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The Ultimate First Time Home Buyer Guide

“What do you need to know before buying a house?” It’s the question at the forefront of many first-time home buyers’ minds. We answer it in this ultimate guide to buying a home — with information on the home buying process and the necessary legal information you need to know before you take action.

Know Your Rights As A First-Time Home Buyer

When it comes to your first-time home purchase, it’s important to know your legal rights as the buyer.

These rights vary from one state to the next but typically include:

  • Choose your own lender, broker, appraiser, and home inspector.
  • The legal right to request copies of any documents related to the sale, and to have those documents reviewed and explained by a lawyer.
  • You have the right to be informed of any mortgages or other liens on the property.
  • You get the opportunity to walk through the home before signing any final paperwork.
  • The right to request information about property taxes from past years.
  • Protections from being discriminated against, such as those outlined in the Fair Housing Act.

The list above does not contain all the possible rights for buyers and these rights may differ depending on the state. Consult with a real estate lawyer if you have any questions about your rights as a buyer.

What Documents Do You Need When You’re Buying A House?

Before you buy a home, you’ll need to produce several documents that verify your income and financial situation. You’ll also need to figure out what type of loan is best for you, and then assemble all of your documentation in order to get approved. This means gathering together pay stubs and W-2s for every job you’ve had over the past two years (or longer, if relevant), and making sure there are no discrepancies between these documents and your federal tax returns. If there are any missing pieces, try reaching out to former employers or lenders to acquire them.

As a good rule of thumb, here are the questions you should ask yourself if you’re a first-time home buyer:

  • In the last two years, have you been able to maintain employment?
  • Have you been out of work for any reason?
  • If you just left a company for a new one, do you think your new salary was at least as much as the one you just left?
  • During the last two years, have your incomes fluctuated? What were the reasons for this?
  • Have you been punctual in paying your bills?
  • Are you currently carrying high balances on your credit cards?
  • Have you ever defaulted on a loan, even your student loans?
  • Have you pulled a copy of your credit report from all three of the major credit bureaus? Some of them include Equifax, TransUnion, and Experian.
  • How are your credit reports?
  • How accurate are your credit reports?
  • Are there any items on your credit report that might deter lenders from giving you a loan?
  • Have you been sending in your monthly payments if you are responsible for paying off any loans?
  • Long-term loans: How long do you have to pay them off?
  • When is your rent due?
  • Have you ever been put out of your home by court order?
  • Have you ever had your house foreclosed on by the bank?
  • Have you ever had a creditor sell your debt to a collection agency?
  • Has a court given you a financial judgment but you haven’t paid it?
  • Have you ever filed for bankruptcy before? When was the last time?
  • Have you been setting aside money for your down payment and your closing costs?
  • Do you have any money saved?
  • How regularly and consistently are you putting money aside?

Pre-approval For A Mortgage And Financing

Mortgage pre-approval is the process of figuring out how much money you could borrow for a house, condominium, co-op, or apartment purchase. Your lenders will look at your income, assets, and credit history to determine what kind of loan you might be eligible for, how much money you can borrow, and what your interest rate might be.

Get pre-approved for a mortgage before you start your house search, as this will make it easier for the sellers to accept your offer because they will know you’re approved for the financing you need.

The pre-approval process isn’t that difficult. The lender will collect some personal information and run a credit report and determine your suitability for the loan. You’ll need to know what amount of money you’re willing to put up as a down payment and the lender will send you a letter informing you whether or not you’ve been approved.

It’s important to understand that a preapproval does not guarantee you’ll get a loan. Rather, it simply indicates that you qualify for one. The lender will need additional documentation to approve your loan. Exactly how much more they require will depend on the type of information they request.

Do You Need A Real Estate Agent?

Even though many people think they need to hire a real estate agent in order to sell their home, it is actually not required and it is legal to sell without hiring an agent. However, some states require that you have an agent when handling the paperwork in connection with the closing of the home sale. In the event that you do not know what the regulations in your state are, you should consult your state department to see if you need a real estate agent’s help with closing your home sale.

Some states require real estate attorneys to be present at closings.

  • Connecticut
  • Delaware
  • Georgia
  • Massachusetts
  • New York
  • South Carolina
  • West Virginia

If you’re in any other state, it depends on your specific situation and whether you will need a real estate attorney.

Additionally, before or after closing, you’ll need to work with your lender to establish an escrow account if applicable. This is where your mortgage lender will set aside a portion of your mortgage payment to cover property taxes and homeowners insurance. That will go into escrow.

It’s always important to check state laws and see if there are any new legalities that may require you to have a real estate agent.

Making A Purchase Offer

You would need to find your dream home and make an offer on it if you truly want it to be your first home. Your real estate agent can help you draft this document.

So before you put in an offer, it’s best to make sure you know whether the asking price is lower or higher than the going rate for that type of area. An offer is a kind of contract waiting for the seller’s approval, so it’s a fairly big document.

We suggest consulting with a lawyer who specializes in real estate law to review the offer and provide legal advice. Your agent should be familiar with the county’s standard real estate purchase forms, but the lawyer is the one who will make sure the necessary provisions are included.

Negotiating The Home Price And Entering Into A Purchase Agreement

A purchase agreement is a binding contract in which a buyer and seller come to an agreement over the price of a home sale. If the buyer’s proposal meets the seller’s expectations, he or she can say yes, reject it, or work to come to a negotiated agreement.

Negotiations between the buyer and the seller can go back and forth before they agree on the price and other details. If they’ve agreed on everything and have signed the purchase agreement, they’re considered to be under contract.

Contacting Your Mortgage Lender

Once your offer is accepted, you’ll need to notify your mortgage lender with the details so that the mortgage approval process can commence. They may request information you had already given for preapproval.

Getting a mortgage approval can be scary, especially if it’s your first time. Make sure to stay in contact with your mortgage lender and get back to them right away if you’re asked for paperwork in order to move the process along as smoothly as possible.

Home Inspection Is A Must

Many contracts for the sale of a home will include a provision for a home inspection before the contract is considered to be binding. Make sure that your agent or attorney has inserted a clause about this in your contract. This protects you as the buyer and grants you the right to employ a home inspector to look for potential problems.

Home inspections are done right after a buyer accepts the offer of a seller. Following both parties signing the purchase agreement, the home goes into escrow. This process will take place before or at the same time as the appraisal.

If your inspector finds problems, your attorney will use this information to try to renegotiate the price for the home with the sellers. There may need to be further negotiation at this point. The seller may not want to do any repairs, but you could try offering a lower purchase price in return.

There are cases where, when negotiating with the seller of a home in a scorching hot housing market, some buyers have been known to waive the inspection so as to have an advantage over competitors. That might be a way to secure the seller’s blessing but is not a good idea, because when purchasing an older home, it might become clear during the course of an inspection that the current occupant did not maintain the home well. Think about your actions very carefully.

Home inspections are simple and quick assessments of a house’s structural integrity and internal systems. If there are problems, you can use this as leverage to reduce the seller’s asking price or demand that the problems be fixed before closing the deal. You may even decide to back out of the sale if there is a large problem with the house and you can’t reach an agreement with the seller to negotiate a lower purchase price.

Meeting Contingencies

Once the home inspection is done and the contract is official, you’ll need to complete all the stipulations that are on the contract. The biggest one often is the sale of your current home. You may have to sell your current home to be able to afford the new one, so the contract may state that the purchase is contingent on that sale.

Again, in the current competitive housing market, a contingent offer, as it’s called, can be a strike against you as the seller may have other buyers who do not have to sell their current home before purchasing the new one. That is, of course, the opposite of appealing It’s possible to sell your home in advance, but you would need to find somewhere to live during that time or pay two mortgages simultaneously, so make sure this aligns with your goals.

Title Insurance, Deeds, Filing & Other Legalities

Now, there are plenty of other legalities and steps when you’re a first time home buyer. Here are some other necessary items to focus on.

Purchasing Title Insurance As A Home Buyer

If you go ahead with the purchase, you’ll need to purchase title insurance, which is a requirement of the mortgage company. A title search will need to be conducted to identify any liens, unpaid dues, easements, and leases on the property. Title insurance guarantees that the ownership rights are clear of any pending legal disputes, which means the property ownership is indisputable. This type of insurance protects the lender against future problems, ensuring that the land can be mortgaged to others.

If you want to safeguard your ownership rights and have money to purchase a new property if another person has a claim to your property in the future, you’ll need to purchase a separate owner’s title policy.

Closing

Provided that you have fulfilled all contingencies and submitted appropriate documentation to your mortgage lender, you’ll soon close on the home and your mortgage.

Your lawyer or real estate agent will go with you to the closing, at which time you’ll sign the legal documents and review all the numbers in detail.

Receiving Your Deed

As part of the purchase, you’ll receive the deed to the home, which is your legal ownership. This deed will include a description of the property and boundaries, as well as any other restrictions or responsibilities of the homeowner.

You’ll want to talk to your lawyer about what to do if you’re married and buying the home together, and if you’re married but buying the home by yourself. Your options are joint tenants, joint tenants by the entirety, and joint tenants with the right of survivorship.

Make Sure Your Paperwork Is Completely Filed As A Home Buyer

After all the paperwork is finished, your purchase is not finished until you have filed all the paperwork with the county. Let your agent or lawyer determine how this paperwork will be filed.

Final Remark: The Ultimate First Time Home Buyer Guide

If you’re ready to buy a home, congrats! But before diving in, it’s crucial to understand all of your legal rights and responsibilities as a first-time home buyer. Start by reading through our guide. This will give you an overview of what you need to know before buying a house. And while you’re at it, don’t forget to talk with an experienced real estate attorney or agent about anything that might be confusing or cause concern for you. Now, if you already own a house and want to sell, then make sure to check out our home selling guide here.

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Legal Favor

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