The home buying process may seem daunting, especially if you are doing it for the first time. There are finances to prepare, loans to qualify for, lenders and preapproval. We are here to simplify the process.
Step 1: Understand the basic steps to buying a house
- Down Payment: This will determine how much you will pay every month. If you want to eliminate Private Mortgage Insurance (PMI), make sure you save up for a 20% down payment.
- Monthly Payments: Your mortgage is a debt that must be paid on a monthly basis. The amount depends on your interest rate. A higher down payment correlates to lower monthly payments.
- Loan Qualification: What type of loan you will receive depends on your credit score. The higher your credit, the more you will be able to borrow.
- Closing Costs: These are miscellaneous fees that can range between 1-8% of the purchase price. You can have these put on the mortgage if you lack the funds.
Step 2: Prepare your finances
Make sure your credit score is in order. One of the first things mortgage lenders will screen for is credit score and financial history. There are many credit score calculators online, just make sure they are geared towards a mortgage loan and not some other type of loan, such as an auto or school loan. We recommend using one of the three credit bureaus: Equifax, Experian and TransUnion.
Eliminate any unnecessary debt. For most housing loans, the highest Debt-to-income ratio allowed is 38%. Banks calculate this by taking how much you pay every month to prior obligations (rent, car payments, bills, etc.) and comparing it to how much you make every month.
Budget money accordingly. Home financing can be tough. Use budget tools to streamline the process.
Step 3: Finder a lender, real estate agent, and shop for a property
The best way to find a mortgage that fits your budget is with a trustworthy lender. They can guide you through the preapproval process, which shows the seller you are a serious buyer. And they know what type of homes most homeowners are looking for.
We also recommend working with a real estate agent. Like a mortgage lender, having someone that is familiar with the real estate market can help homebuyers exponentially.
- Give yourself time to find a house you covet. This will be your home for a long time. Do not rush anything.
- Check out the neighborhood, the school district, the demographics, etc.
- Always remember that once you buy the home, it’s yours. You can repaint the walls or decorate the front yard. This is where virtual staging tools can come in handy. Try to picture what the house will look like when you make it yours.
- And keep your eyes on mortgage rates.
Step 4: Submit your housing application
If you are using a real estate agent, they will be the ones making the offer. This doesn’t lock you into the deal, since contracts tend to have a way for buyers to back out of a purchase, especially if there is damage to the house.
Step 5: Once the offer is accepted
- You and the seller will sign a contract.
- You will have the chance to pay an option fee. This allows you walk away from the purchase for any reason. Since the window to walk away is, at most, two weeks, get an inspection done as soon as possible to figure out everything you can about the house. If there are any discrepancies found during the inspection, you will be able to renegotiate terms.
- You will also pay an earnest money deposit, which shows that you are serious about buying a home.
- The lender will get an appraisal.
Step 6: Close on the house
- You and the seller will sign papers at the title company’s office.
- Supply a bank check for the down payment. If closing costs were not put on the loan, bring a check for that.
- Get the title company to wire the money to your lender.
- Keys will be handed over.
Congratulations! You are a homeowner.
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Contact Us today if you would like to discuss the purchase process further, or if you have any inquiries about our product offerings. If you do not have any questions and are ready to submit your information for a loan decision, please Apply Now.