The feeling is different for all of us. For some, it’s a yearning for an outdoor space to call your own. Others want the ability to create a gourmet kitchen. Or, maybe you’re hoping to stop burning money on rent. At Cheng Real Estate Group, we’ve helped many clients find their perfect first home, so whatever convinced you that it’s time to take that next step—we want to help you get there.
Read on for some of our best advice for first-time home buyers.
Get familiar with terminology
When you shop for homes, make offers, and finally purchase a home, you’ll have a lot of terms thrown at you. Here are a few to remember:
APR vs. interest: As Bankrate explains, an interest rate is the cost of borrowing the principal loan amount. The rate can be variable or fixed, but it’s always expressed as a percentage. APR is a broader measure of the cost of a mortgage as it includes the interest rate plus other costs such as broker fees, discount points, and closing costs, expressed as a percentage.
Earnest money: As Lending Tree says, this is the money you deliver to the seller’s agent to show you’re serious about a purchase. Earnest money is generally 3% to 5% of the home’s cost and is offered after an accepted offer.
Contingent offer: This is an offer on a home that has been accepted by the seller but is contingent upon certain criteria that have to be met. In other words, the final sale hinges on these criteria being met.
Closing costs: Simply put, closing costs are the expenses you incur upon finalizing a real estate transaction, and paid when the title or lease trades hands. You can learn all about closing costs here.
Escrow: The definition of escrow is simply having funds and assets involved in a transaction held by a third-party until an agreement is finalized. The third-party then releases the funds at the same time the buyer receives their new property, as long as all contract terms have been met. Read our article on this topic for more details.
Of course, your realtor and lending agent will be able to answer questions you have, but the home buying process will be easier the more you know going in!
Shop around for a loan—and get pre-approved
All you need is a computer to shop around for loan rates and offers. Once you’ve found the loan and financial institution that fits your needs, get pre-approved for a loan through that lender. A pre-approval letter is often required for a successful sale in warmer markets like Madison, as it shows the seller you are serious and how much you’re approved to spend. Not sure how to start your search for a lender? We can recommend a few that we’ve worked with and trust!
Realtor suggests keeping your financial life low-key as you shop for a house. Any big purchases or credit problems could affect your credit score enough to dash your home-buying hopes. So, don’t buy a new car, change your job, or make any other big purchases.
Find a Real Estate Agent
The Madison metro market is warm, meaning it’s a seller’s market. That means that the real estate environment is one in which there are fewer homes than there are interested buyers. A seller’s market can be a tough one for buyers, and may lead to high costs, short offer timelines, and very competitive practices.
Lock in a Rate as Soon as You Can
The market is variable, and interest rates change all the time. Once you’ve found the mortgage loan and lender you prefer, ask your mortgage lender for a rate lock—and get it in writing.
Hunt for a Home Inspector
A good home inspector, like your realtor, is the first-time home buyer’s biggest ally. Read reviews, ask your friends, family, and coworkers, and find the best one in your area. Have them on-call for when you do make an offer, and make sure you know what to look for during a home inspection to get the most out of the experience. Need a recommendation? Ask your Cheng Real Estate Group realtor!
Other things to consider…
Determine what you can afford: Figure out a budget before you start touring houses. This will help you stay on track and make more realistic decisions.
Be patient: Finding the perfect home can take time, specially in a seller’s market. Start your search early and don’t be discouraged if your first choice doesn’t work out.
Build an emergency fund: Unplanned expenses can come up during the buying process and once you’ve bought the house. Remember to plan ahead and keep putting as much into a savings fund as you can for such occasions.
Our tips and advice for first-time home buyers list wouldn’t be complete without a realtor recommendation: our expert team knows the Madison market top-to-bottom, and will put in the time and effort needed to win you your dream home. Contact us today.