Buying your first home is exciting... but it might also be a little intimidating if you don't know what to expect. However, if you're prepared, and if you've got a good agent in your corner, buying a home doesn't have to be difficult or stressful. Here's what you need to know about buying your first home in Grand Forks or the Red River Valley.
Part 1: Understanding Your Mortgage
A home is a big investment, and unless you've got an even bigger savings account, you're probably going to be using a mortgage to purchase your home. Here's an overview of the mortgage process.
Types of Mortgages
Contrary to popular belief, there's more than just one type of loan out there. So even if you don't have a 20% down payment in savings, perfect credit, or high income, you probably still have some options. Here are some loans commonly used by buyers in the Grand Forks area.
Conventional loan
Conventional loans are most commonly used by buyers with good credit, medium to high income, and about a 10% – 20% down payment.
VA loan
Available to most active, retired, and veteran military personnel, the VA loan offers up to 100% financing, plus lower approval thresholds. It's offered by most banks and lenders.
Government loans
Depending on your income, credit, and where you'll be living, you may qualify for a subsidized government loan program, such as the FHA or USDA Loan.
What Do Mortgage Payments Include?
Most people know that a mortgage is paid back on a monthly basis. But many do not know that that payment actually comprises several smaller payments, which are often abbreviated as "PITI". Here's what's actually in your mortgage payment.
Principal
This is the amount of money you originally borrow. For most buyers, it's the price of the home, less the down payment.
Interest
Interest is essentially the charge for borrowing money. Typically, your earlier mortgage payments will consist mostly of interest payments.
Taxes
Your town and county taxes help to fund public services in your area. Your lender will collect taxes monthly, hold them in an escrow account, and pay your town annually.
Insurance
Homeowners insurance is also often collected by your lender on a monthly basis, held in an escrow account, and paid annually to your provider from that account.
Getting Preapproved for a Loan
There's one final step to take before you start your home search—talking to lenders! Yes, this is something you want to do before you start searching. You also want to get preapproved for a loan. Here's what that might look like for you.
Ask for referrals
How do you know you're working with a trustworthy lender? Ask for recommendations! Ask people you know who've bought recently in your area who they worked with. Local agents also usually have great advice.
Make some calls
Once you find a few possible lenders, start making some calls. Once you explain that you're a first-time buyer, most lenders will take over. They might ask questions, make recommendations, or request financial details.
Discuss your options
As these lenders learn a little more about you, they may start to talk about your options. Are you military? You might hear about the VA Loan. Buying in a rural area? Your lenders might mention the USDA loan.
Get preapproved
Most lenders will ask if you want to get preapproved for a loan. Preapproval involves a precursory review of your finances to ensure that there aren't any red flags. Afterwards, your lender will tell you how much they're willing to loan you.
Part 2: Shopping Homes for Sale in Grand Forks
Once you're officially preapproved for a mortgage, it's time to start searching for your dream home! Here's what you should do first.
Home Shopping Tips
Separate wants & needs
It's unlikely you're going to get everything you want in a home, but you should be able to get everything you NEED. By separating the things you want from those you absolutely need, you can ensure that all your needs are met, even if it means forgoing a want or two.
Stick to your list
There are a lot of homes out there, and it's easy to get overwhelmed by trying to tackle too many. That's why it's important to stick to your wants and needs list—don't waste your time (and energy) visiting homes that don't hit all your needs and maybe a few of your wants!
Take pictures and notes
When touring homes, it can be beneficial to take pictures or to make notes of particular pros and cons of each house. This can help prevent you from misremembering the details of a home, and can also help you determine whether a home fits your needs and wants.
Part 3: Making an Offer
When you find a home that meets all your needs and at least some of your wants, you might be ready to make an offer! Here's what the offer and negotiation process looks like.
Offer, Negotiate & Sign a Contract
First things first, let's make an offer!
The offer agreement
With your agent, you'll determine a competitive and comfortable offering price. Then, your agent will complete a Purchase and Sale Agreement, which details the finer points of your offer, including the price, the type of loan you'll be using, the closing date, and any contingencies (like a home inspection) that you'd like to include.
Negotiations
Once the seller received your offer, they have three choices. They can refuse your offer. They can accept your offer. Or, they can issue a counter offer with modified terms or conditions. If the seller issues a counter offer, the ball's back in your court to accept the counter offer or return with another counter offer.
Due diligence
Once you and the seller reach an agreement, you'll have a set amount of time, called a "due diligence" period, to make sure you really want to buy the home. The home inspection is perhaps the most well-known aspect of the due diligence period. A home inspection helps to root out any potential maintenance or structural issues with a home.
Part 4: Closing the Sale
There are a few more details to iron out before you and the seller head to the closing table. Here's what needs to happen before you get those keys.
The Final Steps
Finalize your loan
Your lender will likely ask you for quite a bit of paperwork, such as tax returns, bank statements, proof of employment, and more. It might get a little tedious, but it's all the lender's way of ensuring you're a qualified borrower.
Sign & pay
On a pre-set day, you, your agent, the seller's agent, and your lender will sit down to sign the final closing paperwork. The seller may or may not be present, as it's possible for them to sign most of their paperwork ahead of time. At this time, you'll hand over a very large check for your down payment and closing costs.
Get your keys!
Finally, the seller (or their agent) will hand over the keys to your new home! (You'll probably want to change the locks first thing, though!)
Ready to Buy Your First Home in Grand Forks?
It all begins with finding the right agent. Want to know more about how we can help you become a successful first time home buyer? Check out our real estate resources, or just give us a call and we'd be happy to chat with you directly.