So you are a first time home buyer in Austin, TX. We know you have a million questions, some healthy anxiety, and perhaps additional fears that we can’t even begin to imagine (it’s OK, we promise).
Let’s start with some reassurance: not only is this a great time to purchase a first home thanks to numerous FHA programs and the infamous $8,000 tax credit, but it’s our job to help ensure that your questions are answered and the process is as stress-free as possible.
Below you’ll find an outline of the steps to buying a home as well as numerous tips and tricks for getting the most out of your experience and avoiding some of the common pitfalls of purchasing your first home, including information about FHA programs and tax credits that are making it easier than ever to move from renting to owning on any budget.
No matter what happens, we’re here to help.
The basic steps to purchasing your first home:
1. The Big Question
Ask yourself: do you plan to be living in the same place for at least the next three years? If so, it almost definitely makes sense to purchase instead of renting. Even with average appreciation, you’ll find that your closing costs will often be paid for within the first two years, and that in as little as three years you’ll be making money by owning your home. The longer you plan to hold the property, the more economical it is to purchase, but even if you plan on staying only for a few years it’s still probably a great option, especially with current programs and tax benefits. In fact, the average age of first time buyers has dropped from about 32 to about 28 in recent years!
2. Get Pre-qualified
This is one of the most important steps on the way to home ownership. It’s important to work with a reputable lender that ensures you look for homes in the best price range to fit your financial picture. Your lender will provide you with a pre-qualification letter which can be used when making an offer on your first home. Email us for a list of reputable lender in Austin. We work with only the best.
3. Get Representation – Hire a Realtor
More home buyers than ever are looking to the internet to get information about homes available in their area, but there’s no replacement for a knowledgeable Realtor who knows the Austin market, knows the home buying process, and knows how to negotiate to get you the best deal.
There is so much more to hiring an Austin Realtor than getting access to houses and a chauffeur to show you around. While it is possible to buy a home without a buyers agent, the experience often proves to be more challenging than many expect. We’ve listed our top 3 reasons below:
1. Representation: Unless you are buying a property that is for sale by owner, the seller has professional representation on their side. By negotiating directly with the sellers agent you are putting yourself at a severe disadvantage since their agent is legally bound to share everything you tell them in order to get the best deal for their client. You wouldn’t go into a courtroom without a lawyer, so why risk the biggest purchase in your life in buying a home without representation.
2. Information: The only way to determine the correct price of a home is to analyze the prices at which similar homes recently sold in the same neighborhood, commonly referred to as a Comparative Market Analysis. While there are a variety of online resources for finding homes for sale, there are no consumer websites that provide home sales data in the Austin-area. This information is ONLY available to REALTORS through their membership with the local Austin Board of Realtors Multilple Listing Service.
3. Experience: When you have an experienced Buyer’s Agent working for you their primary job is to keep you from making a mistake. The knowledge they gain from working with so many clients throughout their career is invaluable when it comes to helping you pick the right house, on the right street, in the right neighborhood. This experience also comes into play when they are negotiating on your behalf as they often have intimate knowledge of the pros and cons of similar homes that recently sold. Once you are under contract to purchase a home, your buyer’s agent will help you finish strong by locating a great inspector, negotiate repairs with the seller, getting estimates from trustworthy contractors and finalizing your financing to ensure you close on time.
When you’re ready to get professional representation, fill out the form below to be hand matched with the perfect agent, or you can browse our team and choose for yourself.
4. Find your new home
With the help of your agent, it’s now time to find the perfect property. It often helps to have a list of wants going in to your first appointment so that you can narrow the thousands of available properties to a list of homes or condos that are in your price range, in the neighborhood you want, and have the features you’re looking for. Your agent can help you balance all of the different factors that go into choosing a home and ensure that when you find the one that’s right for you, you have an ally going into the next step!
5. Make an offer and negotiation
Once you’ve found the perfect home, your agent will assist you in making an offer. They’ll help you negotiate with the seller to ensure that you’re getting a fair price and favorable terms. Once you and the seller have agreed on a price and terms, you’ll then enter the option period (usually 7-10 days) during which your agent will assist you in getting a property inspection and doing any additional research or decision making pertaining to your new home. Once you’ve gotten all your ducks in a row (remember – your agent will guide you through every step!), it’s time to move towards closing!
6. Closing and Moving
WIth your closing date set, your agent will assist you and coordinate with your lender and title company to finalize the rest of the details including the funding of your loan and any repair issues in your purchase contract. Once your closing date arrives, you and your agent will go to the title company, sign all of the paperwork, you’ll pay your down payment and closing costs, and that’s it – you are now a home owner! Time to get a moving truck!
Common Questions about the $8,000 Tax Credit
Who qualifies for the $8,000 tax credit?
All first time home owners who make less than $125,000 per year (or $250,000 per year if purchasing as a couple) and who is at least 18 years old is eligible for the credit. Buyers also must not be classified as a dependent for tax purposes, the home must cost less than $800,000, and the home must be the primary residence for a minimum of three years after the purchase date.
What if I already own a home?
If you currently own a home but have occupied that home for at least 5 of the past 8 years, you are eligible for a $6,500 tax credit as well.
When is the deadline?
In order to qualify for the $8,000 tax credit, your purchase contract must be signed NO LATER than May 1st, 2010, and you must close on your new home no later than July 1st, 2010
How do I claim the credit?
If you are purchasing your home this year, you can either amend your 2010 tax return or claim the credit on your 2011 tax return.
Helpful Definitions
Amortization Schedule: A schedule that outlines the principal and interest payments for the life of the loan on your home. .
Appraised Value: This is an opinion of the value of your home at a given time based on the pertinent facts of the property (location, renovations, features, size, etc.) that’s used by your lender to secure your loan.
Commission: The fee paid to the realtor for their services.
Document Preparation: This fee will be charged and displayed on your HUD statement and is the cost of having an attorney prepare all of the legally binding documents for the purchase of your home.
Escrow Fee: This is the fee charged by the title company to deal with all of the details of the transaction including document preparation, escrow funds, etc. The amounts often vary and are a point of negotiation in the sales contract – often they are simply split between the buyer and the seller.
Homeowner’s Insurance: This is the mandatory coverage that homeowners must have, and it must cover you for the loan amount of the property in case of loss. Requirements and types of protection available vary depending on factors such as whether or not the property is in a flood prone area.
Maintenance Fee/Homeowner Dues: These are fees charges by the homeowner’s association (either for a subdivision in the case of single family homes or the building in the case of a condo project) that are charged every month. What exactly is covered in the HOA fees varies (lawn maintenance and common-area insurance are common items) so check with your agent to be sure.
Mortgagee’s Title Policy: This is the policy required by your lender to insure that they have a valid lien against your property to secure your loan. It doesn’t provide protection for the buyer but rather for the lender.
Origination Fee: This fee is also charged on your HUD statement and is part of closing costs – it covers the origination (creation) of your new loan.
Owner’s Title Policy: This is what your title company provides, and what it proves is that you have legal title to the property (your ownership can’t be contested).
Point: 1% of your loan amount.
Private Mortgage Insurance: Also know as PMI, this is Insurance against a loss by your lender in the event that you default (fail to pay) on your loan. It’s a requirement on all FHA (Federal Housing Administration) loans for for any normal loan on a home or condo where the buyer is putting less than 20% down.
Property Inspection: This is one of the most important steps in purchasing a property. A professional inspector does a thorough inspection of all aspects of the home and provides a written report of all the issues so that you can better understand the condition of the property and negotiate with the seller for repairs or improvements.
Survey: This legal document confirms the size and boundaries of your lot as well as any encroachments, easements, or restriction violations.