What steps should I take to buy a home?
Buying a home is exciting, but it can also be overwhelming. You can feel more confident about this important milestone if you see the home-buying process as a series of steps.
1. Get prequalified
Before you start looking, contact a mortgage professional to discuss prequalification. A professional can determine how much you can afford to pay on a mortgage before you begin your search. Three areas typically evaluated include:
- Your income—how much you regularly earn through your job and other sources
- Your debt and credit—how much you pay in bills and how well you generally pay them
- Your assets—how much you have saved and invested, as well as property you own
2. Find a home
When you have your prequalification letter, work with a real estate agent to find a home that's right for you. Determine the type of home that meets your lifestyle. Have your wish list ready so you know whether a home fits your needs.
3. Make an offer
Once you find the home you want, work with your real estate agent to develop an offer. Your agent will find comparable homes in the area to help you calculate the right offer price. (Make sure your offer leaves you enough money to make any necessary improvements to the home.)
Your agent will then complete and negotiate the sales contract with the seller. Once the home passes inspection and fixes are agreed upon, you'll have accomplished a major step in buying a home: a signed offer.
4. Apply for a mortgage
Now that you have a signed offer, it's time to convert your prequalification into an application and verify your loan selection with terms. You'll meet with your mortgage professional to discuss interest rates and closing costs, and review the documentation needed to confirm your income and assets.
5. Wait for the mortgage approval process to complete
A few wheels are set in motion upon submitting your mortgage application:
- Your mortgage professional will order an appraisal to verify the home's value.
- Your mortgage professional will order a title search.
- Your documentation will be verified.
- Your monthly payment will be calculated, which includes any homeowners insurance, tax payments and HOA payments.
During this time, the mortgage lender reviews all the documentation you provided to support your income, assets and other details in a process called underwriting. Meanwhile, the home is appraised. If the appraisal comes in at a value that supports the sale price, and the lender is satisfied with the loan after underwriting, you can be approved for the mortgage loan.
6. Attend the closing, and the house is yours
On closing day, you'll meet with the title company or attorney managing the closing. There will be a number of documents to sign, but once they're completed, guess what? You'll receive the keys to your new home.
Remember that while home buying is a process, you don't have to go through it alone. Find a good agent and mortgage professional to guide you every step of the way.
Keep it up. You're getting smarter about home buying.
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