If you're a first-time home buyer in California, the prospect of finding your dream home can be both exciting and overwhelming. As a real estate team, we understand the importance of having a dedicated real estate agent, obtaining pre-approval for financing, and knowing the up-front costs of purchasing a home. Here are three things you should know before you start your home buying journey.
1. Work with one real estate agent:
It's important to have one real estate agent who is dedicated to finding you the right property, negotiating on your behalf, and guiding you through the home buying process. Working with the same agent ensures that they get to know you and your family's needs and preferences, rather than starting over with someone new each time you go look at a house. Keep in mind that the agent who shows you a home is ethically the one who should continue the transaction. Also, when you call an agent from a yard sign or advertisement, you are dealing with the seller's agent. While most real estate professionals are adept at handling both sides of a transaction professionally, it makes more sense to deal with someone you have already taken time to get to know and who has your best interests at heart as the buyer.
2. You need to be pre-approved for financing:
Unless you're paying cash for your home, you need to talk to a lender before you start looking at houses. Getting pre-approved for financing helps you set an accurate price range for house hunting, and looking at homes that you can't afford to make an offer on just leads to frustration. A mortgage lender will not only tell you what amount you can borrow, but also your projected monthly payment, your closing costs, and what you should or shouldn't do with your finances to maintain your eligibility throughout the lending process. Having an up-to-date pre-approval in hand is also important so you don't lose out to another buyer. If you find the perfect house, you will want to get an offer in before someone else gets it, and that pre-approval letter must accompany your offer.
3. There are up-front costs:
When you find the right house, and you and the seller have agreed on the price and terms and have signed the contract, you will first need to make your escrow, or “good faith” deposit. This is money you are risking if you back out of the deal for reasons not protected in the contract. Usually, it is between 1% and 5% of the sales price, but can be more or less depending on what you and the seller agree to in the contract. Your agent will help you with this during negotiations. The escrow deposit counts towards the sales price. Next, you should have an inspection of the property done by a certified home inspector. This cost varies depending on the size, condition, age, and features of the home, but is usually a few hundred dollars. You will need to pay this at the time of service. You may elect to pay for other inspections based on the results of the initial inspection. For example, if the inspector notes an issue with the HVAC system, you may need to pay a service fee for an HVAC contractor to look at the system. You want to get as much information during your inspection period as you need to confidently move forward with the purchase. An appraisal and a survey of the property will be ordered, but these are usually added to your closing costs and not expected to be paid in advance. However, you may be asked to provide a credit card number to be charged in the event that the closing does not take place.
In conclusion, the process of buying your first home can be daunting, but working with an experienced real estate agent, obtaining pre-approval for financing, and knowing the up-front costs of purchasing a home can help. Contact our team today if you are thinking about starting the process, we are here to help!
Stay up to date on the latest real estate trends.
You’ve got questions and we can’t wait to answer them.