Congrats on taking a huge step in becoming a homeowner! We’re here to simplify the process every step of the way. Let’s get started…
For a first time home buyer, MA offers no shortage of ways to buy a home. And when it comes to mortgages, there is no shortage of steps to take, either. Don’t worry. We break it all down for you with easy-to-follow information designed to get the keys in your hand.
From the latest news on the housing market to all the steps you need to apply for a mortgage and eventually buy a home, it’s all here for you—and so are we.
What’s Happening in the Housing Market?
There’s no doubt about it—this a unique time. Yet, even with so many changes happening in the economy, buying a home is still a safe investment. If you’re a first time home buyer MA is also a great place to begin your search for a home, as property values usually rise over time.
There are really great things happening within the world of mortgages. Here’s just a taste:
Interest Rates Are Low
The Federal Reserve (FED) sets the interest rates used by banks and mortgage lenders. In response to the COVID-19, the FED cut interest rates, which can mean smaller monthly mortgage payments. If you’re a first time home buyer, this could be a great time to lock in low rates and set yourself up with more manageable payments.
Home Price Appreciation
The value of properties is rising across MA, and owning a home is a great way to benefit from the action. Homes have appreciated in value over the years, which is excellent news for anyone looking to own a home. This means that if you buy now with low-interest rates and hold on to your property, you can build more wealth over time.
Housing Affordability Index
Here’s something cool! You’d think with home values rising, buying a property would be less affordable, right? Actually, no!
The Housing Affordability Index calculates the affordability of homes on a monthly basis. The index is very high right now! This means good news for buyers. Get in touch to learn more about what this means for first-time buyers like yourself.
It’s a Seller’s Market
It sure is and that means a better deal for you.
How? Check this out:
- Even though sellers have more control with lower inventory, lower interest rates mean you have more options.
- When you shop for a home with a mortgage pre-approval letter, you’re way more likely to rise above your competition. This could mean sellers compete for you!
Have questions? No problem. Reach out to us, and we’ll walk you through all the good news.
What You Need to Know Before You Buy
We want you to be successful in owning your first home. That’s why we’ve put together this helpful list of things every first-time buyer should know.
You may find it helpful to print or screenshot this page and refer to it later.
Ready? Let’s go!
The difference between buying & renting
This one may seem obvious, but the disadvantages of renting aren’t always so clear.
When you rent a home, you’re paying someone else’s mortgage and getting a fraction of the benefits. Not only that, but it can also be more expensive to write a rent check than to make a monthly mortgage payment that’s customized around your needs.
Most importantly, owning a home gives you the chance to build long-term wealth.
Learn the Home Buying Lingo
Appraisal – When a home is appraised, a professional appraiser conducts an analysis to determine how much the home is worth. This is an important step in getting a mortgage, as the lender uses the appraisal to design the mortgage.
Closing Costs – A real estate transaction can only be completed once closing costs are paid. These fees live up to their name, as they’re paid when you close on your new home. Closing costs include things like taxes, title insurance, and other fees, to name a few.
Credit Score – Your credit score is a number that represents your credit history. The number ranges between 300 and 850. A lot of factors are at work in someone’s credit score, so be sure to speak with a mortgage broker about your credit score.
Down Payment –If you’re getting a mortgage to buy your first home, you’ll most likely be asked to make a down payment. This counts towards the purchase price of the home and is 3-20% of the purchase price. There are many programs exclusively for first-time buyers that help with the down payment or wave it all together. Get in touch to learn what your options are.
Mortgage Rate – This is the interest rate for your home loan.
Real estate professional – A person who is legally able to assist in the buying and selling of a property and is able to represent either party involved in the sale.
Pre-qualification & Pre-approval…what’s the difference?
This one’s important. Pre-approval is always the way to go. Why? The answer is in the difference between the two. One gets you taken seriously by sellers and agents, and the other has far less weight attached to it.
When you’re pre-approved for a mortgage, it means a lender has looked over all your financials, including your income, debts, credit score, and more. A pre-approval gives you a firm idea of exactly how much you can borrow. In short, it tells you how much home you can afford. Most importantly, you’re now able to make an offer that can be taken seriously by sellers.
By contrast, a pre-qualification does not lock in a commitment from a lender. It’s more of a general idea of what you can (maybe) expect from a mortgage and can change.
Pre-approval is a necessary step to getting a mortgage. It’s important to have all the necessary information and paperwork together. Here’s a quick example of what your local mortgage broker would need to see:
- 2 years of tax returns
- 2 years of W-2s
- Proof of Income – Roughly one month of pay stubs
- Proof of residency
- Bank statement(s)
- Credit score
- Up-to-date information on your debts
Remember, if you’re still searching and are not yet ready to make an offer on a property, you should update your pre-approval letter every 90 days or so. A lot can change in 90 days, including your debts and income levels. If you’re still looking at homes, make sure to keep your pre-approval letter fresh.
If you are applying for a mortgage with someone else, make sure they’re ready to provide the above-mentioned information, too. Speak with your mortgage broker about what items are needed to get you pre-approved and on track for house hunting.
The credit score is a big part of getting a mortgage, that’s an easy one. Still, there’s a lot of confusion about credit scores and what makes them rise and fall, as well as what role they play in getting a mortgage.
Speak with your mortgage broker about your current debts and they can advise on you on what steps to make to improve your credit.
Things to Avoid when Applying for a Mortgage
Getting a mortgage is a huge life event, and we want to make sure you’re a position to get as much out of it as possible.
So here are some things to keep in mind, when you’re gearing up to apply:
- Don’t take out a new credit card. In fact, don’t run up any new debts
- Avoid making large purchases
- Don’t close any credit accounts you have open
- Avoid co-signing loans for anyone else
- Stay with your current bank and don’t open new accounts
There are good reasons to follow these suggestions. Why? Read our blog on this topic to find out. Pressed for time? We’re only a phone call away.
Yes, COVID-19 still matters. Here’s how…
In order to stay healthy during this time, you may wish to submit paperwork electronically or tour a property virtually. Keep in mind that as we grapple with the impacts of COVID-19, a lot has changed in the world of mortgages and real estate.
We stay on top of everything you need to know. Read our blog to get more background on what we’re doing to keep our clients safe while making their dreams of homeownership come true.
Down Payment Assistance Programs in MA & RI
Remember those down payment assistance programs that we mentioned above? Here they are in a handy blog post!
We make it easy to explore your options for down payment assistance programs across Southern New England. Browse by state programs, as well as programs for cities & towns, not to mention federal options, too.
For a first time home buyer, MA has no shortage of programs to help you buy a home with ease. Check out which ones will work best for you and run them by your local broker.
In addition to down payment assistance, there are a variety of loans available for first-time buyers just like you.
From veterans to farmers and everyone in-between, there’s most likely a loan out there to help you become a homeowner. Click here to see a full list of your options across Southern New England.
What to Expect When Buying Your First Home
Making an offer
Now that you’ve found a home you love, you’re ready to make an offer! Congratulations!
There are generally 4 key steps to making an offer. It’s important to stay close with the real estate professional you’re working during this time. They will most likely be handling a lot of this paperwork.
Here’s a brief overview of what to expect:
- Plan a Price. Your real estate professional will look over comparable homes in the area, as well as information on the property itself. Once you determine a comfortable price that works best for you, it’s time to submit an offer.
- Submit the offer! The seller receives your offer and accepts or rejects it, based on a variety of factors on their end. There is room to negotiate, however.
- Negotiating an offer. If the seller wants a higher sale price, they may counteroffer. Another reason to negotiate is you want them to fix the roof before they move out. These are all things that can be negotiated during the offer stage. A real estate professional is your best resource during a negotiation.
- Sleep in your home, not on the opportunity. If you find a home you love, it’s important to act fast. Your real estate professional is a great resource to advise when it’s time to act vs. when it’s time to wait.
By staying in close contact with your agent and your local mortgage broker, you’re well on your way to finding your first home!
Purchase & Sales Agreement (P&S) + Earnest Money Deposit
What’s a Purchase & Sales Agreement, you ask? Simply put, it’s a contract.
When you buy a home, you’re making a deal, and the P&S Agreement defines the terms of that deal.
So, what’s an earnest money deposit? It’s essentially a security deposit that lets the seller know you’re serious about buying the home. This money gives you more time to straighten out important things like the loan you plan to get, along with other important to-dos required for a successful closing.
These funds are held in escrow. This means a third party (typically) holds the funds until the home is purchased, at which point the deposit is applied to the sale price of the home.
Apply for Mortgage
Now that you’ve got everything together, you’re ready to apply for a mortgage! This step is rather straightforward, as you’ve already been compiling the needed documents for pre-approval. Most importantly, you’ve already been working with a local mortgage broker, who can point you in the direction of officially applying for a loan!
Remember, your mortgage broker is the first and best resource during this stage.
The Home Inspection Process
A home inspection consists of a physical inspection of a newly purchased property. The buyer (you) typically pays for this inspection.
A home inspection ensures the property is safe to live in. It also identifies any potential issues the buyer needs to be aware of. Therefore, an inspection is a vital part of owning a home.
These timelines can be different, depending on whether you’re buying your first home in MA or RI. Ask your local mortgage broker and real estate professional about what to expect during this important stage.
Your lender will once more go over all disclosures, credit scores, income levels, and other supporting documents to ensure the loan is good to go. You’re well on your way to becoming a homeowner!
As mentioned earlier, an appraisal professionally determines the value of the home you seek to buy. This is an important step in getting closer to closing day. Remember, the buyer typically pays for the appraisal of the property they are purchasing.
A Property Title
Think of a title as a statement of ownership. A property title states who has the rights to the home, as well as who has the right to sell it.
As a home buyer, you’re eventually going to need the title to be in your name.
A Property Deed
A deed records the title (who owns the property), as well as to whom the title has been transferred. In MA there are 3 types of real estate deeds:
- Warranty Deeds
- Quitclaim Deeds
- Release deeds
In MA, most homes receive a Quitclaim Deed. In RI, the process is more straightforward. Either way, your real estate professional can describe the steps you need to take, in order to get title and deeds to where they should be.
For a first time home buyer MA can be a bit challenging if you’re new to the housing market. Lean on your real estate professional and mortgage broker during this time to get clear and accurate information.
A mortgage underwriter is responsible for making sure you’re able to handle the loan you’ve applied for. Basically, they cross-check everything you’ve submitted to make sure it’s accurate and determine the risk (if any) that this lending package poses.
- Clearing Conditions
- Clear to Close
- Closing Day!
Remember, you can always renovate but you can’t change your home’s location. Be sure to consider schools, shopping, parks, and other neighborhood features as you weigh your options. These factors can affect the value of your home in the future.
Take advantage of virtual open houses from the comfort of your own home. Might help you weed out a few and save you some time.
Decorating your living space is one of the most exciting parts of homeownership, and you don’t want to be limited by your budget when the time comes. If you create a separate fund for this now, you’ll have no problem turning your new house into your home.