Buying a house is a BIG deal, especially when it’s your first time. In the minds of some borrowers, the idea of a mortgage produces visions of huge stacks of paper. But with innovative online tools and a total commitment to customer service, Premia flips that notion on its head by making the homebuying process easier, faster, and more transparent than ever before.
Changing the way you purchase a home, however, doesn’t change the fact that it’s complex and requires practicality, honesty, organization, and trust. Although no two people or situations are the same, there is a general process that you can follow in order to make this big decision go as smoothly as possible.
The overview we have planned of the homebuying process is roughly twenty steps. This first installment will cover the first five. Each will include the phrase, ‘First-Time Homebuyer’s Guide’ in the title, as well as a number reference so you can track accordingly.
1. Reality check/research
It might sound simple or silly, but you’ll need to determine why you want to buy a home before you make the decision. For instance, is it a financial decision or a status decision? If you do the math and determine it would make financial sense to own, then you’re well on your way.
Other reality checks involve your credit history and what you can reasonably afford as a monthly payment, and getting pre-approved can be help in determining this. Ultimately, only you know how responsible you’ve been with money and what kind of financial cushion you can maintain if something unpredictable happens.
If you’re living check-to-check or your life is colored by late payments and frequent calls from creditors, home ownership may not be for you right now. Conversely, if your savings account is healthy and growing and you pay bills on time or ahead of time, you likely can feel confident about moving on to the shopping phase.
2. Shop and compare
So you’ve made the decision to go forward with buying a new home. Hurray! The next step is to shop and compare loan products. We recommend speaking to one of our loan officers about this. There are many different loan options and approaches you can take here, and for a first-timer, it may not always be clear what is available to you. Our loan officers will be able to lift the veil on all that and discuss which solution best fits your financial situation as well as the individual needs of you and your family. In that case, we believe that finding the right mortgage expert is as important as finding the right mortgage product.
3. Find a home
Now that you have a loan officer who answers questions knowledgeably and patiently, it’s time to find your perfect home! A trusted expert real estate agent is key to this process, and doubly so if you're relocating to a new area, since they will have access to the MLS database, a complete source of for-sale listings that gives you the maximum set of homes to choose from.
Your agent will also know the important details of the neighborhoods that interest you, including average home value and the quality of nearby schools, among other factors. Once you think you’ve found the home of your dreams, you’ll enter into a tentative contract with the seller and put down earnest money, which indicates your intention to buy.
4. Apply for a home loan
Now you’re ready to apply for the home loan. By this time, you and your loan officer should have a good idea of which loan product you're going with, along with the requirements you need in terms of down payment, zoning, and other factors. Be sure you have all of your identification credentials handy, since you'll need them when you fill out your loan documentation.
Also, we recommend against making any major money moves while your loan is being processed. Don't close down any credit cards or open any new ones. Hold off on getting a new car loan, switching jobs, taking money out of savings, or anything that could suddenly have an effect on your credit score. Lastly, be patient. It can be nerve-wracking when you're waiting to hear the status of your loan. Just keep in contact with your loan officer. They can give you updates, if any, and let you know if there are any bumps in the road (and how you can resolve them.)
5. Closing
Before proceeding, you’ll want a trusted professional to perform a home inspection, because a house that looks amazing on the outside may have hidden problems that would turn your dream into one long nightmare. Once it comes back clean, all that’s left is the closing. This can be a stressful part of the process for many borrowers, which is why Premia is there for you every step of the way!
Your loan officer will have provided an estimate of costs prior to closing, and at this stage will give you a breakdown of actual costs. This is an important time to ask as many questions as it takes for you to understand what you’re being charged for.
Escrow accounts could be used to manage your finances and mitigate risk to the lender, though you may have options as to whether you’d like to use them. After all the information and paperwork has been processed, your patience and perseverance will be rewarded with a set of keys to your new home! The only thing left to do is plan your house warming party!
Stay tuned for Part 2, where we'll take a look at good and bad reasons to buy a home. In the meantime, if you have any questions about this process, or anything else mortgage related, please contact us today!