First Time Home Buyers Guide - Sacramento

As you take a walk on a sunny Saturday morning in McKinley Park with your partner, you  feel a sense of excitement as you explore the possibility of buying your first home in Sacramento. As first time home buyers, you're not entirely sure what to expect, but the thought of starting your life together in a new home, fills you both with optimism and hope. As you marvel at the towering trees and the colorful flowers in bloom, you notice the unique character and charm of the homes while strolling along the walking paths. Your mind wonders what it would be like to live in one of these classic Victorian homes nestled in the tree-lined streets of Sacramento. You are drawn to the diverse architecture and pristine homes with landscaped gardens. You cannot help but imagine yourself living in a neighborhood like this, whilst enjoying the benefits of a vibrant city with a strong sense of community. As you near the end of your walk, you take a moment to reflect on the possibility of finding your dream home in Sacramento. You feel a sense of excitement about the potential of making this dynamic city your new home. However, buying your first home in the Real Estate Market of Sacramento can be overwhelming. Therefore, Our team of Real Estate Agents at Best Sac Homes Group have compiled this ultimate guide to help you navigate the complexities of buying your first home in the city of Sacramento.  In this first time homebuyers guide, we'll take you through all the steps to buying your first home in  Sacramento, from finding the right home to closing the deal. Work with a Real Estate Agency Research the Sacramento Real Estate Market Assess Your Finances Improve Your Credit Score Save For a Down Payment Create a Realistic Budget Get Pre-Approved for a Mortgage Finding the Right Home  Making an Offer Home Inspections Documentation Closing Costs on a Home Closing Day 1. Work with a Real Estate Agency in Sacramento Real Estate Agents: Have access to more properties and information than what is publicly available. Help you navigate the home buying process  Provide valuable insight into the local housing market  Help you make informed decisions. Assist with paperwork to ensure that everything is completed accurately and on time. How to Find a Reputable Real Estate Agent in Sacramento Ask for referrals from friends and family who have recently purchased a home in the area. Look for agents who are familiar with Sacramento and have a proven track record of successful sales. Check online reviews and ratings of real estate agents in the area. Interview multiple agents to find someone who is a good fit for you and your needs. What to Expect from Your Real Estate Agent Your Realtor will: Ask you questions to determine your preferences and priorities in a home. Provide you with listings that match your criteria and schedule viewings. Negotiate on your behalf to get the best possible deal. Recommend other professionals, such as home inspectors and mortgage lenders. Statistics: According to the National Association of Realtors, 86% of home buyers used a real estate agent in 2022. [1] 2. Research The Sacramento Real Estate Market Research Sacramento Neighborhoods: Sacramento is a unique area with a variety of neighborhoods, each with their own character and charm. Learn what fits your lifestyle and budget accordingly. Consider Proximity to: McKinley Park Good Schools Healthcare Facilities Shopping Malls Restaurants and Coffee shops Walking, Hiking and Biking Trails Statistics: According to a study by the National Association of Realtors (NAR), 47% of buyers cited the neighborhood as the most important factor when choosing a home.  According to a survey by Zillow, the top factors that first-time home buyers consider when searching for a home are price, size, and location.  3. Assess Your Finances Before you start looking for a home, it's important to analyze your finances.  This includes: Assessing your Savings and Income Assessing your Debt and Expenses Assessing your Credit Score Saving for a Down Payment on the House Saving for the Closing Costs of the House Check out our Financial Terms Glossary here According to the National Association of Realtors, the Median household Income of first-time buyers: $71,000. [1] 4.Improve Your Credit Score Your credit score is an important factor in determining whether or not you'll be approved for a mortgage, and at what interest rate. As a first-time home buyer, it's important to work on improving your credit score before applying for a mortgage.  Check your credit report: Get a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion), to see where you stand. If you find any mistakes, dispute them with the credit bureau. Pay your bills on time: It's essential to pay your bills on time every month. Set up automatic payments or reminders to help ensure you don't miss any payments. Pay down debt: Work on paying down your credit card balances, as high levels of debt can hurt your credit score.  It is vital to improve your debt to credit ratio. Don't open new accounts: Avoid applying for a new credit card or loan before applying for a mortgage. It can lower your credit score. Keep old accounts open: Length of credit history is another factor in your credit score. Keep your oldest credit accounts open to show a longer credit history. Be patient: Improving your credit score takes time. It can't be fixed overnight. However, with consistent effort, you can make significant improvements. 5. Save for a Down Payment Saving for a down payment is an important step in the home buying process. It can take time to save up enough money for a down payment, but there are strategies that can help you reach your goal faster. Determine How Much You Need to Save: Before you start saving, you'll need to determine how much you need for a down payment. Most lenders require a down payment of at least 3% to 20% of the home's purchase price, depending on the type of loan. For example, if you're buying a home for $300,000 and your lender requires a 10% down payment, hence you'll need to save $30,000. Cutting Back on Expenses: Start Tracking your income and expenses to determine how much you can realistically save each month.  Look for areas where you can cut back on expenses and redirect that money toward your down payment fund. This might mean eating out less, canceling subscriptions you don't use, or finding a cheaper place to live temporarily. Look into the Down Payment Assistance Program with the California Housing Finance Agency: This program works to make housing more affordable and accessible for Californians. They offer a variety of programs and services aimed at helping people achieve homeownership, including down payment assistance, mortgage credit certificates, and homebuyer education programs. Set a Goal and Stay Motivated: Saving for a down payment can take time, but it's important to stay motivated and focused on your goal. Set a realistic timeline for yourself and track your progress regularly. Celebrate small milestones along the way to keep yourself motivated. 6. Create a Realistic Budget It's important to create a realistic budget when buying a home. First-time homebuyers should consider all the costs associated with homeownership, including mortgage payments, property taxes, homeowner's insurance, utilities, and maintenance. Prioritize Your Wants and Needs:  As future Homebuyers it is essential for you to make a list of their must-haves and nice-to-haves, and prioritize them accordingly. This can help you stay within your budget and avoid overspending on unnecessary features. Consider the Future: It's important to think about the future when creating a budget. As Home Buyers should take any upcoming life changes into account, such as starting a family or planning to retire, and how these changes may impact your budget. Shop Around for the Best Deals: You should shop around for the best deals on all aspects of homeownership, including mortgage rates, insurance, and utilities. Comparison shopping can help you save money and stick to your budget. Use Budgeting Tools and Apps: There are many budgeting tools and apps available to help you stay on track. These tools can help you monitor your spending, set financial goals, and track your progress towards those goals. Research has shown that sticking to a budget is crucial for first-time homebuyers. A study by the National Foundation for Credit Counseling found that 56% of homebuyers struggled with their budget during the home buying process, and 41% of those who struggled with their budget said it impacted their ability to purchase a home. 7. Get Pre-Approved for a Mortgage Getting pre-approved for a mortgage is an important step in the home buying process. It lets you know how much you can afford to spend on a house and gives you an idea of what your monthly payments are going to be. Use this Mortgage Calculator to see how much you can afford As part of the home buying process, you will be required to provide various documents to verify you income, employment, and financial status.To get pre-approved, you'll need to provide your lender with the following information: Income Verification - This includes pay stubs, W-2s, and tax returns to verify your employment and income. Asset Verification - This includes bank statements, investment account statements, and other documentation to verify your assets and savings. Credit Information - This includes your credit report and score to verify your creditworthiness and ability to repay your mortgage. Employment Verification - This includes a letter from your employer verifying your employment status and income. All going well, the lender will provide you with a pre-approval letter that outlines the maximum amount you are eligible to borrow and the interest rate you qualify for. Importance of Pre-Approval: Pre-approval is important because it helps you understand your budget and what you can realistically afford when shopping for a home. This information will help you avoid wasting time looking at homes that are outside of your budget, and will also help you make a stronger offer when you find a home you want to buy.  You can use this to show sellers that you're a serious buyer. 8. Finding the Right Home in Sacramento Determine Your Must-Haves for Sacramento Living: Make a list of must-haves and deal breakers for living in Sacramento, such as a large backyard for gardening, a garage for parking, or a home within the desirable David Lubin School district. This will help you narrow down your search and focus on homes that meet your needs. Consider the Size of the Home: Think about the size of the house that would be a good fit for you and your family in Sacramento. Consider factors such as the number of bedrooms and bathrooms, as well as the overall square footage and layout of the home. Sacramento homes vary from small bungalows to large historic mansions.  According to the NAR study, 32% of buyers cited the size of the home as the most important factor when choosing a home. Think About Long-Term Plans: Consider your long-term plans when looking for a home in Sacramento. Will the home meet your needs as your family grows? Will you need to make any renovations or updates to the home in the future? Sacramento homes have a lot of character but can also require ongoing maintenance. Use Real Estate Websites: Real estate websites like Big Block Realty, Best Sac Homes Group, Zillow, and Realtor.com can be helpful in finding homes that fit your criteria. You can filter by location, price range, and other features to narrow down your options. Attend Open Houses: Attending open houses can be a great way to get a feel for a home and determine if it's a good fit for you. Take notes and ask questions during the open house to help you remember important details. Work with a Real Estate Agent: Working with a real estate agent can be beneficial in finding the right home, especially if you're a first-time homebuyer. An agent can provide insight into the local market, show you homes that fit your criteria, and help you navigate the homebuying process. Statistics: According to a survey by the National Association of Realtors (NAR), 51% of home buyers found their home online in 2022, while 29% found their home through a real estate agent. This highlights the importance of using real estate websites in addition to working with a real estate agent when finding the right home. [1] According to the NAR study, 13% of buyers cited the home's potential for renovation or remodeling as the most important factor when choosing a home. 9. Making an Offer Once you've found a home you're interested in, your real estate agent can help you make a reasonable offer. They'll take into account the home's condition, location, and the current real estate market to help you make an offer that's fair for both you and the seller. Be Prepared to Negotiate: It's rare for a home sale to go smoothly without any negotiations. The seller may counter your offer or make a different request. Your real estate agent can help you navigate these negotiations and ensure that your interests are protected. Keep Your Emotions in Check: Buying a home can be an emotional experience, but it's important to keep your emotions in check during the negotiation process. Your real estate agent can act as a mediator and help you make decisions based on facts rather than emotions. Know When to Walk Away: If negotiations aren't going well and you can't come to an agreement with the seller, it may be time to walk away. Your real estate agent can help you weigh the pros and cons of the situation and determine if it's in your best interest to continue with the purchase. Negotiating with the seller is an important part of the home buying process, but it can be challenging. Working with an experienced real estate agent can help you navigate the negotiations and ensure that you're getting a fair deal on your new home. 10. Home Inspections Once your offer has been accepted, it's important to hire a qualified home inspector to thoroughly evaluate the home's condition. Your real estate agent can provide recommendations for home inspectors in your area. Get a Home Inspection in Sacramento: Once you've found a home that you're interested in, it's important to get a home inspection to identify any potential issues or needed repairs. This can help you make an informed decision and negotiate any necessary repairs with the seller. Sacramento homes can be older and have unique features, so a thorough inspection is important.  Attend the Inspection: It's recommended that you attend the home inspection so you can ask questions and learn more about any potential issues with the home. The inspector will examine the home's major systems, including the electrical, plumbing, and HVAC systems, as well as the roof, foundation, and exterior. Review the Report: After the inspection is complete, the inspector will provide a detailed report outlining any issues or potential problems with the home. It's important to review the report carefully and ask your real estate agent for guidance on how to proceed. Negotiate Repairs: Based on the results of the inspection, you may choose to negotiate repairs with the seller. Your real estate agent can provide guidance on which repairs are necessary and how to negotiate with the seller. Re-Inspection: After any necessary repairs have been made, it's recommended that you have a re-inspection done to ensure that the repairs were completed correctly. Statistics: According to a survey from Porch, 88% of buyers used a home inspector’s services for their most recent home purchase[2] 11. Documentation Property appraisal: A property appraisal is required to determine the value of the home. This is typically arranged by the lender and paid for by the buyer. Title search: A title search is performed to ensure that the seller has the legal right to sell the property and that there are no outstanding liens or claims against the property. Homeowners insurance: Homeowners insurance is required to protect your investment in case of damage or loss. You will need to provide proof of insurance before closing on the home. Purchase contract: The purchase contract is a legally binding agreement between the buyer and seller. It outlines the terms of the sale, including the purchase price, closing date, and any contingencies. Power of attorney: If you are unable to attend the closing in person, you may need to provide a power of attorney to allow someone else to sign documents on your behalf. Flood zone certification: East Sacramento is located near the Sacramento River, so some homes may be located in a flood zone. If this is the case, you may need to provide a flood zone certification. Homeowner association documents: If the property is part of a homeowner association, you may need to provide documentation outlining the association's rules and fees. Permits and inspection reports: If the home has had any major renovations or repairs, you may need to provide permits and inspection reports to ensure the work was done properly and up to code. 12. Closing Costs on a Home Closing costs are expenses associated with purchasing a home that are paid at the time of closing. These costs can vary depending on a variety of factors, including the price of the home and location. It is important for first-time home buyers to understand these costs so that they can be prepared and budget accordingly.  In Sacramento, closing costs can vary depending on the price of the home and location. What Are Closing Costs: can include: Loan origination fees: This fee is charged by the lender to process the loan Appraisal fees: This fee is paid to have the home appraised to determine its value Title search fees: This fee is paid to ensure there are no liens or legal issues with the title Attorney fees: This fee is paid to an attorney to review the closing documents Home inspection fees: This fee is paid to a professional to inspect the home Survey fees: This fee is paid to have the property surveyed to ensure its boundaries Recording fees: This fee is paid to record the new deed and mortgage Escrow fees: This fee is paid to a third party to hold the funds until the closing is complete How Much Are Closing Costs? Closing costs can vary depending on a variety of factors, including the price of the home and location. This can add up to several thousand dollars, so it is important for first-time home buyers to budget accordingly. According to a report by ClosingCorp, the average closing costs in California range from 2% to 5% of the total purchase price of the home. However, this can vary depending on the specific location and price of the home. How to Reduce Closing Costs? There are some ways to reduce closing costs, such as: Negotiate with the seller to pay some or all of the closing costs Shop around for the best rates and fees from lenders and other service providers Ask the lender if they offer any programs or discounts that can reduce closing costs Consider using a real estate agent who may be able to negotiate on your behalf 13. Closing Day On the day of closing, you'll meet with the seller, your real estate agent, and a closing agent or attorney to sign legal documents and transfer ownership of the home. You'll also pay closing costs, which may include fees for the home inspection, appraisal, title search, and other expenses.   Finalize Financing: Before closing on the home, you'll need to finalize your financing. This may involve obtaining a mortgage loan or other financing options. Your lender will provide you with a Loan Estimate and Closing Disclosure, which outline the terms of your loan and associated costs. Review Closing Documents: Prior to closing, you'll receive a Closing Disclosure that details the final costs associated with your home purchase. It's important to review this document carefully and ask your real estate agent or lender for clarification on any items that are unclear. Receive the Keys: After all the paperwork has been signed and all fees have been paid, you'll receive the keys to your new home. Congratulations, you're officially a homeowner! Statistics: According to a report by Zillow, the average time between the initial offer and closing on a home in the United States was 30-45 days in 2021. It's important to be patient and work closely with your real estate agent throughout the process to ensure a successful closing. Conclusion Taking into account all of the factors mentioned above is key for finding your perfect property—from researching different neighborhoods and schools to understanding mortgage programs and closing cost. It's an investment that will pay off for years to come if you do your homework now. As a final piece of advice, don't forget to trust your gut when making this important decision. You'll know when you've found the one! With so many beautiful homes available in Sacramento, there's no doubt that you're sure to find something truly special that fits both your needs and budget seamlessly. Happy house hunting! Start Planning to Buy your First Home Today! Sources: Quick Real Real Estate Statistics by the National Association of Realtors: https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics[1] Home Inspection Leverage by Porch: https://porch.com/resource/home-inspection-leverage[2] PS: We will be covering each of the main steps in more detail in our up and coming home buyers blog series!