxes, and insurance).

• Utilities, maintenance, and potential HOA fees.

Unexpected Expenses:

Set aside funds for repairs, appliance replacements, and other unforeseen costs.

10. Moving In and Beyond

Once you’ve closed on your home:

• Change locks for security.

• Update your address with banks, employers, and subscriptions.

• Set up utilities and familiarize yourself with the neighborhood.

Buying your first home is a mix of excitement and responsibility. With preparation and expert guidance, you’ll find a home that meets your needs and supports your lifestyle for years to come.

HERE is a great video on this topic.