Monthly Archives: May 2017

6 Steps to Buying Your First Home

Share

Hand of young woman showing home key of new homeReady to buy your first home?  Watching home buying shows and reading articles may be fun, but only gives you half the picture of the home buying process (and often skips over the “technical stuff”). Since the path to home ownership is different for everyone, the steps may vary slightly when you buy your first home; however, in general this is the usual order of steps in the home buying process.

Contact a lender

Before you can close on your first home, you need to get pre-approved for a loan.  Choose a lender that can give you a good mortgage rate, but know up front that you don’t need to apply to find out the lender’s rate (be aware that the actual rate might vary over time and after they determine your eligibility).  Remember, that a good mortgage lender offers more than a just good rate; a good mortgage lender gives you not only a loan, but an education and a smooth home sale process.  Make sure you also ask about any other charges over and above the mortgage rate; you don’t want to be surprised by “extra” fees.

As you choose your mortgage lender, ask yourself if you are more comfortable with an in-person lender or online lender and how much assistance you need as you navigate through the approval and closing.  Whether you choose in-person or online, make sure you vet your lender choices to ensure that you are choosing a reputable mortgage lender.  Once you have a list of potential lenders, ask each lender these questions:

  1. What is the current mortgage rate you offer?
  2. What other fees do I need to pay?
  3. What kind of loans do you offer? (Some lenders may not offer certain kind of loans, such as a HUD or veteran loan.)
  4. How long does the process take? What kind of documents do I need to proceed?

Once you have provided all the necessary documents, your lender should provide you proof of pre-approval, as well as the amount you are pre-approved for.  From these documents, you can decide what the budget is for your first home.

Choose a good real estate agent

Once you have a pre-approval letter in hand, it’s time to find a real estate agent that can assist you in finding properties. Choose a local real estate agent with a lot of experience to assist you as you navigate through the process; finding the right property is more than just showings and signing on the dotted line. A good real estate agent should know your ideal location in and out, and have the experience to help you if you encounter any bumps as you work your way through the process.

Make a list of ‘must haves’ and ‘wants’ to take into your first meeting with your real estate agent.  Do you need three bedrooms? Would you really like a large yard? Are you open to the idea of a condo or townhouse?  Your list helps your agent get a clear picture of what you really want in a property so they can choose appropriate properties. Be aware that what you want may change as you look at homes—and that your ‘must have’ list may not fit with your budget.

Let the search begin…and end

Once you have a pre-approval letter and budget number, ask your real estate agent to set up showings at properties that fit with your ‘must have’ list.  Depending on the market you are searching in and your budget, you may need to prioritize your list.  What do you want the most?  What feature is the most important?

As you tour homes, look for red flags that could signal you are purchasing a money pit. Don’t be afraid to ask more questions about anything you see that might concern you (your agent can forward your questions to the seller).

Make an offer

Once you’ve found the ‘one,’ it’s time to put an offer (purchase agreement) in on the property you are interested in. An offer is the document you submit to the seller that contains an asking price and any contingencies, or conditions, of the sale. For example, a common contingency is a financing contingency which means your loan must go through for the sale to be final. Another common contingency is an inspection contingency where the house must pass a home inspection or both parties come to an agreement on how to handle an issue that arises during the home inspection. There are other contingencies that can be included in your offer; discuss your options with your real estate agent.

Your offer may also include an earnest money amount. Earnest money shows the buyer you are serious about the property; if there is a lot of interest in the property, earnest money can set your offer apart. Earnest money is applied toward the balance of the home at closing; if you offer $215,000 with $5,000 earnest money, the final amount to pay at closing is $210,000. Ask your real estate agent how much earnest money they would recommend you should include.

Get a home inspection

A home inspection is a safeguard for buyers; it is a chance for a home inspector to look over the home and alert the home inspector to any potential problems.  A home inspector can let the buyers know the home needs a new roof, there is an electrical issue, or if there is maintenance that needs to be done soon.  If the home inspector does find a major or minor issue, the buyers can ask that the item be repaired or negotiate a lower price because of the issue.  Your real estate agent can assist you through any snags found during the home inspection.

Close on the sale

The final step is closing day.  This is the last step to homeownership; it’s also the day to sign a stack of documents so be ready with your pen.  You may also need to bring documentation to closing day; make sure you ask your lender and real estate agent exactly what you need (if anything).  If everything goes smoothly, you should receive the keys to your first home—and be home to head to your first home to enjoy it.

10 Documents to Have Ready Before You Buy a Home

Share

Mortgage application with approved stamp on it after lender has received all docs and approved home buyerAs a first-time home buyer (or a more experienced buyer!), it’s fun to look at houses online.  It’s fun to watch TV shows about buying homes.  Both options make buying a home look easy (and it can be if you have the right real estate agent in your corner) but the shows and websites tend not to delve into one of the most complicated part of the process: applying for a mortgage.

One of the hardest parts of applying for a home mortgage can be collecting and supplying the document your lender requires for the application process.  Here are 10 documents to start compiling as you start the process that leads to home ownership. (Be aware too, that some lenders may ask for more or less documentation depending on your situation.)

W-2’s

Most mortgage lenders ask for your most recent W-2’s, though some may ask for two or more years worth.  Ask your mortgage lender on the phone for the exact amount so you can expedite the process.

Pay stubs

Another common proof of income your mortgage lender may request is recent pay stubs.  This is especially common if you have been at your job for less than a year.  Your mortgage lender may also require your human resources department fill out a form for verification of employment.

Business profit and loss statements or 1099

If you do freelance work or own your business, your mortgage lender is going to ask for your business and profit loss statements or 1099’s stemming from your work.

Bank statements

Your mortgage lender is going to ask for documents that detail your assets.  One of those documents is bank statements with your available balances.

Tax returns (1-3 years)

Tax returns are a common request from mortgage lenders; some lenders also have you sign a form so they can request a copy direct from the IRS.  They use the two documents to verify that you have supplied the correct information and to get a full picture of your financial situation.

Investment statements

If you have any mutual funds, CDs, stocks, bonds, or other investment accounts, your mortgage lender is going to require investment statements the verify the balances.

Titles (automobile,real estate, etc.)

Your automobile and real estate titles are an important part of giving your mortgage lender a complete list of assets you own and any recent liens.  Some lenders may not require this information; ask your mortgage lender if you need to provide titles.

Canceled rent checks (or proof of payment from landlord)

Past residency is another question that needs to be answered.  Depending on your specific situation, your lender may ask for the name of your landlord, address for the past two years, and for canceled rent checks if you were a tenant.

Gift documentation (if part or all of your down payment was gifted)

If part or all of your down payment is going to be gifted from a friend or family member, your mortgage lender needs proof of the gift.  This documentation may include an account statement and letter from the individual giving the gift.

List of debts

Your mortgage lender may be able to get this from your credit report.  You may have to supply new loans or additional information in a list.  Include any student loans, alimony, child support, credit cards, or other debts along with the creditor name and contact information (including address).

If you have any questions, ask your lender.  Once you are approved (or during the approval process), your real estate agent can help you find your home and go from mortgage applicant to new home owner.