Home Buying Process
Step 1: Save for Costs and Fees
In most cases borrowers need to provide money for upfront fees, a down payment and closing costs before moving into a new home. This is one of the most overlooked steps and can cause problems later in the home buying process if you are not prepared for it.
Estimating Upfront Fees
Appraisal and credit report fees are the most common upfront charges lenders have often well in excess of $500. Each lender has different requirements and charges different amounts so be sure to do your homework on each lender you are considering. We help borrowers get the process going by not charging any upfront fees.
Estimating Your Down Payment
Unless you are seeking a VA loan (which may not require a down payment), you will need to make sure you have money saved for a down payment.
The minimum down payment on a conventional loan like a 30 year fixed is 5% but the majority of borrowers put between 5-20% down. An FHA loan is available with a down payment of 3.5%. The larger the down payment, the lower your loan amount and the less you will pay in interest over the life of your loan.
Estimating Closing Costs
You will need money for closing costs which are fees associated to title, escrow, and other third-party charges. You will have to bring these funds with you when you close the loan. While how much you need will vary depending on the loan amount and tax requirements in your area, you can generally expect closing costs to be between 2% – 6% of the purchase price.
Step 2: Get Approved for a Loan
Getting pre-approved for a loan before you start your home search is important for a few reason reasons: First, it helps you understand what you can afford. And second, it provides proof to real estate agents and sellers that you are both willing and able to buy a home.
You can begin the pre-approval process here.
Step 3: Find a Real Estate Agent
A good real estate agent can be the difference between a positive and negative home buying experience so it is important that you find a good one. Ask family and friends for recommendations and be sure to search reviews of agents you are considering. One of the first things your agent will do is review your pre-approval letter from step 2 and discuss your budget before you look at listings.
Step 4: Find a Home
There are many variables that go into selecting a home that fits your needs; square footage of the house, number of bathrooms, school districts, proximity to work and social activities, etc. There are a number of websites and print publications available for people searching homes for sale. It is best to use multiple publications and your real estate agent in your search to ensure you see all the inventory available in the neighborhood you wish to move into.
Step 5: Make an Offer
Once you have found a home you want to buy, your real estate agent will write an offer letter and send it to the real estate agent representing the seller. The seller will either deny, accept or counter your offer. If your initial offer is denied you can make a new offer or look for a new home. If an offer is accepted, you and the seller will sign a purchase agreement and you will move into the mortgage process.
Step 6: Mortgage Process
The next step will be to complete a mortgage application. Most lenders use the Uniform Residential Loan Application (URLA), also known as Fannie Mae form 1003. The application asks for information about the home being purchased, the type of loan being used, as well as information about you. The application can be confusing so we have loan agents standing by to help.
You can speak to an agent at 866-708-5626 or here
Once you have a completed loan application, your file will move into the processing stage. Loan processors collect a variety of documents related to you and the home being purchased. These documents include bank statements, tax records, employment information, the purchase agreement, and more. They will review the file to ensure it contains all documents needed. Once all the documents have been gathered your file moves to an underwriter.
An underwriter’s primary responsibility is to evaluate the level of risk associated with your loan. He or she reviews your credit history, debt-to-income ratio, assets, and other elements of your financial picture to predict your ability to make the mortgage payments. Underwriting is seen as the most important step in the mortgage process because it determines whether or not the loan is ultimately approved.
If the mortgage underwriter is satisfied the borrower and the home being purchased meets all the lender’s guidelines, they will issue the loan clear to close. This means all requirements have been met, and the loan can be funded.
Step 7: Move Into The Home