Being a first-time home buyer can be both exciting and overwhelming. Currently, in Colorado, buying a home is a very competitive undertaking given pent-up buyer demand, low mortgage rates and tight housing inventories. As a result, buyers have to be prepared to move quickly once they find the right home. Below are some helpful things to know as a first-time home buyer, as well as the role of a title company.
Consider Talking to a Mortgage Professional
It can be tempting to jump right into hunting for the perfect house, especially if this is your first time as a home buyer. You should consider getting a mortgage pre-approval before you begin comparing properties so that you know what you can afford. And, this pre-approval will help you to make a stronger offer when you do find the home you want to buy. Sellers need to know that the buyer they choose can afford their home and a pre-approval shows a seller that you have the money needed to purchase the home. A mortgage professional can also guide you through the loan process, including the type of loan that will work best for you (conventional, FHA, USDA, VA).
Determine What You Can Afford
Before you fall in love with that first beautiful home you see, understand your price range and mortgage payment. A professional (a lender for example) can help you calculate your mortgage payment, including principal, interest, taxes, and insurance. This will allow you to shop for a home and a mortgage with confidence.
Consider Working With A Real Estate Agent
While working with a real estate agent is certainly optional, this professional will be very beneficial in helping you navigate the buying process.
List Your Must-Haves And Nice-To-Haves
You will want to prioritize which features you want in a home based on your needs and wants. This may include the number of bedrooms, specific schools, if you need a bigger yard or to be located near a park, and also the distance from family and friends. Ultimately, this list will help you shop for homes more effectively and compare properties with less stress.
Understand Earnest Money
Once you identify your dream home, your real estate agent will help you to negotiate a fair price with the seller. Once both parties agree to and sign a contract, as the buyer, you will need to provide an earnest money deposit, also known as a “good faith deposit.” Giving this money to a neutral third-party (aka an escrow) signals to the owner that you’re serious about the offer. A title company will hold this money in escrow throughout the transaction process.
Know Your Title Company
Most likely, the sellers of the property have selected the title company that will be handling the transaction. Educate yourself on who the title company is and their reputation. A good place to start is to ask your real estate agent or check out ALTA.org.
Title Commitment and Policy
During the transaction, most likely in the first week, the title company will provide a Title Commitment that outlines the details of your Title Insurance Policy. Your real estate agent will help you understand what these documents mean. In a nutshell this policy serves as a safeguard against outside claims of interest against a property that may arise after a real estate closing.
Get a Home Inspection and an Appraisal
Your real estate agent and lender will guide you through this phase of contractual obligations. When buying a home, you’ll want a professional inspection in addition to an appraisal.
The inspection: During an inspection, the inspector will inform you about real or anticipated concerns with the home. You can use the results of your inspection to learn more about your home, request monetary concessions and/or ask for repairs from the seller. Your real estate agent can guide you through this process.
The appraisal: After an appraisal inspection, your appraiser gives you and your lender a third-party home value opinion.
Determine who the utility providers are for your new home by asking your real estate agent, or inquire at the local municipal building or city hall. You will want to contact the utility companies to let them know your move-in date and schedule service at your new home to start one day before your scheduled move-in.
Don’t forget to update your address with your former utility companies (so they can send you a final bill) and with the post office.
Budget for Home Improvements
As a homeowner, your work is never done. Treat your maintenance budget just like any other true expense in your annual budget planning. Add it as one of your expenses, and set aside some money every month. Then, when one of the appliances breaks down, you’ve got the money in the budget to replace it.
Happy home ownership!