A first-time homebuyer, according to the U.S. Department of Housing and Urban Development (HUD), is someone who meets any of the following conditions:

• An individual who has not owned a principal residence for three years. If you’ve owned a home but your spouse has not, then you can purchase a place together as first-time homebuyers.
• A single parent who has only owned a home with a former spouse while married.
• A displaced homemaker who has only owned a home with a spouse.
• An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
• An individual who has only owned a property that was not in compliance with state, local, or model building codes—and that cannot be brought into compliance for less than the cost of constructing a permanent structure.

The absolute first step for your client is to get approved for a mortgage. Without being approved for a mortgage it will be quite difficult, if not impossible, to purchase a new home. 

Before you start shopping, it’s important to get an idea of how much a lender will give you to purchase your first home. You may think you can afford a $300,000 home, but lenders may think you’re only good for $200,000 based on factors like how much other debt you have, your monthly income, and how long you’ve been at your current job. 

Make sure to get pre-approved for a loan before placing an offer on a home. In many instances, sellers will not even entertain an offer that’s not accompanied by a mortgage pre-approval. You do this by applying for a mortgage and completing the necessary paperwork. It is beneficial to shop around for a lender and to compare interest rates and fees by using a tool like our mortgage calculator or Google searches.

An agent from the Ritter Real Estate team will help you locate homes that meet your needs and are in your price range, then meet with you to view those homes. Once you’ve chosen a home to buy, our team of professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. A good real estate agent’s expertise can protect you from any pitfalls that you might encounter during the process. Most agents receive a commission, paid from the seller’s proceeds.

Find a Home

Make sure to take advantage of all the available options for finding homes on the market, including using your real estate agent, searching for listings online, and driving around the neighborhoods that interest you in search of for sale signs. Put out some feelers with your friends, family, and business contacts. You never know where a good reference or lead on a home might come from.

Consider Your Financing Options, Then Secure Financing

First-time homebuyers have a wide variety of options to help them get into a home—both those available to any purchaser, including Federal Housing Authority (FHA)-backed mortgages and those geared especially to novices. Many first-time homebuyer programs offer minimum down payments as low as 3% to 5% (vs. the standard 20%), and a few require no down payment at all. Be sure to consult a lender about all of your options.

Pre-approvals and Choosing Lenders

Don’t be bound by loyalty to your current financial institution when seeking a pre-approval or searching for a mortgage: Shop around, even if you only qualify for one type of loan. Fees can be surprisingly varied. An FHA loan, for example, may have different fees depending on whether you’re applying for the loan through a local bank, credit union, mortgage banker, large bank, or mortgage broker. Mortgage interest rates—which, of course, have a major impact on the total price that you pay for your home—can also vary.

Once you’ve settled on a lender and applied, the lender will verify all of the financial information provided (checking credit scores, verifying employment information, calculating DTIs, etc.). The lender can pre-approve you for a certain amount. Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, such as finance a car purchase.

Make an Offer

Your real estate agent will help you decide how much money you want to offer for the house, along with any conditions you want to ask for. Your agent will then present the offer to the seller’s agent; the seller will either accept your offer or issue a counteroffer. You can then accept, or continue to go back and forth until you either reach a deal or decide to call it quits.

Have the Home Inspected

Even if the home that you plan to purchase appears to be flawless, there’s no substitute for having a trained professional do a home inspection of the property for the quality, safety, and overall condition of your potential new home. You don’t want to get stuck with a money pit or with the headache of performing a lot of unexpected repairs. If the home inspection reveals serious defects that the seller did not disclose, then you’ll generally be able to rescind your offer and get your deposit back. Alternatively, you can negotiate to have the seller make the repairs or discount the selling price.

Close—or Move on

If you’re able to work out a deal with the seller—or better yet, if the inspection didn’t reveal any significant problems—then you should be ready to close. Closing basically involves signing a ton of paperwork in a very short time period, while praying that nothing falls through at the last minute.

Things that you’ll be dealing with and paying for in the final stages of your purchase may include having the home appraised (mortgage companies require this to protect their interest in the house), doing a title search to make sure that no one other than the seller has a claim to the property, obtaining private mortgage insurance or a piggyback loan if your down payment is less than 20%, and completing mortgage paperwork. Other closing costs can include loan origination fees, title insurance, surveys, taxes, and credit report charges.

In a real estate transaction, the agent is usually paid by the seller via commission as opposed to a flat free. Typically, a real estate commission fee is 5–6% of the home’s final sale price. In many cases, both the buyer’s agent and the seller’s agent split the commission fee 50/50, both receiving 2.5–3%.

Yes, almost everything in real estate is negotiable. Typically, there is a difference between a home’s list price and how much it actually sells for. The current market’s saturation will determine how much wiggle room there is for negotiation. That being said, you never know who else is house hunting. Sometimes people will swoop in and offer the exact asking price, or even more than the asking price.

Earnest money is similar to a deposit when renting a place. It is made in good faith to demonstrate to the seller that the buyer’s offer is legitimate. The amount is usually 1-2% of the selling price and essentially takes the property off the market. The money also gives the buyer extra time to conduct a title search, get an inspection and property appraisal, and financing.