First Time Home Buyer’s Guide
Congratulations on making the decision to buy a home! Purchasing a home is a big investment, and the process can feel overwhelming if you’ve never been through it before. We believe informed buyers make good decisions, so Front Door Title has put together some information to help guide you through the process of buying a home. We hope it helps, and if you have any questions, please feel free to give us a call!
How Much Home Can You Afford?
Before you start drooling over listings of your dream home, it’s a good idea to find out how much home you can afford. Take time to learn about the various loan options and get a mortgage pre-approval, Talk with your current bank, or local mortgage officers that friends and family recommend.
Do your research on what the current mortgage rates are for the various types of loans, and maybe even use an online calculator to give you an idea of what monthly payments would be with certain down payments and interest rates. These online calculators are only estimates, and not a replacement for getting pre-approved for a loan from a licensed mortgage banker. A typical mortgage for a first time home buyer is a 30 year mortgage. Pre-approval will help things go more smoothly when you make an offer on a home. When a seller is considering an offer on his home, he wants to see a pre-approval from a qualified lender so he knows your offer is one that you qualify for.
Find a Property
Once you know what a comfortable price range is for your home purchase, you can start looking in earnest. Online listings such as can be found at Realtor.com have made researching your options easier than ever. Be sure to read some of the tips pages on sites like Realtor.com and others. There is a wealth of information out there on the professional industry sites.
Consider working with a Realtor. Realtors know the housing market, and can make buying or selling a home much easier than if you try to do it all on your own. They are familiar with all of the contracts and legal aspects involved, can help guide you through the process and have experience negotiating on behalf of their client.
Make an Offer
So you’ve found a home you think you’d like to live in, and you can afford. Congratulations! At this point, you make an offer to purchase through a written proposal that spells out the purchase price and terms, such as pending inspection, time to closing, etc. It is wise to include in your offer an option to get an inspection of the home you are wanting to purchase. The buyer’s agent will help you come up with an offer that has a chance of being accepted, but is not so low as to be an insult to the seller. In a typical situation, you will complete an offer, which your buyer’s agent will them present to the seller’s agent, who presents it to the seller. Many times, the seller will make a counter offer, and this can go back and forth a few times until an agreement is reached.
Sign the Purchase Agreement
Having a seller accept your offer is exciting! Once your offer is accepted, and the seller has signed it, you have a contract.
Now that you have a contract to purchase and the seller has the contract to sell, you begin the process of making application for a mortgage and selecting the Title Company who will conduct your closing. The lender will ask you for many documents and personal information as part of the loan approval process.
While you are in the process of mortgage approval, your title company will be doing a title search and examination, checking to assure that the title to the property is insurable and marketable. As a buyer, you have the right to select the title company that will close your transaction. This choice is generally made right after the seller accepts the contract, to give the title company time to do the title analysis and resolve any issues that might arise. Your Realtor will likely recommend a title company they have worked with in the past. Your realtor will also recommend that you purchase owner’s title insurance in addition to the title insurance you are required to purchase for the lender.
Get Homeowner’s Insurance
You have to have proof of a homeowner’s insurance policy at closing. Most lenders require you to pay a year’s worth of premiums up front. If your loan includes an escrow account, it will be set up to make future monthly payments toward your future property taxes and insurance.
Settlement Time (Or Closing)
Once the buyer receives a commitment of financing and all inspections have been completed, it’s time to come to the real estate settlement table. “Settlement” and “closing” and “consummation” are used interchangeably to describe the meeting where through signing of documents and disbursement of funds, a property changes hands from the seller to the buyer. The process is generally conducted by a title company like Front Door Title.
You can expect to sign several documents at settlement. They include, but are not limited to:
- Closing Disclosure:This form contains the terms and costs of your transaction. By law, your lender must provide the Closing Disclosure to you at least three days before your closing.
- Promissory note:This document is your promise to repay the loan (mortgage) to your lender. The note provides details regarding your loan, including the amount you owe, the interest rate of the mortgage loan, the dates when the payments are to be made, the length of time for repayment and the where the payments are to be sent.
- Deed of trust:This document, which may also be called a Security Instrument or Mortgage, identifies the property you are purchasing as the collateral for the note you sign. It is the document that gives the lender the right to foreclose should you fail to pay the note as agreed. It is recorded in the Land Records office of the county where the property is as a matter of public record.
In Maryland, if you are truly a first time home buyer, defined as someone who has never owned a principal residence in Maryland, then you are exempt from your portion of the State Transfer Tax (.25% of the Sales Price). Front Door Title supplies all of the paperwork for this exemption.
We hope this information has been helpful. Your realtor, and the staff here at Front Door Title, will be happy to answer any questions you may have. Call Front Door Title today at 410-870-7070. You can also use our contact form and someone will get back to you shortly. We are always happy to help!