First-time homebuyer guide for Washington State
We strive for transparency, which is why one of our goals at The PNW Team is to keep our clients informed and prepared when they are ready to purchase a home.
Before I got into the real estate business, my wife and I decided to buy our first home through a large corporate bank. We knew NOTHING about the home-buying process and trusted that it was the best decision, but we weren’t told what to expect throughout that process.
We weren't informed how much our downpayment was going to be and had no idea what closing costs were much less what they included. Long story short, it didn’t work out.
Coming from what I learned from that bad experience, a goal of mine when becoming a real estate agent was to help people understand what to expect when buying their first home so that their transaction can go as smoothly as possible.
To start, purchasing a home can be broken into 7 parts.
Hiring an agent
Getting pre-approval
Looking at homes
Making an offer
Mutual acceptance
Final settlement statement
Closing day
Hiring a local realtor
This is a given but there are important factors on who the buyer hires to represent them and their best interests.
About 75% of home buyers will hire the first realtor they find, and this leads to a continuous number of transactions failing. We highly recommend interviewing 2 to 3 agents before committing to one.
Check for reviews on different search engines and social media platforms. We recommend Google for solid agent reviews!
Getting pre-qualified for a loan
Getting pre-approved means a loan officer gives the buyer the green light for a home loan. If the buyer plans on paying out of pocket in cash, congrats! They don't have to worry about this step.
What is needed to be pre-approved:
A lender to represent the buyer and fund the purchase
Documentation such as W2's, bank statements, & pay stubs
A credit check
All of this info is important for the lender to prove to the bank (who the buyer is borrowing money from) that they can make mortgage payments on time.
The buyer may already have a lender in mind, but if not, we highly recommend Steven Wright with Movement Mortgage. Steven has closed over a hundred transactions with The PNW Team and has continued to find the best competitive rates for our clients.
Looking at homes
Of course, most people probably have already been searching for homes before getting to this step, but now private showings can be scheduled by a realtor or be notified asap when that first open house happens for the home they have their eyes on.
Some major things you want to check during showings…
Age & Condition of the roof
Age & Condition of the water heater
Check the floors (especially around where there is water such as bathrooms and kitchen)
Cracks in the wall. A brick wall with cracks could indicate movement.
Test the windows. Make sure they close and latch properly.
Check the electrical box. Make sure it’s installed properly with no exposed wiring.
Check the plumbing
A lot of these items you’ll get a better understanding of the condition through a home inspection; however, catching a lot of this stuff early can save you time before placing an offer.
Making an offer
Since the buyer is now pre-qualified, they have skin in the game. This means that they now have the leverage to make an offer on a home that they are interested in after searching and looking at different properties.
When the buyer is ready to make an offer on a house, they will need to discuss what those terms look like with their agent. Likely, this involves a large amount of paperwork which goes over:
What is the purchase price they are offering?
How much of closing costs (if any) is the buyer asking to be covered?
What appliances will be included?
What timelines are involved?
What are the contingencies in this sale?
To better understand contingencies, we split contingencies into two different types which include the Inspection Contingency and Financial Contingency.
The inspection contingency allows buyers the opportunity to evaluate all conditions of the home with a qualified home inspector. After the inspection has moved forward, the buyer can either accept as is or reject the home on its inspection. If there's a rejection then the buyer can either ask for repairs and maintenance or terminate the transaction and retain earnest money.
The financing contingency is a clause that states a buyer’s offer being contingent on being able to secure the financing on their home purchase. In most states, the buyer has about 5 days to secure who their financing is going through, and they have 30 days to finalize their financing.
For example, if a buyer lost their job or if their credit score severely dropped then their home loan will likely be disqualified. This is why our team always makes a point to inform our clients not to switch jobs during a real estate transaction.
Once the buyer finalizes their offer, their agent will submit that offer to the seller's agent to present to the seller. If the buyer set an offer review date, the seller has until 9 PM on the scheduled date to review and to respond to their offer.
If a review date isn't set then the seller will have 2 business days to review and respond to the buyer’s offer.
Mutual Acceptance
Mutual acceptance happens once all contract terms for the buyer and seller are agreed on and have signed off on any changes that have been countered. This event initiates the timeline for each contingency in the contract.
Though out this process, the agent’s role is to protect the buyer’s interest by preserving their contingencies and communicating everything that is happening within the transaction.
Final settlement statement
The buyer’s loan will be held by Escrow, a neutral third party that facilitates all funds. This company will coordinate with the buyer on the best way to pay the monthly mortgage amount after closing.
While contingencies are being fulfilled, the buyer will have an opportunity to re-evaluate the condition of the home and renegotiate based on the condition. Once all terms are settled, Escrow will provide a final settlement statement which allows the buyer to review the required downpayment, total closing costs, and the total mortgage amount.
That monthly mortgage will include principal, interest, taxes, and insurance.
Principle: the actual amount the buyer is paying off on the loan.
Interest: the amount the buyer is paying the loan officer.
Taxes: Specifically state taxes that are sometimes incorporated into the mortgage.
Insurance: There are two types (PMI & Homeowners Insurance)
Closing day!
Finally, the best part. The Escrow company will let the buyer know when the transaction has been released to record and has been finalized. Once recorded with the local county, the agent will then give the buyer keys to their new home!
On closing day, it’s important for the buyer to remember to transfer all utilities into their name. This includes electric, gas, water, garbage, and any other utilities that may be included in this transaction.
That’s a lot of info to take in but that’s pretty much what it’s like buying a home. If you would like to learn more about purchasing a home through our team, we offer a free homebuyer’s packet that you can check out here!
