Step-by-Step Guide for First-Time Homebuyers

June 28, 2024 by Partner Colorado Credit Union

Buying your first home is one of life’s most exciting milestones. It’s more than just finding a place to live; it’s about creating your own space where you can grow and make memories. We know the homebuying process can seem a little overwhelming, especially if it’s the first home you’ve ever bought.

There are so many questions like, “how much can I afford?” or “which home loan is right for me?” or “what does it take to qualify for a home loan?”. All these unknowns can intimidate even the most determined homebuyer. We’ve helped thousands achieve the dream of homeownership, so we know what it takes and how to guide you through the journey. Here’s a step-by-step guide to introduce you to the homebuying process.

Prepare Your Finances

A home is typically one of the biggest purchases you’ll ever make in your lifetime. Making sure your credit score is in good shape before you buy a home will help you qualify for better loan terms. Normally, the higher your credit score is, the lower your interest rate will be, which could end up saving you thousands over the life of your mortgage. As a Partner Colorado member, you can also check your FICO® Credit Score through a feature on our Mobile Banking App.

If you need to improve your credit score before buying a house, check out our blog for tips on how to improve your credit score.

It’s also important to think about how much you have in savings to put towards a down payment. You typically need 20% of the home’s purchase price, but lower down payment options do exist.

Get Preapproval for a Mortgage

Once your finances are in order, you’re ready to take the next step and get preapproved for a mortgage loan. This involves submitting financial documents like pay stubs, tax returns and bank statements, as well as undergoing a credit check. Preapproval gives you an estimate of the amount you’ll be able to borrow.

Establishing a price range for buying your home can help you narrow down your search options and prevent you from looking at homes over your budget. It’s also important to think about how much you have in savings to put towards a down payment. You typically need 20% of the home’s purchase price, but lower down payment options do exist.

Our free online Home Affordability Calculator is a useful tool to help make sure your monthly mortgage payment will fit your budget. Our calculator can factor in any down payment you plan to make, as well as include other necessary expenses like property taxes and home insurance.

Find the Right Realtor

Having the right realtor is key to finding the right home for you. Ask friends or family for referrals and look at online reviews. Interview a few agents before hiring one. Discuss how many homes they’ve sold in your targeted area and make sure you’re confident that they understand your needs.

Define Your Home Criteria

Consider the neighborhood, school district, daily commute and proximity to amenities before you start looking at houses. Decide what type of home you want whether it’s a single-family home, condo or townhouse.

It’s also a good idea to create a list of must-haves vs. nice-to-haves. List your essential features like number of bedrooms, bathrooms and parking options, as well as any additional preferences that might be nice to have like an extra guest room or a remodeled kitchen.

Make an Offer

Once you find the house that’s right for you, it’s time to make an offer. Work with your realtor to review comparable sales to determine a fair offer price. Your realtor will put together an offer letter, which will include your offer price, contingencies (like an inspection, financing and an appraisal) and a closing date. Be prepared for a counter offer from the seller and be ready to negotiate. Decide on your maximum price and must-have terms.

Finalize the Financing

To complete the application process, you’ll need to decide on what type of mortgage loan best fits your needs. You can typically choose between a fixed-rate mortgage or an adjustable-rate mortgage. Other options include an FHA (Federal Housing Administration) loan, VA (Veterans Affairs) loan or USDA (U.S. Department of Agriculture) loan. Partner Colorado can help you find the perfect mortgage option for you.

Home Appraisal and Inspection

The lender will require an appraisal to ensure the home’s value supports the loan amount. If the appraisal is lower than the purchase price, you may need to renegotiate or cover the difference. Your realtor will also set up an appointment to have a licensed home inspector evaluate the property’s condition. You’ll want to discuss repairs with your agent and adjust your offer accordingly. Your realtor will then set up a final walkthrough of the property before your closing date to ensure it’s in the agreed-upon condition.

Closing Day

This is the day you’ve been waiting for and working so hard to reach. Be prepared to sign numerous documents to finalize the mortgage and property transfer. You may need to bring a cashier’s check or arrange a wire transfer for closing costs and a down payment. Then the best part happens, you get the keys to your new home!

By following these steps and staying organized, you can navigate the homebuying process with ease and make informed decisions that suit your needs and financial situation.