With so many new regulations and rules, first-time buyers might feel like the home buying process is like the scariest ride in the amusement park. But it does not have to be such a complicated and stressful event.
From applying for a loan to getting the keys to your new home at the closing, the steps to buying a home can run smoothly if you prepare and have an understanding about the process before actually jumping.
Here is a step by step look at the things to do when you buy a house and get a mortgage:
Find your loan professional
Before looking for a house or deciding what color to paint your kitchen, you need to find someone who will look out for you and explain everything that will be happening.
“You need to feel comfortable who you are working with, and find someone you trust,” says Stephanie Graves, broker/owner of SMS Mortgage, Irvine, Calif. “Find someone through a referral. But speak to more than one lender or broker. You will be able to tell who knows what they are doing.”
Meet with the lender or broker
If you can choose someone that you can meet face to face, it can help many problems that can arise on the credit report they pull.
A credit score can really affect your interest rate, Graves explains. “Every 20 point bucket on your credit score is a price adjustment for Freddie Mac and Fannie Mae. A lender should absolutely help you to get a handle on it,” she says.
Get preapproved for a mortgage
When your credit score is up to snuff with the lender’s requirements, your broker will write you a preapproval that shows home sellers and your realtor that you are serious about buying a home.
Your preapproval will also give you an idea of how much the lender is going to be willing to lend you. At this time, you should ask your lender how long it will take to actually close on a loan and how much it will cost to close.
Decide what payments you can afford
Even though your lender says they will give you a $250,000 mortgage, you need to figure out what monthly payments you can afford now and in the future. List all the things that you need to pay for, pay off and pay down.
Also, know what kind of money you’ll have available for a downpayment and for closing costs. Leaving those out is a mistake that too many first-time home buyers make. You have to figure out what kind of funds will be leftover for new furniture, a lawnmower, new carpet and anything else you might need or want.
Choose a helpful real estate agent
Even if you’ve been looking online at homes that fit your lifestyle, your budget and your preferred neighborhoods, be sure to talk with friends, family and co-workers about who they used as an agent when they bought a house.
A good realtor should be able to guide you through finding that perfect place and all the things that must happen to get it done.
Write an offer
You walk into a home and you know it’s the one for you. So, your agent helps you decide on a good price to offer, and the offer is sent to the seller’s agent or the seller, if they are selling it by themselves.
Make sure your contingencies in the offer mention that you can back out of the offer if something major comes along in the inspection. Sometimes, you’ll hear back right away from the seller whether or not they accept.
If they want a little more money or some other contingency, talk with your realtor about whether or not it’s worth considering.
Get inspections ordered
Once your offer is accepted, things will go fast. Your realtor can help you order the overall house inspection, but you may also need other inspections such as termite, radon and more. An inspection isn’t required everywhere, but a lender will most likely require it.
Lock in your interest rate
At this point, it’s time to lock in a rate with your lender. Throughout the home buying process, you should have a pretty good idea of what your mortgage rate might be.
Figure out where your downpayment is coming from
A family member may have offered to give you half of your downpayment, but keep in mind that only certain loans will allow for a percentage of the downpayment to be a gift.
There must be documentation of where any of the money comes from. Some loans such as the FHA, allow for all of it to be a gift, Graves adds. VA and USDA offer zero down payments.
Respond to all requests from your lender
To keep things running quickly and smoothly, respond quickly to any questions your lender asks for, and then wait for the approval.
Look over all the closing documents before the closing
“Go through every loan disclosure, fee and other documents,” she says. “Ask to have everything explained if you don’t understand. This is a big purchase, and you need to have your fees memorized and feel comfortable with the lender about.”
Sign papers and pick up keys
You’ll be attending the closing, but make sure to have the funding situation all wrapped up. Once all the papers have been signed, and you paid the sellers, you can go enjoy your new home. You deserve it.