Buying your first home is an exciting milestone, but it can also feel overwhelming. From securing financing to signing the final paperwork, the process is filled with details that first-time homebuyers need to navigate carefully. To help you feel confident and prepared, here are 10 essential things every first-time homebuyer should know before closing.
1. Get Pre-Approved for a Mortgage
Before you start house hunting, secure a mortgage pre-approval. This not only shows sellers you’re a serious buyer but also helps you understand how much you can afford.
2. Understand Closing Costs
Closing costs typically range from 2% to 5% of the home’s purchase price. These can include loan origination fees, appraisal fees, title insurance, and more. Budgeting for these costs is crucial.
3. Review the Sales Contract Carefully
The sales contract outlines key terms of your purchase, such as contingencies, deadlines, and closing dates. Review it thoroughly and ask your agent or attorney about anything unclear.
4. Don’t Skip the Home Inspection
A home inspection reveals potential issues with the property, such as structural problems or outdated systems. Addressing these concerns before closing can save you thousands in the long run.
5. Secure Homeowners Insurance
Most lenders require proof of homeowners insurance before closing. Shop around for a policy that offers the coverage you need at a competitive price.
6. Check Your Credit One Last Time
Lenders often recheck your credit before finalizing the loan. Avoid any significant financial changes, such as opening new credit lines or making large purchases, as they could jeopardize your approval.
7. Be Prepared for a Final Walkthrough
The final walkthrough is your last chance to ensure the property is in the agreed-upon condition. Check for repairs, appliances, and other promised items.
8. Understand Escrow Accounts
Your escrow account is used to pay property taxes and insurance premiums. Make sure you understand how it works and how much you’ll need to contribute each month.
9. Know What’s Included in the Sale
Confirm which items will remain in the home after closing. Fixtures, appliances, and other features should be explicitly listed in the sales contract.
10. Have a Financial Cushion
Unexpected expenses can arise after closing. Having a financial cushion ensures you’re prepared for maintenance, repairs, or other costs associated with homeownership.
Purchasing your first home is a big step, and knowing these key details will help you navigate the process with confidence. By understanding the financial and logistical aspects of closing, you’ll be better equipped to make informed decisions and enjoy your new home without unnecessary stress.