Buying a home is a complex process that demands a great deal of time and emotional investment. Take it one step at a time. This first-time home buyer guide will show you the most important things to know before buying a house.
I. Deciding to buy
Before embarking on a home search, ask yourself if this is a good time for you to buy. Some buyers will monitor market conditions and mortgage rates before taking the leap.
But experts say that regardless of these external factors, it is more important to determine if you are financially ready to purchase a home, and whether you see yourself settling down and living in the same place for at least five years.
II. Getting your finances in order
What do you need to buy a house? Now that you’ve made the decision to buy, you must get your finances in order. If you pay your credit card in full and on time, keep your income-to-debt ratio below 43%. Some may want to see closer to 30% or generally live within your means, then you should be able to qualify for a loan. To win the confidence of lenders, your credit score, which is based on your financial history, should be 620 or more.
To gain an advantage in a competitive market, you should consider getting pre-approved for a loan. This gives you an estimate of how much home you can afford, and persuades sellers that you have the financial capacity to go through with the sale.
This is also a good time to decide which mortgage option is best for you.
The most common mortgage types include:
- Fixed rate mortgages (FRMs) are typically paid off within a 15 or 30-year amortization period, with a fixed interest rate throughout the loan’s life cycle
- Adjustable rate mortgages (ARMs) come with a lower initial interest rate within the first few years of the loan’s life cycle, after which the rate fluctuates depending on market conditions and other factors
- Government-backed loans like Federal Housing Administration (FHA) loans and U.S. Department of Veteran Affairs (VA) loans allow qualified buyers to purchase homes with little to no down payment
- Jumbo mortgages are targeted at high-income buyers in search of homes in the high end of the market, and which go beyond typical federal loan limits
- Wisconsin Housing & Economic Development Authority (WHEDA) loans are specific to Wisconsin. For those that qualify, there are options for little to no down payment and in some cases upgrades or improvements can be built into the loan.
Aside from getting pre-approved for a loan and choosing the right mortgage type, you must have sufficient cash reserves for the down payment, which typically covers 20% of the sales price, but which can be as low as 6% when purchasing with a government-backed loan.
III. Finding a buyer’s agent
What does a real estate agent do for a buyer? Working with an agent allows you to benefit from their connections, resources, expertise, and knowledge of the market. Hiring one will help you avoid the common pitfalls of buying a home.
If you feel comfortable working with the listing agent you are more than welcome to, but you do have the right to have your own representation. With a signed Buyer’s Agency Agreement, your agent will represent you and ONLY you, providing advice and opinions before and throughout the transaction.
Even if you are not a first-time home buyer, keep in mind that no two transactions are the same – more so if you are buying in an area you are not familiar with. You still stand to benefit from the services of an agent.
A competent agent will have the following qualities:
- A valid real estate license, along with the proper designations and certifications relevant to their area of expertise
- Thorough knowledge of the local housing market and real estate transactions
- Up-to-date knowledge of state, national, and global real estate trends
- A large and varied network of professional contacts in real estate and related industries like construction and mortgage lending
- Negotiation skills
- Availability and strong communication skills
- Strong reviews and great community reputation
You’re in good hands with Windseeker Realty. Let our agents guide you as buy prime real estate in the Lake Superior area. Call (715)779-5000 or send an email to Agent(at)WindseekerRealty(dotted)com.
IV. Looking for homes that’s right for you
The vast majority of buyers start their search online. Feel free to utilize all the online tools at your disposal, from MLS to Zillow to social media. From there you can decide which properties match your criteria.
But in order to have a fruitful search, you need to know what you want in a property. Make a checklist of must-haves, from the number of bedrooms to the architectural style of your choice. Decide on your non-negotiables, and determine which features you’re willing to compromise on.
Here are a few tips when searching for a home:
- Block your schedule for showings so that you can personally view the property.
- Try to look past the cosmetic appeal of the home and conduct an inspection. A certified, unbiased home inspector will report back on any findings affecting your purchase, such as structural issues. In some cases sellers will allow this prior to making an offer, but generally inspection is built into an offer to purchase.
- Get a feel for the neighborhood. Visit the area at different times of the day and week to see how much traffic and activity the neighborhood gets. Talk to the neighbors and have a chat with the homeowners association (HOA) if applicable.
V. Escrow and appraisals
Once the offer has been accepted by the seller and the contract is signed, you will be required to make a deposit, or give earnest money, to the concerned attorney, broker, or escrow agent.
The contract is forwarded to the attorney or title company, who will conduct a title search and other paperwork necessary to transfer the title to you, and to prepare the title commitment.
You will get an opportunity to review and sign off on disclosures based on property type. Wisconsin law requires sellers to provide buyers with a standardized disclosure form, also known as a real estate condition report (RECR) for residential homes. These reports are appended to the contract and signed by both parties.
For homes built prior to 1978, a disclosure specific to EPA-mandated lead paint will also be required, allowing the seller to attest that, to their knowledge, lead paint had not been used on the property.
During this stage, buyers will have the home inspected within a specific time frame agreed upon by all parties to put the purchase contract into effect.
Some buyers will bring in multiple inspectors who specialize in specific areas, such as the roof, swimming pool, or heating, ventilation, and air conditioning (HVAC). The accepted offer documents will dictate what inspections you are allowed to do.
In Wisconsin, a licensed inspector conducts a general inspection, in addition to these types of inspections, when the situation calls for it:
- Lead-paint inspection
- Mold inspection
- Pest inspection
- Radon inspection
If financing is among the conditions of the contract, a licensed appraiser will assess the value of the home for the lending institution, which will then confirm if their investment in the home is accurate.
VI. Closing the deal
Closing is the last step of the buying process. It is overseen by a third party, such as an attorney or title company. You will do a final walk through of the home prior to closing as dictated in the offer documents.
- You will do a final review of the paperwork
- Proceeds of the sale are forwarded to the seller
- If there is financing involved, you will sign the mortgage note
- Both parties will settle fees like the agent’s commissions, prorated property taxes, and title insurance
- The title and keys to the home will be turned over to you
VII. Moving in
Now that you have the keys to your new home, it’s time to pack your things and move in. Although Wisconsin doesn’t require moving permits, do research on parking restrictions that may apply in your new community, especially for the moving truck.
Winters bring heavy snowfall, so schedule your move outside of the cold months. If you do decide to move in the winter, be alert when driving to prevent accidents.
Check out these articles on what to know as a first time home buyer:
Find the perfect home in the Chequamegon Bay & Lake Superior area or other Wisconsin communities with Windseeker Realty.
Live your best life in Wisconsin. Windseeker Realty can make it happen. Call us at (715)779-5000 or send an email to Agent(at)WindseekerRealty(dotted)com for a smooth, stress-free transaction.