Here is what any Grand Rapids real estate first time home buyer needs to do to be ready to buy their first home in Grand Rapids!
1. GET YOUR CREDIT IN ORDER
The first step toward buying your first home takes place months before walking into your lender’s office. It’s crucial to check your credit score at least three to six months ahead of your mortgage application. You can request a free copy of the report from each of the three credit bureaus (Experian, TransUnion and Equifax) at many different web sites.
2. SET UP A MEETING WITH AT LEAST ONE LENDER
The next step is to set up at least one or two meetings with a local lender and get yourself pre-approved for a certain dollar amount. There are also other costs involved with buying a home, so also get a good-faith estimate from each lender you speak to, because there is more to a lender than his or her interest rate.
3. BE PREPARED FOR THE DOWN PAYMENT
Now starts the money talk. You have to be ready for the costs of the down payment and closing costs. It used to be the norm to put 20 percent down, but with the market in its current state of flux, many first-time homebuyers are finding ways to pay just 3 to 5 percent of the total cost upfront. Federal Housing Act (FHA) loans increasingly have become a popular option for first-time buyers. These competitively low-interest loans are ideal for buyers with less than perfect credit, and because the Department of Housing and Urban Development (HUD) minimizes the risk of default for lenders on these loans, borrowers are only required to put down 3.5 percent of the cost–a far cry from the traditional 20 percent down payment. Still, there are advantages to paying more at the start. A larger down payment ultimately means smaller monthly bills down the line. Also, if you purchase a conventional loan, paying 20 percent or more upfront will eliminate the need to pay Private Mortgage Insurance (PMI) charges. PMI is insurance for your lender that can be paid upfront or in monthly installments, and is designed to offset your lender’s risk in the case that you’ve paid less than 20 percent on your home. It can cost around $55 a month per $100,000 financed. While it’s important to note that FHA loans also carry mortgage insurance with a down payment of under 20 percent, their low barriers to own still make them a good choice for first-time buyers.
4. FINDING A KNOWLEDGABLE REAL ESTATE AGENT
Finding the perfect home can have a lot to do with finding a compatible real estate agent, especially in today’s evolving mortgage landscape. “The person you choose will quarterback the whole process for you,” he explains. It’s crucial to be in contact with an agent before starting the home search, “because you might be looking at x when all you can afford is y.” First-time home buyers should make it clear what features they’re looking for and how much they’re willing to spend.
There are, however, certain questions that Fair Housing laws prohibit agents from answering, such as where to find religious centers in the area, the quality of the school systems, and crime rates. Be proactive in speaking with members of the community and inquire about the issues that matter most to you. For parents, search public sex offender registries, which can be found online, to see if there are high-risk areas in the neighborhood. In most states, agents must disclose whether violent crimes occurred on a property within a set number of years, but not so with suicides — find your comfort level and do your research.
When making an offer, make sure your agent pulls comps that have sold in the last year for that particular area. That will help you decide what the home should sell for and where to write your offer.
At signing, the buyer should demand that the contract be contingent on an objective appraisal of the house. Look into the history of the home and make sure there aren’t any liens against the property. You should be able to negotiate with the seller to make any necessary repairs to the house before closing on the deal.
Contingencies vary by state, but you should certainly inspect the home for possible lead paint, radon, and structural issues. Depending on which contingencies your state recognizes, these flaws can provide grounds to cancel the contract without penalty, and get back the earnest money deposit you put down at the start of negotiations.
5. CLOSING THE DEAL
The whole process, from start to finish should take you about 2-4 months. Once a contract has been written, the closing process should take about 30-45 days.
Now it’s time to move and enjoy your first home.
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