Buying a home for the first time is one of the largest purchases you can make. I have a question for you – Do you know what to expect in the home buying process?
Choose a Realtor
There are so many steps in the home buying process behind the scenes with your Realtor. If you have a great Realtor, they will make the transition from renter to homeowner go smoothly.
I recommend hiring a Realtor as the first step in your home buying process. Friends and family may say you should consult with a Mortgage lender, to see what amount you’re approved for and if you need credit counseling. The reason I prefer my potential clients speak with me first, is because it allows me to set expectations before we start our home search, and I’m able to recommend reputable Mortgage lenders.
Explore mortgage options
When a potential homeowner looks to get approved to buy a house, there are several loan options. The most common is an FHA loan. This type of loan is popular because it accepts a low down payment and requires a low down payment of just 3.5% down on the purchase of their home. The minimum credit score to qualify is 580, and mortgage insurance on a FHA loan isn’t cancelable.
A Conventional loan has a minimum credit score of 620 and requires 3% down. Conventional mortgage insurance can be canceled once you reach 20% equity in your home, so if you plan to keep the home beyond 5-10 years, consider this loan. Additionally, conventional loans charge a higher rate for lower credit scores, whereas FHA doesn’t.
VA loans are for our Veterans that served our country. These loans don’t require any money down or have mortgage insurance, but instead upfront VA funding fees, such as loan origination charges.
Research first-time home buyer assistance programs
Many states offer first-time homebuyers down payment and closing assistance to low income homebuyers. The purpose of the program is to increase homeownership opportunities.
Get a Pre-approval letter
This is important because it tells the buyer how much their approved for. A lender will pull your credit and review documents to verify your income and assets. This also shows home sellers that you’re a serious buyer that has been pre-approved. You should apply for a pre-approval when you’re ready to make a purchase.
Option Period and Inspection
This portion of the home buying process is an agreed upon amount of days between the buyer and the seller, that allows for an inspection of the home. Buyers are even waiving their option period in order to get their offer accepted.
Buy Home Insurance
Your lender will require you to purchase homeowners insurance before closing. Homeowners insurance covers the cost of repairs and belongings in the home, in the event your home is destroyed by an incident covered in your policy. It’s important to have enough insurance to cover the cost of rebuilding the home.
Closing Cost
These are the fees and expenses you pay at closing to finalize your mortgage, and they typically range from 2% to 5% of the loan amount. You can always ask the seller to pay a portion of your closing costs.
Your almost home
As tempting as it seems, it’s important not to make any large purchases that may impact your credit. This is important because if a purchase is made, it could significantly impact your loan and even cause it to be denied. It’s best to wait until you have closed on your home before you make a huge purchase.
The combined salary of homeowners is lower today compared to 2008, at the height of the housing crash – this means homeownership is right at your fingertips.
May the odds ever be in your favor during your home search.
