You are ready to take that big plunge into homeownership. You feel that great wave of inspiration and then suddenly you realize there are several unknowns that start crossing your mind. Then the panic sets in. Understanding the home buying process can be overwhelming, however, by being proactive and educating yourself it can be a smooth experience.
PREPARATION FOR BUYING A HOME
Prior to starting your search, it’s critical to be prepared with the following:
1. Credit Profile – Your credit score and the amount of debt you owe influence a lender’s view of you as a borrower. Those factors will help determine how much money you can borrow and what interest rate you’ll be charged*.
2. Analyze your financial situation – “Buying Power”
3. Monthly Income – Money that you receive on a regular basis, such as your salary or income from investments. Your income helps establish a baseline for what you can afford to pay each month.
- Available Funds – This is the amount of cash you have available to put down and cover closing costs. You can use your savings, investments, or other sources.
- Debt and Expenses – It’s important to take into consideration other monthly obligations you may have such as credit cards, car payments, student loans, groceries, utilities, insurance, etc.
Now you are READY! Your excitement sets in! What’s next? Where do you even start? Do you knock on homeowners’ doors and ask them if they are interested in selling? If only things were as simple as just walking into a department store and browsing through the racks. Unfortunately, it’s not that easy. There are a few steps that need to happen prior to shopping.
STEPS OF THE HOME BUYING PROCESS
1. Connect and Consult with a Realtor and or Loan Officer
A Realtor will start and guide you through the home buying process. Consider them your best friend from now until the end of the process. A Realtor will also connect you with resources needed to help you finance your dream home: a loan officer.
The Loan Officer will consult with you to determine the right loan for your needs. Your Loan Officer will also give you an overview of the mortgage process from start to finish. If you do not have Realtor, the Loan Officer will also have great connection for you. It might also be helpful to ask if the Realtor and Loan Officer have a history of working together, because if they do, it could make for a much smoother process.
2. Let the Home Search Begin!
This is the fun part! Once you explain in detail what your dream home looks like to your Realtor, they will show you homes in the market area you’re looking for and keep you informed on new listings that you may not be aware of.
YOU FOUND YOUR DREAM HOME! WHAT’S NEXT?
3. Making an Offer – FINALLY, you found your dream home! You see the price on the tag and are ready to say “I’ll take it!” Your Realtor will now write up a purchase contract. At this time, you will also need to put down a small deposit. Let the negotiations begins.
4. Negotiations – Your Realtor will negotiate on your behalf with the listing agent and the sellers to come to agreeable terms.
5. Contract of Sale – Once the contract is fully executed, you will have an attorney review period, during which your attorney will review your contract on your behalf. Your Realtor will educate you on whether an attorney is needed as some states do not require an attorney.
6. Home Inspection – You will be there along with the home inspector and your Realtor. This is where you’ll find out if there are any issues with the home you’re purchasing.
7. The Mortgage Application – Your Loan Officer will help guide your through this. They will collect all documents and submit your loan for disclosures. Once all documents are collected, you will sign your application so that it can begin being processed.
8. Appraisal – Your Realtor will schedule an appraisal to determine the actual value of the subject property. This is an important step because the property needs to appraise for the loan to be granted.
9. Underwriting – This is when your loan is given conditional approval. This is approval subject to items an underwriter needs to clear your loan to close. Documentation requests can range from an updated pay stub to a letter from your CPA explaining your earnings if you’re self-employed. Every loan scenario is unique.
10. The CLOSING! – Give me the KEYS! At least 3 days before your confirmed closing date, you will receive, review, sign and return your Closing Disclosure. Once cleared for closing, your mortgage team will: confirm your closing date and time, prepare your closing package, confirm all fees and send the file to the title company to prepare for closing day.
Many new home buyers do not prepare accordingly nor educate themselves on the various steps to the home buying process, but now you’re one step ahead of the rest! Being savvy and proactive, your experience can be seamless. Now go shopping!!!
If you have questions along the way or need help in the home buying process, please don’t hesitate to reach out to us.