What to Expect as a First Time Home Buyer

What to expect as a first-time home buyer

While you shouldn't expect blood, sweat and tears as Winston Churchill famously said, you can expect it not to be so easy the first time around as you learn how the process works. After all, you've never done this before, so having the right attitude about it will help manage the small bumps along the way.

Home buyers frequently encounter a wide range of ownership opportunities and unexpected events in today’s vibrant housing market. For example, the Sunshine State is known for its diverse housing styles and communities, from coastal villas and cottages to oceanfront high rises and ranch-style homes with acreage. Whether you are looking for a primary residence, an investment or a vacation property, you can expect to find a dream home that will fit your style and budget.

Nonetheless, buying your first home can present some unique challenges. Generally speaking, federal regulations make it more difficult to purchase a home than to buy stocks or crypto. With this in mind, a first-time home buyer should always expect... the unexpected. Just remember, you have two experts working on your side. These are the real estate agent representing you as the buyer and the loan officer for the mortgage company advising you financially. These two pros quickly troubleshoot problems and work as a team to push your loan to closing, the ultimate goal.

A good real estate agent and mortgage loan officer are experts at solving problems. Some loans go smoothly, others don't. There are many things that can happen outside of the agent or lender's control. The key advantage is to have a team in place that can quickly address problems so they don't cause you to miss your closing date or incur additional costs during the process. 

And while there are good agents and loan officers, the exceptional ones are known for managing expectations well and closing early. Getting a file to close early is the absolute mark of an expert real estate agent and mortgage professional. These are the best-of-the-best, and are oftentimes not found in large mortgage companies.

Setting proper expectations goes a long way at creating a good experience for homebuyers. This is a high-level overview of what to expect:

Applying for a mortgage
This is where you answer a lot of questions about yourself, your income, and your assets in order to make sure you qualify. 

Shopping for a home to buy
This is where you look around at home on Zillow or with a real estate agent in-person. Homebuyers do not pay the real estate agent's comission. The seller does at closing, so don't worry about how they get paid. The real estate agent and the lender work for free until you close, so they are highly motivated to get you to close so they can get paid. 

Signing a contract to buy the home
Once you've found the home of your dreams, your agent will put in an offer to buy the home and you'll sign a contract for sale once the offer is accepted. You're usually required to put down a deposit when the contract is signed, and this can range anywhere from $500 - $5,000. This deposit goes towards your down payment for the home and is a part of closing costs you'll pay up front. 

Locking in your rate 
Once you've signed a contract to buy a home, you'll give a copy to the lender who will then give you an official rate quote in writing called a Loan Estimate. If you're happy with the terms you can lock in your rate now. Locking in your rate protects you from rates going up and usually lasts for 30-45 days giving you enough time to close. Once you close, the rate is locked in for the life of the loan. 

Inspection
Once you sign a contract to buy a home, you'll get it inspected to ensure the home is in good condition. A home inspection is not required by the lender (only the appraisal is), but it's never a good idea to buy a home without getting it inspected. If things need to be replaced or fixed, your real estate agent will handle that for you with the seller to either have it done immediately or give you some money towards closing costs to cover the expense. 

Appraisal
The appraisal determines the fair market value of the home used by the lender for certain calculations that determine your rate and payment. If the home appraises over the agreed upon sale price of the home, this is good. You're buying it for less than what it's worth. If it appraises for less than the agreed upon sale price of the home, this is bad and could pose some challenges. When this happens the seller usually agrees to lower the sale price of the home. A lot of paperwork and documents to sign

Loan processing
This is where the lender and title company work to make sure the home is okay for them to finance. Here they make sure the title is free of any liens or encumbrances, verify all property dues (taxes, association dues, etc.) and get all the paperwork ready for the set closing day. 

Disclosures
You'll get a lot of required paperwork from the lender so just be ready for it. Some documents you have to open and review them; others you have to sign. You'll also have to answer some more questions so be ready for that too. 

Closing
Once the lender's underwriter gives a clear-to-close on your loan, you'll close on the set closing date. All you do at closing is sign your name a gazillion times, which normally takes about 30 minutes to an hour. Then, you'll hold up a cheesy sign and smile for the camera like this! Agents and lenders try to make the process and delightful and fun as possible. 

  

Unexpected Problems
Some mortgages go smoothly, some don't. There are many things outside of your agent or lender's control. Great real estate agents and loan officers are experts at anticipating and solving problems behind the scenes quickly. Some problems you'll know about, others you won't. Trust your agent and loan officer. They're professionals and know what they're doing. 

The good news is that like with most things, once you buy your first home, you'll know what to expect and be better prepared for when you buy your second one.

Obstacles & Opportunities for the First-Time Home Buyer

With its strong economy and growing population, our southern states are a great place to invest in a home that can appreciate in value over time. This is especially true in Florida. Purchasing your first home will allow you to begin building your equity in the home and wealth for the future. High IQ buyers, carefully weigh the investment potential when confronting obstacles like those discussed below:

Competitive Housing Market – A challenge that you may face as a first-time home buyer is the competitive nature of the market. Many areas, especially those near major cities, waterfront communities or popular tourist destinations, are in high demand as more people are moving to Florida than any other state aside from Texas.* 

Higher Cost of Housing – The high cost of housing in many parts of the country is one of the biggest challenges facing new homebuyers. For example, the typical home value in Florida is currently around $391,409, which is somewhat higher than the national average of $357,589.** Although this may pose challenges for many first-time buyers, there are a lot of homes that are priced lower giving new homebuyers more affordable options. 

Potential for Bidding Wars – The demand for real estate has led to bidding wars for prime properties, and they can be intense at times. Although this can make it difficult to get an offer accepted, remember to use your advisors, make decisions quickly, and be prepared to complete all paperwork in a timely manner. And don't forget your goal: to become a homeowner. Everyone enters the market at some point in their life, and no one gets to choose what the market will be like when they do. 

Overcoming obstacles as a first time home buyer means that you may need to budget carefully and potentially make trade-offs in order to afford your first home. Despite these challenges, obtaining your first mortgage and buying your new home can be an exciting and rewarding experience.

How to Find Unique Home Buying Opportunities

A unique opportunity for some first-time home buyers is the availability of government-backed mortgage programs. These programs are designed to help people with low to moderate incomes afford their first home and can include free money for the down payment or closing cost. These low rate/low cost mortgage loans are often exclusive to certain lenders. Ask your broker if you qualify for any number of sponsored home loans. By taking full advantage of assistance programs, you may be able to get into a home with a lower down payment as well as a more manageable monthly payment.

Click here for Bee Mortgage Videos to watch "What should I expect as a first-time home buyer." Each video is dedicated to a topic of interest for new homebuyers, such as when to buy, how to qualify for a mortgage, and what your net assets will need to be to afford your purchase. Our team of industry experts are passionate about changing the way mortgage lending works for a first-time home buyer to the more seasoned real estate investor.

Homeownership allows today’s first time home buyer to invest a portion of their income (roughly 35%) into a tangible asset that appreciates over time. You can chat with us online or speak directly with a human at 855-626-1999.

*Source is Forbes article 10 States People Are Fleeing And 10 States People Are Moving To.

**Source is Zillow Home Value Index for the typical sales price of houses in the United States. The collective data focuses only on the middle price tiers of homes in every state, including the District of Columbia.