Buying your first home can be a very exciting time, yet scary as well. With such a large 
investment, you should always do your homework before any costly mistakes are made. Here is a step-by-step guide for potential new homeowners.
Situating Finances
First of all, you must assess your finances to determine if you can buy a home, what your budget is and if there will be any red flags when attempting to mortgage. You can check your credit score online for free once a year. After acquiring your score, move to your annual income. When planning for a house, always think in terms of annually and not monthly.
You may be able to scrap your mortgage every month but you want a good deal of “wiggle room” to account for the down payment, renovations, closing costs, taxes and payment for the many contractors which will help you choose the right home (agents and appraisers). A general rule of thumb is that you should be able to offer a 20% down payment. There are also mortgage calculators available online that will determine the minimum you can pay monthly (never go with the maximum).
Assemble Your Team
Since this is your first time buying a home, you will need as much help as possible to assure you make the right decisions. This means acquiring a lender and real estate agent. There are many factors in choosing a lender, so it’s best to shop around for a reputable firm. Lenders give estimates during consultations and, although they aren’t concrete, they give you numbers to compare. You want an established lender who can offer both low rates and reliability. If your agent is late, non-attentive, pushy or, even worse, naïve, then it’s best to go with someone else.
House Shopping
The search for your dream house is the most exciting part of home buying. After determining budget, you must now choose what best suits your needs. Average homes have three to four bedrooms, two baths and a backyard. These might not fit your specific situation but they are the most sellable houses when thinking about a return on investment. Never shop with emotion, because this will cloud your judgment. Just because you love it, doesn’t mean it’s the wisest purchase.
Buyer Vs. Seller Duel
Once you’ve decided on a home that has been given the green light by your team, you can move into negotiations. All homes are priced higher than they sell for. Always look to negotiate, and expect several counter offers before settling somewhere in the middle. Once an amount is agreed upon, a modest money deposit is a good faith gesture that illustrates a serious interest in the property. It is usually credited to the down payment if the offer is accepted by both party lenders.
Mortgaging
Now you must decide on your mortgage program. There are three basic loans:
1. Adjustable Rate Mortgage (ARM) – a short term loan which has a fixed rate for the first years of the term (typically about seven) and then adjusts up or down for the remainder of the agreement. This is meant for those not planning to stay in the house for an extended period of time.
2. Fixed Rate Mortgage – This is the most traditional loan that offers a fixed interest rate for the duration of the loan, usually 15-30 years. In contrast to an ARM, this is for those planning on living in the home for a long period of time and therefore the predictable interest rate favors them in the end.
3. Interest Only Payment – Allows the buyer to pay the interest portion of the homes mortgage for a certain period of time. This frees up cash flow during this time period since paying only interest will lower the payments. This method will take you longer to pay off the principal.
Closing your new home
The final step in the process is the closing. At this point you have decided on the home, negotiated the price and acquired the best mortgage plan. Now you must decide on a deadline, but keep in mind the original owner might not have closed on their new home or you may still have to wait for your lease to end. Once the date is established, closing costs must be settled. This includes loan fees, inspection fees, real estate commission, Deed Stamps, Appraisal fees, taxes and much more. Once this is complete, you are now the proud owners of a new home.
If you’re looking to buy or sell your home, please give AllHomesAZ a call at (480) 227-5214. AllHomesAZ is a local company and a proud member of the Better Business Bureau. We are ready to make an offer for your current home and help you get into your new home fast!
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