Purchasing a first home is an exciting milestone in any person’s life. The road to get there, though, can include some unknowns the first time around. Let us map out the home-buying process and some tips and things to keep in mind.
Assembling a Good Team
As a first-time buyer in Connecticut, one of the best things you can do for yourself is assemble a great team of professionals to guide you through the process, answer any questions, and look out for your interests. These parties can include:
- Real estate agent
- Real estate attorney
- Mortgage broker/lender
- Home inspector
- Accountant/tax advisor
While hiring some of these professionals – like an agent and home inspector – is optional, we highly recommend doing so, as they will help you find the deal you’re looking for and steer you away from missteps.
Note: In Connecticut, the seller typically pays the fee for both their realtor and the buyer’s realtor, so it’s smart to take the free advice and help as a homebuyer. Also, homebuyers are required, and for good reason, to hire an attorney to conduct their closing. So make sure you find an attorney you feel comfortable working with.
Establishing your home buying criteria and understanding your financial position
The home search should start with setting the parameters of what you can afford and what qualities you’re looking for – everything from the size of a backyard to the quality of the school district.
An important piece of knowing how much can you can afford is understanding your financial position, something your mortgage broker/lender can help with. When applying for a mortgage, the underwriter will consider different factors, including income history, credit score, credit history, employment history, income stability, debt-to-income ratio, and assets.
Tip: There are different local, state, and federal homeowner assistance programs that are worth exploring if you need help financing your first home.
You will also need to determine how much money you’re able and willing to put down. Typically, buyers will put between 3-20% down, and the decision should depend on a couple of factors, including how much debt you’re willing to take on and how much cash you want on hand.
Tip: When determining the affordability of a home, keep in mind the closing costs you will incur, as well as any other ancillary costs such as HOA fees, property taxes, utilities, and homeowners' insurance. For closing costs, as a general rule, you should expect to pay between 3% and 6% of your total loan amount. For example, if you take out a $600,000 loan, you should expect to pay roughly between $18,000 and $36,000 in closing costs.
Making the offer
Once a property is identified, buyers will work with their realtor to submit a competitive offer on the home based on comparable homes in the area and many other factors.
Note: The real estate attorney is usually not involved in the offer or negotiation phase and usually only becomes involved once a sales contract is drafted.
To make an offer more competitive in a hot real estate market, buyers will sometimes waive certain protections with their offer. An example of this would be an inspection contingency, which allows the buyer to back out if the home inspection detects an issue with the home.
Tip: Buyers should be careful about waiving protections and contingencies, as it could mean they will not recoup their deposit if the contract is canceled.
Having your offer accepted and entering the contract
Once your offer is accepted, contacts will be drafted and signed by both parties.
Tip: Once the offer is accepted, the clock will start on various deadlines laid out in the contract, such as deadlines to perform an inspection and secure financing. Make sure you’re aware of and stay on top of all deadlines in the contract, something an attorney and realtor can help with.
The Closing
On the day of the closing, the buyer completes a walk-through of the property to ensure that everything is in order with the home.
The buyer will meet with their attorney to review and sign the closing documents. This is usually done at the buyer’s attorney’s office, though some attorneys will meet their clients at the property. At Pederson Real Estate Law, we always offer to meet clients at their new home for the closing to make it as convenient as possible.
Prior to the closing day, the seller will also meet with their attorney to sign all documents, and then on closing day each attorney will wire and Fed Ex documents and monies back and forth.
Sometimes the buyer’s realtor will also be present at the closing, and rarely but sometimes the mortgage lender will also attend. Prior to Covid-19, the buyer and seller usually met together with their attorneys to conduct the closing, but nowadays the two sides don’t usually meet together.
Hire an experienced closing attorney to guide you through the process
Having an experienced attorney by your side to oversee all the fine details can make big difference during the real estate closing process.
At Pederson Real Estate Law, Attorney Charlene Pederson has been helping Connecticut clients through residential real estate transactions for over 25 years. If you need an attorney for a closing in the lower Fairfield County, CT area, contact us today for a free consultation.
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