Buying your first home is one of the biggest decisions you’ll make in your life. It’s exciting but also scary. Where do you even start? Don’t worry, we’ve got you covered. In this comprehensive guide, we’ll walk you through the entire home-buying process step by step, whether you’re interested in buying or selling a house in Milwaukee. From figuring out how much you can afford to making an offer to closing the deal, we’ll provide helpful tips and strategies to navigate this life milestone with confidence. By the end of this guide, you’ll feel equipped to find a place you’ll be proud to call home. The journey may seem long, but stay focused on the destination—the moment you get the keys and walk through the front door of your new home for the first time. You’ve got this! Now let’s get started.
Table of Contents
Determine Your Budget for Your First Home
The most important step is figuring out how much you can afford to spend on a home. Look at your income, budget, and expenses to determine the maximum price range you’re comfortable with.
A good rule of thumb is that your monthly housing costs (mortgage payment, taxes, insurance) shouldn’t exceed 28% of your gross monthly income. If you make $50,000 a year, aim for housing costs under $1,400 per month. You’ll also want to factor in a down payment of at least 3-20% of the purchase price, closing costs of 2-5% of the loan amount, and moving expenses.
Save up and pay off debt
Start saving as much as possible for your down payment and closing costs. Cut out extras like dining out and entertainment. Pay off high-interest debts like credit cards to improve your credit score and debt-to-income ratio. The more cash you have on hand and the less debt you carry, the better position you’ll be in to buy a home.
Once you determine your budget, you can start looking at properties in that price range. You may need to adjust expectations based on costs in your local market. Compromise by looking at smaller homes or ones that need minor repairs. Consider less expensive neighborhoods or cities within a reasonable commute.
The key is not to get in over your head financially. Buy a home you can afford now and in the long run. Make sure to get preapproved for a mortgage before you start seriously looking. Know exactly what you can spend so you can shop with confidence for your first home sweet home!
Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage before you start house hunting is one of the smartest moves you can make. ### Why Get Pre-Approved?
Pre-approval means a lender has reviewed your finances and is ready to offer you a mortgage up to a certain amount. With a pre-approval letter in hand, you’ll have more bargaining power and be taken more seriously by sellers. You’ll also know exactly how much you can borrow so you can focus your search on homes in your price range.
To get pre-approved, gather documents like your tax returns, pay stubs, W-2s, and bank statements and submit them to a mortgage lender. They’ll review your income, debts, assets, and credit to determine how much they’re willing to lend you. The lender will either pre-approve you for a specific loan amount or deny your application. If denied, ask why and see if there are any steps you can take to strengthen your application.
Shop Around at Different Banks and Credit Unions
Compare offers from multiple lenders to find the best deal. Look at interest rates, closing costs, and loan terms. Even small differences can save you thousands over the life of the loan. Apply to multiple lenders within a focused period, as too many credit checks can temporarily lower your score.
Once pre-approved, start searching for your perfect place! But don’t make any big purchases that could affect your finances before closing on your new home. Stay within the pre-approval amount and you’ll be moving into your first home before you know it. The key is to prepare thoroughly, move purposefully, and remain patient through what can be an exciting yet demanding process. If you follow these tips, you’ll be well on your way to getting the keys to your first home!
Research Neighborhoods and Find the Right Location
Finding the right neighborhood is one of the most important parts of buying a home. Do your research to determine locations that meet your needs and budget.
Check Crime Rates and Schools
Safety and education are usually top priorities for homeowners. Compare the crime rates in different areas you’re interested in. Check school ratings and distances for neighborhoods on your list. If schools aren’t a concern now, keep in mind that good schools often indicate a well-established, family-friendly community.
Explore the Locale
Once you have some promising neighborhoods selected, go explore them in person. Drive around and get a feel for what each area is like. Notice details such as the condition of roads and houses, available amenities, traffic and parking. See if you can picture yourself living there. Stop in at local restaurants, cafes and shops. Chat with business owners and residents to learn more about the community. Their perspectives can reveal aspects you may miss on your own.
Determine Your Must-Haves
Make a list of your non-negotiable requirements like public transit access, storage space, outdoor area, etc. Then compare how well different neighborhoods satisfy your needs. You may have to compromise on some points to find an option within budget. Decide what factors are most important to you before beginning to view homes.
Work Within Your Budget
Be realistic about what you can afford. Focus your search on neighborhoods with average home values in your price range. More affluent areas may have homes you love but can’t comfortably pay for. On the other hand, significantly lower-cost neighborhoods could end up costing you more down the road. Aim for the best overall value to get the most house and lot for your money.
Thoroughly researching neighborhoods and locations will help ensure you choose a community you’ll be happy to call home for years to come. Keep an open mind, explore all your options and you’ll find the right place!
Work With a Real Estate Agent to View Homes
Working with an experienced real estate agent is one of the best ways to start viewing homes. They can help guide you through the home buying process, set up property showings, and negotiate the best deal.
Find an Agent
Ask friends and family for referrals to agents they’ve worked with and had a good experience. You can also search online listings to find agents in your area that specialize in first-time home buyers or the neighborhood you’re interested in. Interview a few and go with the one you feel the most comfortable with.
Once you’ve selected an agent, they will ask you questions about what you’re looking for to get a sense of your needs, budget, ideal location, and timeline. Be as specific as possible so they can focus on showing you suitable properties.
View Homes
Your agent will schedule showings for homes that meet your criteria. Try to view homes in person rather than just online—photos don’t always do them justice! As you view homes, take notes about what you like and don’t like about each one. Discuss your feedback with your agent so they can find even better matches to show you.
Don’t feel pressured to make an offer on a home you’re not crazy about. Buying a house is a big decision, so take your time to find one that feels right. View as many properties as you need to in order to find “the one.” Once you do find a home you’re interested in, your agent can help determine an offer amount and whether you should consider bidding on the home.
Working with a real estate agent is a home buyer’s best strategy. They can guide you through the entire process, from viewing listings to making an offer and negotiating the best deal. Finding an agent you connect with and who understands what you’re looking for in a home will make the search much easier and help ensure you end up in a place you’ll be happy with for years to come.
Make an Offer and Negotiate Terms
Once you’ve found a home you’re interested in, it’s time to make an offer. This is an exciting step, but also one that requires careful consideration. The offer you submit will determine whether the seller accepts or rejects your bid, and could impact your negotiating power.
When determining your offer price, review the asking price and compare it to the prices of recently sold comparable properties. You want to make sure you’re not overpaying. However, in a competitive market you may need to offer at or slightly above asking to have the best chance of your offer being accepted.
Include contingencies
Attach contingencies to protect yourself, like:
- A home inspection contingency allowing you to back out if major issues are found
- A financing contingency in case your loan falls through
- An appraisal contingency so you can withdraw your offer if the appraisal is lower than the offer price
Once you determine an offer price you’re comfortable with, submit it to the seller in writing. Be prepared for them to accept, reject or counter your offer. If they counter, you can accept their counteroffer or provide another counteroffer of your own.
Negotiate the best deal
Some items that are often negotiable in an offer include:
- The offer price (you can ask for a lower price)
- The closing date (you can ask for more time)
- What’s included (you can ask for certain furnishings or appliances to be left)
- Repairs (you can ask the seller to make necessary repairs or provide a credit for you to make them)
Stay professional and courteous through the negotiation process. Don’t get emotional—focus on the facts. Be willing to compromise when possible to reach an agreement. If negotiations stall, you can walk away or submit a final offer before withdrawing.
Making an offer and negotiating the terms to reach a final purchase agreement requires patience and persistence. But if done right, you can land a great deal on your first home! Stay determined and keep your eye on the prize—the keys to your new place!
Conduct Inspections and Appraisal
Conducting professional inspections and an appraisal on the property are two of the most important steps in the home buying process.
Home Inspections
Once you have an offer accepted on a house, hire a licensed and certified home inspector to thoroughly evaluate the major systems and components of the home. They will check the roof, attic, basement or crawlspace, plumbing, HVAC, electrical, and structural elements for any issues that could cost you down the road. It’s best to be present during the inspection so you can see any problems firsthand and ask questions. Negotiate with the seller to have necessary repairs made or the price lowered.
Some things an inspector will look for include:
- Roof damage or leaks
- Foundation cracks
- Water damage or flooding risks
- Electrical issues like outdated panels, exposed wires
- Heating or cooling systems near the end of their lifespan
- Plumbing leaks or pipe corrosion
While home inspections are not technically required, they can give you peace of mind about the home’s condition or help you avoid purchasing a potential money pit. For a few hundred dollars, a thorough inspection is well worth the investment.
Appraisal
An appraisal is required by mortgage lenders to determine if the offer price is in line with the home’s fair market value. An appraiser will evaluate recent comparable home sales in the neighborhood to estimate the value of the property. If the appraisal comes in lower than your offer price, the lender may not approve the full mortgage amount. You’ll have to renegotiate with the seller to lower the price, pay the difference in cash, or walk away from the deal.
Appraisals and inspections are two critical checkpoints when buying a house. While the process can seem tedious, they help ensure you go into homeownership with realistic expectations about the property’s condition and value. Conducting your due diligence upfront will give you confidence and peace of mind in your investment for years to come.
Finalize Loan Details and Paperwork
When you’re ready to finalize the home buying process, there are a few last details to wrap up regarding your mortgage loan and necessary paperwork.
Loan Approval
If your offer was accepted, you’ll need to go through an official loan approval process with the lender you chose. They will review your income, employment, credit score, down payment amount, and other details to determine if you qualify for the loan amount needed to purchase the home. Be prepared to provide W-2’s, pay stubs, tax returns, bank statements, and any other requested paperwork. The lender will check that all the information is accurate and you meet their qualification criteria before officially approving your mortgage loan.
Rate Lock
Once approved, you’ll want to lock in your interest rate as soon as possible to avoid any increases before closing. Your lender can lock in a rate for 30 to 60 days. Be sure to ask about any rate lock extension fees in case closing needs to be pushed back for any reason. The rate you lock in is the interest rate you will pay for the life of the mortgage loan.
Final Walkthrough
Do a final walkthrough of the property, ideally the day before closing. Make sure any repairs you requested were made, all appliances and fixtures are in working order, and the property is still in the same condition as when your offer was accepted. This is your last chance to bring up any issues with the seller before ownership is officially transferred to you.
Signing Paperwork
At closing, also known as settlement, you will sign official paperwork like the final sales contract, mortgage documents, and deed. Your down payment and closing costs will also need to be paid at this time, usually in the form of a cashier’s check. Once all documents have been signed and payments made, you will get the keys to your new home!
Congratulations, you’re now officially a homeowner! While the process may have seemed long and complicated at times, your hard work and perseverance paid off. Enjoy this new chapter of homeownership.
Complete the Closing Process
The closing process typically takes around 4 to 6 weeks to complete after your offer has been accepted. This final stage requires signing official paperwork, transferring funds, and getting the keys to your new home!
Complete a Home Inspection
Once your offer has been accepted, schedule a home inspection right away. A home inspector will thoroughly check the property to identify any issues that need to be addressed before closing. Negotiate with the seller to get necessary repairs done or lower the price accordingly.
Review and Sign the Contract of Sale
This legally binding document details the terms of the home sale, like the closing date, purchase price, inclusions, and more. Read through carefully before signing to ensure all details are correct. Your real estate agent and lawyer can help explain any parts that are unclear.
Apply for a Mortgage and Home Insurance
If taking out a mortgage, meet with your lender to sign the final paperwork. They will also need to verify your employment, income, and debts. You’ll want to apply for home insurance at the same time to ensure there are no gaps in coverage. Shop around at different companies to find a policy that fits your needs.
Complete a Final Walk-Through
Do one last walk-through of the property, ideally the day before closing. Check that any agreed upon repairs were done properly and make sure the seller has moved out all their belongings as promised in the contract of sale. This is your chance to bring up any remaining issues to be addressed before closing.
Sign Official Documents and Get the Keys!
On closing day, you’ll meet with the seller, real estate agents, and lawyers to sign final legal paperwork like the deed, mortgage documents, and property tax forms. Once everything is signed and the money has changed hands, you’ll get the keys to your new home! Congratulations, you’re officially a homeowner.
The closing process can feel overwhelming, but with the help of your real estate and legal team, you’ll navigate it smoothly. Stay organized, ask questions, and don’t rush into signing anything you don’t fully understand. Before you know it, you’ll have the keys in hand to your first home!
FAQ: Answers to Common First-Time Homebuyer Questions
Buying a home is a big decision with lots of questions. Here are some of the most frequently asked questions from first-time homebuyers and the answers you need to know.
How much can I afford?
As a first-time homebuyer, the amount you can afford depends on your income, debts, down payment, and interest rate. A good rule of thumb is that your total monthly payment including principal, interest, taxes, and insurance (PITI) should not exceed 28% of your gross monthly income. Get preapproved for a mortgage before you start shopping so you know your limit.
Should I buy or rent?
This depends on your situation. Buying a home usually means paying more upfront but building equity over time. Renting typically has lower upfront costs but your money goes toward paying the landlord. Think about how long you plan to stay in the home, your financial stability, interest rates, and the local housing market. For many first-time homebuyers, buying is the better long-term choice if you intend to live there for several years.
How much do I need for a down payment?
As a first-time homebuyer, you may only need 3-5% down for an FHA loan or 3-20% for a conventional loan. The more you put down, the lower your interest rate and monthly payment will be. Save as much as you can for your down payment, closing costs, and emergency fund. Check with lenders to see if you qualify for down payment assistance programs.
Should I use a real estate agent or go it alone?
For most first-time homebuyers, using a buyer’s agent is highly recommended. They can guide you through the complicated process, help you find listings, schedule tours, negotiate the best deal, and ensure all paperwork is in order. Their commission is typically paid by the seller, so using an agent costs you nothing. Only consider going it alone if you have a lot of experience with real estate transactions.
Have more questions? Don’t hesitate to ask your real estate agent, mortgage lender, or a housing counselor. They want your first homebuying experience to be a positive one and are there to help you every step of the way.
Conclusion
So there you have it, a comprehensive guide to buying your first home. Now you know the key steps to take and what to watch out for along the way. While it can feel overwhelming, if you go in prepared with the right mindset and information, you’ll navigate the process smoothly. Remember, do your research, get preapproved, find the right real estate agent, make an offer, and don’t be afraid to negotiate to get the best deal. Once you have the keys in hand and step into your new home, all the hard work you put in will feel worth it. You did it – you’re officially a homeowner! Enjoy this new chapter in your life.
