Buying your first home is such an exciting time, but it can also be one of the most nerve-wracking.
Having a place to call your own, without your money going to a landlord every month, can bring you a sense of stability and the feeling that you’re putting down roots somewhere. It can also be a smart investment for your future, particularly if you’re buying in an area where there’s the potential for growth.
As you prepare to become a first time homebuyer in Michigan, we want to help you understand the process and decide what mortgage options you should be considering that suit your financial situation.
Prepare to Buy
Before you get to the fun part of looking at properties, you need to sit down and seriously consider if you’re ready for this. Start by checking your credit score and if it’s not where you want it to be, give yourself time to fix and improve it.
Take this time to save for your down payment as much as possible—the more you put down, the lower your mortgage could be. Set a budget and make a financial commitment to cutting back on luxuries where you can so that you can buy your dream first home as soon as possible.
Homebuying Process
Get pre-approved
The first step to take in the home buying process is to get pre-approved for your mortgage loan. Research the different mortgage options available to you and talk to your local bank’s loan specialist for more information.
You’re likely looking at a conventional loan or, if you qualify under special conditions, a government loan like an FHA, VA, or USDA loan could also be an option. These are good options to consider if you have a lower credit score or know you won’t be able to afford a sizable down payment. You may also qualify for home loan programs like state or local housing agency programs, or special purpose credit programs if you have a more complex financial history.
You’ll also want to consider whether you’re looking for a 30-year or 15-year loan. Remember that you’ll likely pay less per month with a longer-term loan, but you’ll pay more interest over the lifetime of your mortgage.
Think about whether you want a fixed or adjustable rate for your mortgage too. A fixed rate means that your interest level won’t change over the lifetime of your loan, so you’ll pay the same amount in both principal and interest every month until the loan is paid off. An adjustable or variable rate loan may start lower but will see interest rate fluctuations as the market changes. This can make your monthly payment higher if the interest rate increases.
Once you’ve decided on a mortgage option, provide all of your documentation to your loan official, like W2 and tax statements, proof of income, and identity documents. They’ll need this information to tell you how much you’re approved to borrow, which will guide you in looking for homes within your budget. With preapproval in hand, you also become a more attractive option for sellers, as it shows some proof that you’re able to afford their house. Contact a West Shore Bank mortgage lender today to get started!
Find a real estate agent
Once you’re ready to start looking for a home, you’ll need to find a reliable realtor who can guide you through this process. Look online and review consumer ratings or use the National Association of Relators “Find a Realtor” form to get started.
House hunt
This is the fun part! Work with your realtor to start viewing homes in your budget and in the location you’re looking to live in. Know what your priorities are, where you’re willing to compromise and what is non-negotiable. Do you need to be in a certain location for your child’s school? Do you need a yard for your dog to play in?
Remember that you likely won’t find the perfect property so it’s vital that you know what’s most important to you. If you’re willing to do some DIY, many properties in your budget could turn into your dream home over several years of work and care. But if you want a move-in ready house, you might need to compromise on some of your “nice to haves” to keep it within budget.
Make an offer
When you’ve found the right home for you, you’ll make an offer through your realtor. The sellers will likely make a counter-offer or reject yours if they have other options on the table. This is where having an experienced realtor pays off—they’ll be able to advise a reasonable offer, without costing you too much extra upfront.
Get inspected and close the deal
When your offer is accepted, it’s not quite time to celebrate. Always get a home inspection completed before you go to closing. This can flag any issues that you didn’t see in an initial walkthrough of the property. If there are any problems, you can ask the owners to address these before you buy or to lower the sale prices if you’re willing to take care of the problems after.
In competitive markets, it’s tempting to waive the inspection contingency to get your offer accepted. But this is a very risky move. Weigh this up with your realtor and only offer this if you’re very confident that you can handle any potential problem that arises after closing.
Making an Offer
When you’re ready to make an offer on a home, you need to understand how the market looks before going in with your number (your realtor can help with this).
If you’re in a buyer’s market, house prices are typically lower and sales are slower, with lots of properties to choose between. This is more favorable to you as a buyer, so you could get a good deal. A seller’s market, though, is the opposite. Properties are scarce and move off the market quickly, while house prices typically rise due to higher competition.
Make a competitive offer based on your research and you can even write a letter to the seller explaining why you love the home. This can sway some sellers, particularly if they have an emotional tie to the home such as it being their first home or where they brought their children home for the first time.
If you can, be flexible with your timing. Some sellers may need longer to close, while others may be looking to move quickly. Respond to any communications and counter offers quickly to help move the process along and make you look like a great option to the sellers.
Homebuying Closing
Always review the closing disclosure before you sign any documentation. This is a five-page form that gives you all the final details about your mortgage, including the loan terms, your projected monthly payment costs, and any other fees associated with your mortgage.
Perform a final walkthrough of the property around 24-48 hours before closing with your realtor to identify any issues or problems that still need to be resolved. You can then gather all the rest of your documents and head to closing.
When you attend the closing meeting, you’ll sign all the necessary documents like the mortgage promissory note, closing disclosure, and settlement statement, and also pay your down payment and start your mortgage loan. You’ll also receive the keys to your new home!
Local Michigan Resources
When you’re getting ready to buy a home, you can find support from a number of local Michigan home buyer resources. The Northwest Michigan Community Action Agency offers homebuyer education classes for free, while the MI Home Loan program is specifically set up to support first time buyers.
Habitat for Humanity also offers you support as you go through this process, including down payment assistance and other guidance or financial aid. You can also get more information about buying a home from the MSHDA Housing Counseling Service.
Find Your Dream Home with West Shore Bank
When you’re ready to find your first home in Michigan, the loan team at West Shore Bank is here to help. We’ll guide you through the different mortgage options that are available to you, while helping you understand the process of becoming a homeowner. Contact our mortgage lending team today to get started.
