From house hunting to closing on your new loan, we’re here for you every step of the way! Here’s everything you need to know before you get started.
If it’s your first time buying a home, you probably have questions! Here’s what you can expect during the home buying process, and the steps you can take to make sure you are as prepared as possible for your purchase.
1) Review your finances and prepare for the costs that come along with being a homeowner.
- Take advantage of our mortgage calculators to get a better idea of what you can expect to spend on a monthly payment, and what would be realistic with your budget.
- Review your credit score. Whether it’s bad or good, your credit score can have a huge impact on the interest rate you qualify for, and in turn, how much you are spending both monthly and in the long run.
- Calculate your debt-to-income (DTI) ratio. Not sure what this means? It’s a comparison of how much you owe each month to how much you earn each month, and it’s a calculation your lender will use to determine the risk associated with lending to you. The lower your DTI is, the less risky you are to a lender.
- Begin saving for the down payment. Will you be able to put 20% of the cost of the home down? If not, there are plenty of loan types that can help, such as an FHA Loan, or a VA Loan. Down payments can be as little as 3% on a traditional mortgage loan or zero down with a VA Home Loan. Reach out to ask a loan officer for more information about down payment options.
- Prepare for the costs associated with becoming a homeowner. Your monthly mortgage payment, closing costs, home inspection, home insurance, property taxes, homeowner’s association fees (if applicable), utilities and other general maintenance and upkeep are just a few. Make sure you aren’t caught flat footed with the expenses a home can bring!
2) Consult with your Mortgage Loan Officer at no cost to create a road map and choose a finance option that works best for you and your family!
We will help put all the pieces of the puzzle together with you. Your choices and options will become clearer after a consultation; sometimes several consultations. This is considered the biggest step to homeownership. Start this dialog with your Mortgage Loan Officer early and often. They will encourage you to get you prequalified verbally and then, when ready, get preapproved to formalize the numbers and the qualification terms.
3) What’s the difference between a prequalification and a preapproval?
A prequalification can help give you an idea of how much you can borrow for your mortgage. It’s important to note that a prequalification doesn’t guarantee you will get a loan, but it can be helpful in the process. A prequalification is a verbal consultation and understanding of your ability to qualify, as well as running all the numbers.
A preapproval requires more extensive vetting and paperwork. It is a full and completed, underwritten mortgage application along with a full analysis of your cash flow, credit, ability to repay and costs to close. This serves as a commitment to lend you a specific amount of money for your mortgage. Preapprovals eliminate any doubts and give you a firm commitment of your ability to get a mortgage loan.
Preapprovals can also be a great way for buyers to stand out from their competitors in a tight market. When multiple offers are submitted on the same home, your offer will stand out, because the seller will have assurance that you can provide reliable financing, and ensure a smooth sales process. Preapprovals are traditionally valid for 90 days, and are also easily certifiable.
4) Let the search begin!
Now that you know your budget, your price range, and what type of loan you will apply for, you can begin the fun part – house hunting!
Begin scheduling home tours with your real estate agent and looking at listings online. Save yourself any potential emotional distress by narrowing your search criteria to match your budget, and only view the listings that are realistic.
Be sure to compare all of your options, educate yourself on your local market, and consider the neighborhoods in addition to the features of the home.
Your Mortgage Loan Officer will be there for you for every step of your journey, and can help compare costs, payments and options.
5) Hold on tight! It’s time to begin the process of applying for a mortgage.
When you find your dream home, your real estate agent can help you submit an offer that aligns with your budget and preapproval. If the offer is accepted, a purchase contract will be drawn, and you will be required to provide a good-faith or earnest money deposit with the realtor or seller. This will be put in escrow to show your commitment to purchase.
Typically, after the seller accepts your offer, you will receive a loan estimate from your lender that includes your interest rate, a loan estimate and any closing costs. At this point, the numbers can be locked down and predictable.
You will also be required to provide updated paperwork and documentation that verifies your income and assets in order to recertify the preapproval based on the specific terms of the purchase.
6) Home inspection and Appraisal.
After you have secured your financing, you’ll want to hire a home inspector to look for any potential issues or problems with the home. Inspections can give home buyers a sense of relief, and peace of mind about the purchase and the condition of the home. However, anything discovered during the inspection may require further negotiation between the buyer and the seller.
This is also the time when your lender will order an appraisal, in order to determine the property’s fair market value.
7) The closing disclosure and the final walk through.
At least three days prior to your closing, as required by law, your lender will provide you with the Closing Disclosure. It’s important to review this document carefully, as it outlines your loan term, loan amount, interest rate, closing costs, underwriting fees, government fees, and other items in great detail, and it also discloses the amount of money you’ll need to bring with you to closing (also called cash to close).
Before closing day, you’ll also want to do a final walk through on your soon-to-be new home to ensure that it is in the expected condition prior to the sale. Be sure to do a thorough inspection of all of the ceilings, walls, floors, outlets, appliances etc. Also, if the home is already vacant, make sure all trash and belongings from the previous owners have been removed.
8) You’re almost home! All that’s left is closing.
At a closing, the home’s title is transferred from seller to buyer; the seller will receive a check for any proceeds of the sale; and if the home is being financed, the buyer will sign the mortgage note. If you’re lucky, you’ll even get the keys to your new place!
Before closing day arrives, be sure to confirm what you need to bring with you and where your closing will take place. Typically, you will be asked to provide a form of ID, cash to close (a cashier’s or certified check in the amount of the closing costs), and proof of your homeowner’s insurance, along with a ready pen to sign loads of paperwork!
9) Welcome Home!
Congratulations! You’ve survived the home buying process! While it can sometimes be stressful, and the stack of paperwork can be intimidating, don’t lose sight of your end goal – homeownership! This is an exciting and memorable time, and something to be proud of.
Whatever your needs may be, Old Fort Banking Company is here to assist. Reach out to our experienced team of Mortgage Loan Officers today to discuss your unique situation, learn more about buying or selling, or with any questions about the process.