If you have decided that it's time to purchase your first home there are a 12 steps you'll need to take on the path to home ownership. Read below to learn more about these steps and what you can do to make the process as smooth as possible.
1) Figure Out Where To Live
This may seem like a no brainer, but there is a lot to consider when making this decision. Education, Commute, Community, Taxes, Property Sizes, and proximity to shopping, restaurants, and other amenities are all need to be considered when figuring out just where to live.
For families with children, the education system often plays a major factor in deciding where to live. Neighboring towns can have wildly different programs and some top magnet schools may be surrounded by schools that struggle to meet basic requirements. And if you are instead looking at private schools, the public school system doesn't matter as much. It's all up to you to decide how important the public education system is, and whether it meets the needs of you and your family.
Here in Fairfield County Connecticut, a large portion of the population commutes into New York City, and the time for that commute is a major factor. From Greenwich, CT the train ride into the city can be as little as 45 minutes while from other parts of the county, you could be looking at a 2 hour commute each way. And even in the same town commutes can vary up to 30 minutes based on the roads you have to take, traffic, parking, etc.
Every town has a distinct personality. A quick Google search can give you a good idea as to what you'll find in the different towns. The descriptions you'll find may be a bit more extreme than reality...that's what makes them entertaining, but generally speaking you'll find that they are all based on truth and are a good gauge for what you'll actually find. Figure out if the personality of the town and it's people mesh with who you want to associate with.
Taxes are another big factor, especially here in Southern Connecticut. While certainly lower than the taxes you'll find across the border in Westchester County, NY, property taxes in Connecticut are still high, and vary significantly from town to town. This impacts the affordability of a town. Remember, taxes can make up a significant part of your monthly housing expenses.
Do you want to see your neighbors? Depending on the town you choose to live in, you may not have a choice. Some towns are zoned so that the minimum property size is half an acre, while others allow for much smaller lots. So think about whether you feel safer having people nearby, or if you want to hear the crickets chirping.
And depending on your lifestyle, you may like to walk everywhere and have your grocer, gym, favorite restaurants, and dry cleaner all easily accessible, or you may prefer to be remote, and only visit these places on occasion, making their proximity to your home less important.
Learn about the Towns of Fairfield County and find the right place for you.
2) Determine How Much You Can Afford
Look through your current income and expenses and savings and decide how much you are willing to spend on a monthly basis for housing.
Your savings will need to be applied towards the down payment on the house. While it is best to put down at least 20% of the price of the home, it is possible to purchase homes with a lower down payment, but at an additional cost.
An online calculator can help you to figure out what your mortgage will be for a given price and down payment. But remember that these calculators do not take into account the annual taxes that you must pay on your home. Take a look at some homes that you think are in your price range and find out what the taxes are on those properties and factor that into your calculation. Here in Connecticut, the taxes vary quite a bit depending on the town, so the price of an affordable home in one town may not be affordable in another.
While the bulk of your housing cost will be for the mortgage and taxes, houses need constant repair and updating. One estimate is that you should budget for 1% of the home's cost in upkeep each year.
Before you start looking or talking to Realtors, get in touch with your bank and get a pre-approval letter for the most that you are willing to spend on a home. This tells the Realtor that you are serious and not wasting their time by looking at houses that you will never buy.
3) Decide on Your Wants and Needs
We already discussed the importance of the town you choose to live in, but what about the house itself? How large does it need to be? How much property do you want to maintain? Do you need a certain number of bedrooms? Do you want a pool, a 3 car garage, or a particular style? Figure out what is a must, and where you are willing to concede, and make sure that you know these things before the next step...
4) Find a Great Realtor!
There are lots of mediocre Realtors out there. Yes, they are all licensed, but it's only a small percentage who are GREAT, and have the skills and know how to handle all the challenges that Real Estate has to throw at you. Read more about finding a great agent to help you with the purchase of your home.
As mentioned in the last step, bring your lists of wants and needs to your agent and ask them for their thoughts. "Needing" a house with new everything may not be realistic in some markets, and a good agent can either provide you with ballpark estimates on how much it would cost to update a room or add an addition, or can connect you with trusted partners who can. Your agent may also have additional questions for you that can help hone in on the best homes for you and your family.
One thing to remember is that as a buyer, your agent is paid for by the seller, so unless you are an agent yourself (in which case you probably shouldn't need to read this article) it's always a good idea to have someone experienced representing your best interest.
While your Real Estate Agent will certainly help with the process and negotiations of purchasing your home, their ability to find homes that meet your needs is hardly any better than what you can do on your own. So take to the internet and start searching. Compile a list of properties that you'd like to see and have your agent show them to you. For homes that are new to the market that you think you'll love, don't dawdle and get in there to see it ASAP. I can't tell you the number of times I've had clients tell me that they'd like to go see some homes next weekend but don't give me a list until a day or two before, and by the time I set up the appointment, there is already an accepted offer on the house.
Ask your agent any questions that come to mind to your agent as you walk through each home. It is important that any concerns you have are addressed before making the decision to put an offer in on a home.
6) Be Decisive
If you come across a home that you love, don't sit around and wait for someone else to snatch it up. Have your Realtor get in touch with the agent listing the house and let them know that you plan to make an offer. This way if there are other offers coming in, you aren't locked out of contention simply because you needed a few days to think about it. I know that there is always the fear of missing out on something better, but if that something better does come along, you can always back out of the deal, at some cost, but until the ink is dry on the final contract, you are not obligated to purchase the home.
7) Submit An Offer
Submit a written, signed contract with a personal check made out to (your broker or lawyer), Trustee, for $10,000. (This amount may differ based on the brokerage that you use). This is your formal offer to the seller, and once the price is negotiated on and signed by the sellers you are well on your way to becoming a home owner.
The money that you put down at this stage goes into an escrow account, meaning that your broker or attorney deposits and holds onto the funds until closing on the house, and they will be withdrawn from your account once the contract is signed by the seller. It is a way to show that you have a vested stake in the purchase of this home and won't just change your mind later. You will however have contingencies in place for an inspection and securing a mortgage, so that if the condition of the house is unacceptable, or you are unable to secure a mortgage, the initial deposit may be returned to you.
In addition to the offer and check you will need to provide:
8a) Inspection the House
Following the acceptance of your offer you will have 7 business days (or another agreed upon duration) to complete an inspection of the property you intend to purchase.
8b) Secure a Mortgage
With a signed contract in place, you can begin the mortgage process. Get back in touch with your mortgage broker and let them know the agreed upon price and expected close date and they can get started on securing your mortgage.
You will need to provide your broker with:
After the paperwork is completed, the mortgage company will schedule an appraisal of the home.
9) Negotiate
Once inspections are completed, you will have 3-5 days to negotiate with the seller about what the seller will fix or what credit towards closing costs they will provide in lieu of making repairs.
In addition to negotiating on inspection findings, you may also have to negotiate based on the appraisal. Banks are not willing to finance a home that costs more than what they believe it to be worth. They don't want to be lose money should you have to sell in the near future, and don't want you to be in a position where you have less equity in the home than what you are putting down in your down payment. So if the home does not appraise for more than you are offering, you will need to reach an agreement with the seller on a way to reach the appraisal value.
If you have significant concerns regarding the findings of the inspection or cannot come to an agreement with the seller about the price post-appraisal, you may back out of the deal at this time.
10) Prepare to Move
While the purchase of a home is a lot in and of itself, you can't forget that once the house is yours, you need to take care of it and ultimately move in.
What needs to be done prior to moving will differ based on what you'd like to accomplish before your boxes arrive, but there are a few things that you will need to do.
In addition, you may want to:
11) Close On the House
Once negotiations are complete and the mortgage company has provided their commitment letter, stating that they will cover your mortgage and provide you with the specific terms, your closing is in the hands of the lawyers. Your attorney will work with the seller's attorney to draft all of the paperwork for closing.
On the day of the closing, you should complete one last walk through of the house to make sure that the home was left in an acceptable state and that no further damage was incurred and all agreed upon repairs were made.
Then it's time to bring a certified bank check for the remainder of your down payment, your ID, proof of insurance, your personal checkbook, and your favorite pen to the attorney's office and get ready to sign...a lot.
In addition to the cost of the home, you may be responsible for paying taxes, fuel remaining with the home, and attorney fees at the time of closing. Your attorney should provide you with this amount prior to closing.
The attorney may provide you with keys to your home at that time or you may need to wait for them to bring all of the papers back to the seller's attorney and complete the transfer of monies before receiving your keys
12) Move In
Congratulations! You are now a homeowner. It is however time to take responsibility for your new home.
The first thing that you'll want to do is change the locks on ALL of the doors. The previous owners may be great people and have left you with every key to the house, but you don't know who else has a copy. Protect your family and your belongings by hiring a locksmith to come in and change all of your locks before your belongings arrive.
When and how you move into your home is entirely up to you. Some people start fresh in their new home while others may be combining households and have more than is needed. Some are moving down the street, while others are coming from across the country, so logistics may vary widely. Moving is also stressful, so take a deep breath if you need to, and know that it'll all be worth it in the end.
My only suggestion for the move in is this; try to unpack as much as you can within the first week of moving. Once you get beyond that, boxes tend to be forgotten and finishing the unpacking becomes less and less of a priority. If you can get a lion's share of the unpacking done quickly your house becomes a home much more quickly and you can really start to enjoy it.
If you have any more questions about the home buying process, or are looking for a good agent, my team and I are always here to help.
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