Tips For First-Time Homebuyers
As a first-home buyer—or even a veteran of many home purchases—buying a home can be a very exciting experience. At the same time, this process can be full of stress and anxiety. No one can breathe a complete sigh of relief until all of the paperwork is signed and the keys to your new home are in your hands.
If you’re a first-time homebuyer, it’s vital to educate yourself on the complete process. And even if you’ve done this a few times, you need to make sure you know what to expect and how to avoid the common pitfalls and mistakes that you and your real estate closing attorney must address. While your realtor or real estate agent may be a fantastic resource, you still need legal guidance in this area because home buyers have certain legal obligations during the process.
Let’s look at some common pitfalls first-time homebuyers make, and address a few remedies.
Ignoring Mortgage Programs
Of course, a buyer must have the financial wherewithal to be able to buy the home. In addition to plunking down savings, it’s a mistake to ignore and not explore the various mortgage programs that are designed specifically for first-time homebuyers. For example, VA loans are guaranteed by the U.S. Department of Veterans Affairs and can be used by those who served in the military. This program helps veterans to purchase a home at a competitive interest rate often without requiring a down payment or private mortgage insurance (PMI). USDA loans from the United States Department of Agriculture are for qualified borrowers and permit them to put down 0% and still obtain 100% financing. And Federal Housing Administration (FHA) loans have smaller down payment requirements of around 3.5% and are helpful for those whose credit is less-than-perfect.
Failing to Understand the Home Appraisal Process
An appraisal is a critical step in ensuring your home loan can be funded. Your prospective home must appraise for the price you’re paying or higher. If it fails to do so, you may have to spend time scrambling before you can close. Conducting an independent appraisal and seeking the help of an experienced real estate closing attorney can help to solve this issue.
Not Paying for an Inspection and Requesting Subsequent Repairs
After the appraisal has concluded, your next move is to hire a licensed home inspector. This professional will examine and test the primary units of the home, such as the major appliances, HVAC, plumbing, and electrical systems.
After you review the inspector’s detailed report, you can negotiate repairs with the seller. If it’s serious problem, a buyer can ask that the repair be made before the sale closes or request credit for the cost of the repairs on the final sales price. If the seller refuses your request for repairs, you can retract your offer.
It’s a big mistake to buy a previously-owned home without an inspection because you’re buying it “as is.” You may move in and find there are major issues that you overlooked—but ones a seasoned home inspector would find easily.
Not Fully Understanding Title Insurance Policy and a Title Search
At closing, buyers will sign title documents that transfer ownership rights from the seller to you. A title insurance policy protects the buyer from any possible defects in the title, such as a lien on the property. If there’s a defect to a title, it creates problems for the sale and will delay the deal for a considerable amount of time. This policy protects the buyer and the lender. Typically, a real estate closing attorney will conduct a title inspection that serves as the basis for the policy. The title search will determine whether the property is free and clear of any liens. If there’s a lien, the lender will not sign off on the mortgage loan and give you the loan to buy the home. Make sure that the title search is clean to avoid problems at the closing.
Paying for Private Mortgage Insurance (PMI) If you Can Afford a Larger Down Payment
PMI is a mortgage insurance homebuyers often must pay every month if they use conventional financing and made a down payment of less than the customary 20%. This insurance is for your lender’s benefit: the PMI protects the lender in the event that you’re unable to make your payments. PMI can cost new homeowners up to a few hundred dollars each month. You may be able to eliminate the need for PMI by increasing your down payment to 20%. If your budget allows you to do this, you should strongly consider doing so.
Failing to Hire a Closing Attorney to Review the Sales Contract
A home purchase is a sales contract. While many of the forms in the closing process are standard, a closing attorney can review the contract to make certain that it is legal and memorializes all of the terms upon which you and the seller agreed.
First-time homebuyers need to do their due diligence, which includes studying documents and asking questions. The assistance and counsel of a qualified real estate closing attorney can make the entire process run more smoothly, with less stress and as expeditiously as possible.
Experienced North Carolina Real Estate Attorneys
If you have specific questions about the home purchase process, reach out to one of our attorneys for a consultation. At Green Mistretta Law, we are committed to delivering the best possible results for our clients and take pride in offering superior legal counsel. Give us a call or reach out to us online to learn more.
This article does not establish an attorney-client relationship and must not be construed as legal advice.