There you are, smiling at the thought of homeownership. After all, it is the epitome of the American Dream, putting your hard work, determination, and initiative to good use. But where do you start? And how do you know whether you’re truly ready for such a commitment?
According to the National Association of Realtors (NAR), 35% of buyers are first-timers at a median age of 32 and a median household income of $72,000. Of all buyers, 88% purchased their home through a real estate agent or broker. Why? Because there’s much more to buying real estate than fitting in with the statistics; which brings us to step one:
Finding a realtor you can trust. Buyers are typically surprised to learn all commission is paid for by the sellers, making our services essentially free to the buyers. Whoever said “the best things in life are free” was on to something. Ahead, we’ll lay out the simple steps to the home buying process, making that seemingly intimidating decision to purchase your next home a much more comfortable one.
Speaking with a mortgage broker to determine your buying power is the next most crucial step. He/she will need your recent pay stubs and last 2(+) years of W2s and tax returns to determine your affordability and provide you a Pre-Qualification (PQ). They’ll also need to pull your credit to review any open accounts and debt to income ratio. Any debt accrued can lessen your buying power. Credit scores are critical in eligibility for your home loan and competitive interest rates. The three most common types of loans in our current market are FHA, VA, and Conventional. A 620 credit score is needed to qualify for VA and conventional loans, while a 640 credit score is needed to obtain an FHA loan, a loan specially tailored to first time homebuyers with a minimum down payment needed of only 3.5%. Your mortgage lender will help determine the best loan for you.
Next is the fun part. Once you’ve discussed with your realtor what you’re looking for in your next home and you have the pre-qualification in hand, you’re ready to begin the hunt to finding your dream home. Writing down a checklist for your absolute ‘must-haves’ can save you time and help you to avoid missing out on that right house when it comes along. Things to consider are the location, number of bedrooms and bathrooms necessary for your family, zoned schools, and proximity to hobbies and everyday points of interest to most suit your family. When you find the right home, you’re ready to write an offer. For a handy, printable checklist we’ve put together to make this task easier, click here.
So you’ve found your perfect dream home, and it’s listed at just the price price. Your offer will be presented to the sellers by their listing agent, at which point they will either accept, decline, or counter. In the case of a counter-offer, sellers may wish to negotiate any of the terms in your offer. It will be the guidance of your trusted realtor that will come in handy during these negotiations. For the sake of continuing with our steps to the home buying process, let’s assume with wishful thinking that your offer is accepted. What next?
You’re under contract, which means the clock starts. The date at which both the buyer(s) and seller(s) have signed the contract is your effective or executed date, the critical date in which all timelines and deadlines are calculated. Your earnest money deposit (escrow), inspection period, and scheduling of closing are all defined in your agreed upon contract. Time is the essence of this contract. In some cases, not abiding by these deadlines can result in the loss of your earnest money deposit.
For the next few weeks, you’ll be working closely with your chosen mortgage lender to ensure your financing is secured. You’ll complete the mortgage application within the first few days. Upon further verification of your paperwork and eligibility, your file will be submitted to an underwriter for an initial review, in which any conditions will need to be addressed. Final underwriting ensures all conditions are met before approving your loan. Obtaining loan approval means you’re “clear to close!”
The title company to handle your closing will perform a title exam and obtain title insurance. Your lender will provide all closing documents to the managing title company/agent prior to your closing day.
Congratulations, you close on your new home! You’ll find that nothing is all that intimidating about this process with the help of your trusted realtor.
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