Purchasing your first home is an exciting milestone, but it can also feel overwhelming for first-time homebuyers. At Coldwell Banker Realty, we understand the challenges of navigating the home-buying process and want to provide you with the knowledge and resources to make this journey as smooth as possible. In this guide, we’ll walk you through everything you need to know, from saving for a down payment to closing the deal.
Why Buy Instead of Rent?
There are many financial and lifestyle reasons why buying your first home makes sense:
- Build equity: Unlike renting, your monthly mortgage payments go towards building equity in your home. In the long run, you’ll own an appreciating asset.
- Tax benefits: Homeownership may provide tax deductions for mortgage interest and property taxes.
- Stability: You won’t have to worry about rising rents or being told to vacate. The home is yours for as long as you want to live there.
- Freedom: As the homeowner, you can customize and make renovations. No more asking for permission from a landlord.
- Create roots: Owning a home gives you a chance to put down roots in a community. This provides stability, especially if you have a family.
How Much Can You Afford?
Determining your budget is one of the first steps when buying a home. Here are the key factors that decide how much home you can afford:
- Down payment amount: Most conventional mortgages require at least 3-20% down. The more you put down, the lower your monthly payments. Pro Tip: ask your lender about CHFA loans for first-time home buyers in Connecticut. They offer eligible borrowers loans for down payments and closing costs. No need to save for a down payment!
- Debt-to-income ratio: Lenders often want to see that your total monthly debt payments are less than 36% of your gross income, but some loans may let that be as high as 50%. This includes your mortgage, credit card, student loan, and car payments.
- Credit score: Your creditworthiness determines the mortgage interest rates offered to you. Aim for a score over 740 to get the best rates, but that is far from a minimum.
- Other monthly costs: Make sure to account for property taxes, home insurance, HOA fees, maintenance costs, and moving expenses.
How to Save for a Down Payment
The down payment is often the biggest hurdle for first-time buyers. Here are some tips to help you save faster:
- Open a high-yield savings account to stash your down payment funds. Try to contribute a set amount from every paycheck.
- Reduce monthly spending by creating a budget and limiting dining out, entertainment, and shopping.
- Take advantage of 401K and IRA accounts to save for retirement and free up cash flow.
- Consider a CHFA down payment assistance loan. Eligible first-time homebuyers can get grants or loans to cover the down payment or closing costs. Eligibility requirements apply; ask your lender for details.
- Explore employer assistance programs – some companies offer employee benefits to help with the downpayment.
Every bit of savings helps. With proper planning, you can build up your down payment within a few years.
Finding the Right Mortgage
Shopping around for the best mortgage deal should be high on your checklist. Here are some tips for scoring an affordable home loan:
- Check your credit reports and scores at least 6 months before applying for a mortgage. This gives you time to fix any errors and improve your credit profile.
- Get pre-approved before going to look at homes. Focus on local mortgage lenders.
- Consider FHA loans, which allow down payments as low as 3.5% for buyers with good credit. Conventional loans typically require 5-20% down.
- Here in Connecticut, we have an amazing first-time home buyer mortgage program. Attractive and often below-market interest rates. Down payment assistance loans. Work from the direction that this is the loan you should get as a first-time buyer in CT until there is a good reason for you to go a different route.
Having your mortgage pre-approval in place before you start hunting gives you a major advantage over other buyers.
How to Find the Right Real Estate Agent
A knowledgeable real estate agent is invaluable for guiding first-timers through the entire buying process. Here’s how to find the right agent for you:
- Ask trusted friends and family for recommendations of agents they’ve worked with.
- Look up on this page for “About Me” and reach out to Jon Sigler.
Jon Sigler isn’t just any real estate agent; he’s a Connecticut powerhouse with over two decades of industry experience. Currently rocking it at Coldwell Banker Realty, Jon’s the guy you want in your corner whether you’re buying, selling, or grappling with home financing.
With a resume that includes stints as a mortgage loan officer at reputable banks, he offers unique financing insights that most agents can’t match. Known for his smooth, stress-free processes and his tagline #SiglerSoldAnother, Jon’s got both first-time homebuyers and veteran investors singing his praises. His reviews are glowing, calling out his local know-how, process expertise, and responsiveness.
- Choose an agent that makes you feel comfortable, understands your needs, and is eager to help you every step of the way.
Don’t go it alone. The right real estate pro will make a big difference in helping you become a happy homeowner.
What to Look For in Your First Home
While buying a starter home, keep the big picture in mind, but don’t obsess over finding your forever home. Focus instead on a home that aligns with your current lifestyle and budget. Here are some things first-time buyers should look for:
Location: Choose a neighborhood that offers amenities you want, like shopping, parks, etc., and has a reasonable commute to work.
Condition: Look for updated fixtures, appliances, electrical, plumbing, and heating systems. Avoid homes that need major repairs. One of the greatest bits of advice a first-time homebuyer needs is “cost certainty .”Knowing that the mortgage payment is all you need to spend. Can you afford a $10,000 bill for a new furnace or roof? Do you have money to make the updates to the kitchen you want? You likely have the money you need for the monthly payment but not those large chunks of cash starting out.
Layout: Choose a layout that fits your needs and offers good storage space. Walkability and parking are also important.
Price point: Search for homes priced under your budget maximum. This leaves room for bidding wars or overages.
Don’t feel disheartened if you can’t find your dream home right away. Be patient and keep looking until you find the right fit. The perfect first home is out there!
Make a Strong Offer
Making a competitive offer is crucial to getting your offer accepted in today’s fast-paced market. Our agents can advise you on crafting an appealing offer based on market conditions:
- Offer price: Go in with your best offer price from the get-go. Offer just below or at the list price for a higher chance of acceptance.
- Down payment: Put down 20% or more if you can to show you’re a serious buyer. But what first-time homebuyer has 20%? CHFA offers eligible borrowers loans for their down payments.
- Close date: Propose a realistic closing date that works for both parties.
- Contingencies: Include contingencies like financing and appraisal to protect yourself.
- Earnest money: Offer 1-3% of the home price as an earnest money deposit to indicate you’re committed.
- Act fast: Be ready to move quickly with all your paperwork handy. In a sellers’ market, delayed offers often lose out.
Going in with your strongest foot forward gives you an edge over competing offers. Our agents can provide in-depth guidance tailored to your specific situation.
Contingencies to Be Aware Of
Making your offer contingent on certain conditions can protect you as a buyer. Common contingencies include:
- Financing contingency: Your purchase hinges on your mortgage loan getting approved.
- Home inspection contingency: You can walk away if the inspection reveals significant issues not disclosed by the seller.
- Appraisal contingency: Ensures you won’t pay more than the home’s appraised value.While contingencies protect your best interests, they can also make your offer less appealing to sellers. For the strongest offer, set tight completion timeframes.
What to Expect During Home Inspections
Home inspections allow buyers to assess the condition of the home before finalizing the purchase. Here’s what you need to know:
- Hire a licensed and experienced home inspector to do a thorough inspection. Reviews from prior clients are helpful.
- You should plan to accompany the inspector during the 2-3 hour inspection to better understand the home’s condition.
- The standard home inspection looks at the roof, attic, ceilings, walls, floors, electrical, plumbing, HVAC, appliances, foundation etc.
- Specialized inspections for pests, radon, lead, mold, etc., may also be recommended.
- If major issues are found, request repairs from the seller, a price reduction, or opt to walk away. Minor issues may be addressed post-closing.
- Be present for the final inspection walkthrough immediately before closing to ensure repairs were completed, and the home is broom-swept.
Home inspections provide peace of mind and assurance that your new home is structurally and mechanically sound before you commit to the purchase.
Preparing for Closing
You’re nearing the finish line! Here are the key steps to take to have a smooth closing:
- Work closely with your lender and real estate agent to ensure all your paperwork is complete and submitted on time.
- Final walkthroughs are done immediately before the closing date to verify the condition and repairs.
- The closing disclosure outlining all final costs is issued 3 business days before closing. Review it carefully.
- A title search is performed to verify the seller has a clear title free of any liens or claims.
- Home insurance needs to be activated by the closing date with proof provided. Your agent can refer insurance agents.
- Schedule your moving truck and time off work. Change your address with USPS, accounts, employers, etc.
- Bring proper ID and a cashier’s check for the closing costs and down payment to the closing appointment.
With coordination and preparation, the closing day will go smoothly. Soon, you’ll be picking up those keys and moving in!
Life as a Homeowner
Owning a home brings many new responsibilities. Here are some tips for transitioning into homeownership:
- Set aside funds to furnish your new home and make any minor upgrades or repairs needed.
- Make a plan to pay the mortgage each month. Direct deposit money needed for the payment. Set up autopay.
- Maintain your home well with seasonal upkeep. Some costs can be reduced by DIY projects.
- Hold onto records of home improvements and maintenance to boost your home’s value for eventual resale.
- Consider an umbrella insurance policy for extra liability coverage beyond your homeowners’ insurance.
- Enjoy decorating and customizing your own space! Take time to build memories and celebrate this milestone.
With the right prep, budgeting, and maintenance, being a homeowner is very rewarding. We wish you the very best on your journey!
Let Us Guide You
We hope this comprehensive first-time home buyer’s guide provides you with greater confidence to purchase your first home. At Coldwell Banker Realty, our experienced agents are ready to help turn your homeownership dreams into reality. We assist first-time buyers every step of the way, handling everything from finding your perfect starter home to a smooth closing process. Contact us today to get started on the path to your new home.