Buying a home for the first time in the USA, whether you’re a native or a foreigner, can be a delicate process. Before you dive in, it is better to make sure that you know what it takes beforehand and get the help you may need.
From previous considerations to getting a loan, finding a real estate agent, and doing the closing, we’ll help you navigate through. Find out helpful tips to make a smooth purchase and get the best of the tools available for you.
Getting Started with Buying a Home for the First Time in the USA
If this is your first time buying property in the USA, there may be certain specifics that you need to know that may not exist elsewhere. Real estate sales in the USA are fairly conventional processes, very organized, and they take some time.
As we navigate through the basic steps to acquiring property, you will see it is about being prepared and following the due process. Nevertheless, there are also tools that you can use to help you along the way.
Step 1: Financial Health Check and Loan Pre-Approval
The very first step before buying a home for the first time is reviewing your finances and getting a written confirmation from a potential lender. Doing this first helps ensure a successful transaction in the future and can save you some time.
You will need to know your credit score, be aware of what you can really manage, and get pre-approved in order to make a solid offer. Next, we will discuss each of these elements further.
Assessing your credit score and managing debt (the role of the FICO score)
The Fair Isaac Corporation score, known as FICO, is one of the most relevant credit scores in the financial world. You’ve probably heard of it just as “credit score, but the truth is that there are many, and this is perhaps the most popular.
Broadly speaking, it is a numeric score ranging from 300 to 85,0, and it lets prospective lenders know how likely you are to pay back on time. Factors such as your amount due and how timely your payments are help to make this score.
| Score | Grade |
| 300 to 579 | Poor |
| 580 to 669 | Fair |
| 670 to 739 | Good |
| 740 to 799 | Very good |
| 800 to 850 | Exceptional |
With the FICO score, lenders will get to know how well you have been managing debt. By doing this, they intend to determine your suitability as a prospective customer; a better score means more chances of getting a better loan.
The crucial step of mortgage pre-approval (Knowing what you can afford)
After figuring out your score, the next step for buying a home for the first time is getting a pre-approval letter from a possible lender. It is highly advisable to do so, as it will both let you know how much you could get and help you make a solid offer.
To do this, you will need to submit your financial information for consideration, such as W-2 forms, tax returns, and pay stubs. In return, you will get the maximum amount that the lender is willing to offer, and you will know where you stand.
Step 2: Finding the Right Team and the Right Home
After you have a solid idea of how much you can actually spend on purchasing a new home, the next step is to find it. And to do that, you should surround yourself with people who can help you.
As it is mainly required at the State level, you will encounter the figure of the real estate agent. This is basically an expert in real estate who will assist you on your quest based on the criteria that you lay out.
But finding the ideal agent is only half of the job, as you will also have multiple properties to evaluate. In order to do so, you need to be aware of certain costs that go beyond the initial purchase and the subsequent loan payment.
Property taxes, home insurance, and Home Owners Association fees are a few to take into consideration.
The role of the real estate agent and the criteria for house hunting
When buying a home for the first time, the real estate agent will be your first guide and ally. This will be the expert who will help you find what you want according to your needs and preferences.
Among the things your real estate agent will want to know is if you want a single home or a flat, and how many bedrooms you want. The neighborhood, local amenities, and services in the proximity (such as schools or daycare) are also important.
To correctly choose the right agent for you, look for experts in the area that you are interested in. Find out also if they cater to special features, such as your own language, and if you’re an international buyer.
Knowledge of the type of financial transaction that you’re looking into also matters. You may want to get someone who has experience brokering a sizable down payment in exchange for a lower interest rate, if that’s what you want.
Understanding the costs beyond the mortgage (Property taxes, insurance, HOA fees)
Other than the property price and the possible financing of it, you will want to know about other future expenses. In the United States, as in different countries, homeowners are required to pay property taxes every year.
Local governments collect these, and their rates vary according to the State. Other expenses that you may incur include insurance, which may be mandatory depending on the conditions of your loan and property.
Another type of expense is the HOA fees, which will depend on whether your property has a management service or not. These fees can vary in price, but they can affect your monthly budget if you don’t plan for them ahead of time.
Other type of bills, such as utilities and the average cost of living, is something that you can research beforehand. Knowing these costs will prepare you for what is to come and give you a realistic expectation about your desired home.
Step 3: Making an Offer and the Underwriting Process
After you found the one, the next step in buying a home for the first time is preparing your offer. If you’re confident in your search, and you want a solid chance at it, an attractive offer is your next best shot.
Once your offer is accepted and there is an agreement, the real process of getting a loan begins. To be approved, you will go through a series of background checks. Staying consistent is the key to navigating this part of the process.
If it all turns out all right, you will become a homeowner, and your priorities will change. Your focus will move from acquiring to maintaining and keeping up with your payments.
Crafting a competitive offer and the inspection contingency
As we previously mentioned, getting a lender’s letter of pre-approval will play an essential role in crafting a competitive offer. Not only will you want to prove that you have the means to buy.
Showing that you’ve done some previous work adds credibility and seriousness to your offer. In opposition to other interested clients who may have spoken about their intention to buy, you will have solid proof to demonstrate your interest.
There is, though, one more thing that you must be aware of. It is a fact that in order to ensure that you’re really getting what you’re seeing, you may want to hire an inspector. The cost will be on you, but it will give you certainty of the quality of the property.
If you’re buying new or almost new, this may be less of a concern. However, if you’re buying a used property that has been on the market for a long time, you may want to assess its condition.
Navigating the mortgage underwriting process (The final loan review)
Finally, while buying a home for the first time, you will face the underwriting process to disburse the loan. This means that you will go through a final background and financial check before you actually get the funds.
In this check, the lender may offer an appraisal of the property to ensure that its price is the right one. Other than that, they will run an overview of your credit score, your assets, job history, and ability to pay.
The key to navigating this part of the process is to stay consistent and avoid unusual movements during this phase. Ideally, you will want to maintain your debt behavior, meaning you will want to avoid new debt and pay on time.
The entire underwriting process can take between a couple of weeks and a couple of months, depending on your history. External circumstances can also play a role. Once you’re done with this step, you’ll be ready for the closing.
Step 4: Closing Day and Taking Ownership
The last and final step on this journey is the closing on the property and settling as the homeowner. You may want to celebrate, but you still need to pay close attention because this is when all final documents are signed.
After formalities are done, it’s time to move in and set up your new home. If all previous steps are done correctly, there will be no surprises at this point. What is expected from you at this stage is to keep up with your monthly payments.
What happens at the closing table
The final and definitive moment you’ll encounter when buying a home for the first time is the closing day. On the closing table, the final reviewing and signatures will take place, finalizing the purchase.
You should go over names and dates, values and signatures, as the final loan and property documents will go into legal force on this date. Also, any closing fees not related to the purchase itself are to be paid at this point.
Starting at the closing date, you will be officially the owner of the new property. Also, on this date, your loan will begin to count. Interests and other essential fees will start accumulating.
Once the legal aspect is done, you will be ready to take ownership and financial responsibility over the property.
Post-Closing: What to expect as a new homeowner
As a new homeowner, there are a few tasks that you may want to perform, even before moving, but definitely right after the closing. Some of these are moving your utilities to your new address, updating your subscription, and getting a new lock.
The main change, however, is that now you will be responsible for the maintenance of the property. Most importantly, your property loan starts to be active, and from now on, you will have to keep up to date with your monthly payments.
If this is your first time as a homeowner, you will find the usefulness of organizing in advance and designating resources for specific purposes from the start. Setting auto payments to avoid forgetting bills is a good option, too.
At CredHelper, we want to help you build your new routine to create a budget and manage your expenses. With the help of online tools, keeping track of your home expenses is much easier for the average, not-a-financier individual.
