Congratulations on beginning the process of purchasing your first home!  We have helped many first time home buyers in the Chain of Lakes area of Central Minnesota. 

The following steps should help you start to understand the process of purchasing your first lake property, log home or single family home.
 

1. First you need to decide what size budget you have.  You do not want to buy a house that costs more than you can afford.  A general rule of thumb says that the purchase price of your home should not exceed 2.5 times your annual income.
   
   
2. Once you find out how much you can afford you can look for Minnesota real estate financing. Do not be afraid or embarrassed to ask lots of questions - in fact that is exactly what you should be doing!
   
   Real estate mortgage loans are just that, a fancy way of saying that a bank or "lender" is willing to give you $X immediately in return for you paying the $X back over the term agreed to (usually 30 years or 15 years) plus interest payments.  The interest rate on a real estate mortgage in MN or any other state depends on the interest rate the United States Federal Reserve decides to set  for banks.  Currently the national average 30 year fixed mortgage interest rate is roughly 6.25%.
   
   You should speak to a Minnesota loan officer or mortgage broker, which is the person who connects people in need of real estate lending (the buyer) with a supplier of the funding, usually a bank or mortgage company.  The loan officer will help you by letting you know what real estate loan amount you will prequalify for.  Prequalification means that based on your stated income and your credit score, they are likely to find a way to lend you the money to purchase a house within your budget.  A prequalification letter can be emailed, faxed or physically mailed to the prospective buyer.  In some cases the seller may want to see your prequalifiation letter so that they know you are serious about buying their property and not wasting their time.
   
   
3. Decide on the cities, towns and neighborhoods that you want to live in. Take a weekend to drive around the areas you think you want to purchase and look for houses that are for sale.  Stop to pick up the MLS property listing fliers in the box on their For Sale signs.  You will start to get a better of idea of how much houses in the area cost, what condition the properties are in, the size of the homes, average square feet, yard, bedrooms, bathrooms etc. 
   
   
4. Once you have found the neighborhoods you like best, contact a real estate agent to set up times that you can view the properties you liked best. Real estate agents can also help by finding you more properties that you were unaware of and continue to send you updates when new real estate comes up for sale.  Remember, buying real estate is not a race!  You need to think about your decisions before jumping on the first opportunity and paying too much for a house because it is the first one you wanted.  Great houses are put up for sale every single day so if you don't get the first you want, just wait for the next one!
   
   
5. Once you find a property in Minnesota or anywhere else that you want to buy, you can make an official offer to the seller.  An offer is only valid if it is signed by you!  Verbal agreements are not enough for real estate transactions - everything must be signed.  You will generally sign standardized paperwork that protects the buyer and seller from making common mistakes like purchasing a house that was misrepresented or letting someone buy a piece of real estate that he or she could not afford.
   
   When you submit your offer to the seller, the offer will explain that you would like to buy their real estate (log cabin, luxury condo, lake home, etc.) for a price that is stated on the offer.  In addition to purchasing the lot and buildings, you can also buy the appliances, furniture, piano, and anything else you want.  You, the buyer, should add contingencies which allow you to get out of the contract if you decide that you don't want to buy the house after you learn more about it or if you do not qualify for a mortgage real estate loan.
   
   You will set a date and time that you want the seller to respond by with an answer or counter offer.
   
   You will need to pay a good faith or earnest deposit check will be given to the seller or the seller's real estate agent.  This money is a guarantee to the seller that you are actually serious about buying their real estate.  If you do not decide to purchase their property, you will get your deposit back.  However, if you do come to an agreement and buy the real estate, then your deposit will be applied to the home purchase.  The amount of the deposit is generally proportionate to the asking price.  An asking price under $100,000 could be as low as a few hundred dollars but larger home prices will generally require larger deposits.
   
   
6. Once you submit your first offer do not be discourage if it is rejected immediately!  Every seller hopes to get more than their house is worth and every buyer hopes to find a desperate seller who wants to sell a great investment real estate at a bargain.  This is when the negotiations begin.  You and the seller can continue to make counter offers until an agreement is reached on the price and terms of the offer.  If no arrangement can be made then the buyer and seller go their seperate ways and wait for better offers from someone else.  The key to getting what you want in a timely manner, is sacrificing something in order to help the seller reach some of his or her goals too.  That could be as simple as raising the price $1000 or possibly agreeing to buy the house if the seller can continue to live in it for 60 days because they aren't ready to move out.  Buying real estate is not all about dollars and cents... sometimes its "sense" that makes the difference.
   
   Note: while you are negotiating back and forth with the seller, another buyer has the opportunity to come in with a more attractive offer and scoop the real estate up from underneath you.  If this happens, don't worry because there are more houses available!
   
   
7. Once you have agreed with the seller have agreed on the purchase price you will both sign the purchase agreement.  Now you are "under contract"!  While you are under contract the seller cannot accept any other offers even if they are higher than your offer.
   
   
8. Hire a qualified home inspector to carefully go through the home you are about to buy.  This person will know the ins and outs of building safety codes, asbestos hazzards, lead paint, foundation cracks, leaking roofs, broken windows, mold, electrical systems and utilties like gas and water.  Expect to pay several hundred dollars for a good inspector.  Remember, the inspector is looking for problems!  You pay the inspector to protect from making a bad investment with your life savings.  The inspector's advice is worth every penny.
   
   
9. If you find that inspection is satisifactory then you can go to the next step!
   
   Following the inspection you may find out that you can no longer afford the property because it needs a new roof, the plumbing must be replaced or any number of other common problems.  In some cases the seller will be willing to fix the problems before you buy their real estate or they could drop the price so that you can fix the issue after you purchase the home.  If the seller is unwilling to work with you to fix large problems that you cannot afford or are unwilling to take on, then this is not the right house for you
   
   
10. Call the county and city treasurer and building deparments to ask about the property you are about to buy.  The township or city and the county have people employed to take your calls.  You will want to find out what the taxes cost.  Property taxes are usually paid twice a year and the amounts will vary greatly.  Lakefront property taxes are much higher than property off of the water.  Find out if any unpaid taxes are overdue, if there are any special assessments on the property (the seller owes money for a new road that the city put in or other public service),
    Call the energy company and find out what the gas and electricity cost annually for the property.
    
    If there are any services or additions you want, now is the time to address them: high speed internet, building a dock, use a boat lift, add a garage, DNR permit to fill wetlands, do you have a historic landmark that cannot be rennovated without approval from the city... the list is endless.
    
    
11. Complete your loan application by providing your last two years of tax returns, purchase a year of homeowners insurance policy from an insurance company for the property (approx $1000 for first timer houses), and possibly pay for the lender to appraise the value of the real estate (a few hundred dollars).  If you do not end up purchasing the house, your homeowners policy will be refunded to you by the insurance company.
    
    It is very common for the bank to think your offer does not represent the real value of the house.  Sometimes your offer is higher than the bank thinks the house is worth and sometimes it is lower or spot on.  The apprasier is a person who is familiar with your local market (i.e. Lake Houses on Sylvan Lake in Minnesota) and should be able to give an unbiased value of the house without having a vested interest in the property or the buyer or seller's intentions.  If the lender's appraiser says the house is only worth $400,000 but you offered $450,000 then the bank will not lend you the money to buy the house because they don't believe the house is actually worth that much.
    
    
12. A title commitment should be obtained from a title insurance company.  The title commitment is extremely important because it means that if the seller was not legally allowed you the property or the property was misrepresented, then the title insurance company will pay you back for the damages or refund you the full amount of the purchase price and take the house back.
    
    
13. If you are purchasing the real estate without any special conditions then you will probably want a Warranty Deed.  A warranty deed says you own the property and the grantor (seller) guarantees that he or she holds clear title to the real estate and has a right to sell it to you the grantee (buyer). The guarantee is not limited to the time the grantor owned the property - it extends back to the property's origins.  You may want a lawyer to help you understand the terms of any agreements you sign.
    
    
14. Once you are approved for the mortgage, the title commitment is provided and the seller is guaranteed to be selling the property free and clear of any hidden costs to you, it's time for closing!  Arrangements to prepare the closing documents will be made by the buyer's agent, seller's agent or both parties.
    
    You will sign a lot of paperwork that may go quickly or take several hours if there are changes that need to be made to the closing documents if mistakes were made.
    
    If you are putting money down (10%, 20% etc.) this is when those funds are exchanged.  You can transfer money to the lenders electronically or bring a certified check from your bank.
    
    
15. After the closing you are now the proud owner of your first house!  Take the keys, grab a bottle of champagne and invite your friends and family over to celebrate!