Step 1: Qualifying For a Home Loan
The first step is to figure out the amount that you are qualified to borrow, and determine the options available to you. This will increase your borrowing power. There are many Lenders that have programs that allow first time homebuyers to put little or no money down depending on your credit history and loan amount.
Complete the online form and we find the Lenders that will pre approve you based on the information you provide. If you have not begun to look for a home, you can estimate the property value. This will at least give you a starting point.
Once you complete the online form, the lenders that fit your criteria will contact you to make their best loan offers. They will also discuss the lending options that are available to you.
You should consider:
The down payment
This is the amount of money you have available to put a down payment on the house you want to purchase. Depending on your credit history, you may qualify for a loan program that requires 0% down.
Don’t forget to budget for closing costs
There are other costs beside your down payment associated with purchasing a home. First time homebuyers have to take into consideration closing costs. Some additional fees associated with closing costs are points, lender’s fees, title charges, escrows for your property taxes and home owners insurance. Many loan programs allow the seller to contribute up to 6% of the sales price to your closing costs.
What monthly payment is comfortable for you
Just because you qualify for a certain loan amount doesn’t mean you are required to use the maximum financing available to you. Along with the mortgage payment, property taxes, homeowner insurance and all of your monthly liabilities don’t forget to budget for thing you like to do. Vacations, entertainment, future college tuition etc. also cost money and you do not want to deprive yourself. You do not want overextend your budget and work solely to make your mortgage payment.
Step 2: Choosing your loan program
Once your loan application is pre-approved, our Lenders will review the loan options that are available to you. They will help you determine what type of loan is best-suited to your financial and personal situation.
Once you choose your loan program, your Lender will issue you a pre-approval letter. Your Pre-approval Letter will include your maximum financing, your loan program details and your monthly payment. You can use this letter to go shopping for your new home.
You should consider:
Your financial situation
How much money do you have for a down payment and closing costs? Will this totally empty your bank account? You may want to consider a loan program that allows you to put less money down so that you have some money in reserves.
The length of time you plan on staying in the home
Most first time homebuyers sell their homes within the first five years of purchase. You may not want to spend a lot of money on points to get a lower rate on your mortgage because you will not be in the house long enough to recoup your savings. Also, you may want to consider an arm that has a lower monthly payment. If you plan to sell your home within two years you may want to consider an FHA one year arm. If the rate for the first year is 5% the maximum your loan can increase is 1% in the next year. So the second year interest rate cannot exceed 6%.
Your personal credit history
If you have less than perfect credit, there are loan programs that will allow you to work on improving your credit and reward you for doing so. For example, our Lenders have several rewards programs that allow you to enjoy a reduction in your interest rate without refinancing. If you make 24 months mortgage payments on time, your rate will automatically reduce. They also have adjustable rate mortgages that will allow you to convert to a 30 year fixed at each adjustment period. Ask your Lender for details of special financing programs.
Step 3: Going House Shopping
Once you have been Pre-qualified, choose your loan program and have been issued a Pre-approval certificate, it’s time to go house shopping. It is recommended that you seek the services of a professional real estate agent.
Once you have found the home that meets all of your needs, you will negotiate a sales price and then sign a sales agreement. Many homebuyers have an attorney review this contract to make sure everything is in order.
You should consider:
Your real estate agent
Be sure to use a real estate agent that works for you. Your real estate agent should be knowledgeable and familiar with the area that you want to purchase your new home. The best way to find a good real estate agent is to ask for referrals. Pick an agent that wants to work with you in fulfilling your home purchase needs.
The length of time you will remain in the home
If you plan on never moving again, will this home meet your needs? Do you plan on moving in a few years? Are you planning a family or will your income increase over several years? It is important to know how long you plan on staying in your home before you purchase.
Don’t make the mistake of purchasing a home in a neighborhood you know nothing about. Will this neighborhood meet your needs? Ask the neighbors the true story about the neighborhood.
Type of Property
Are you looking for a single family home, a townhouse, or condo? Before you begin your house shopping, decide what type of property that will satisfy your needs. Also don’t purchase a house that may be hard to resell. When you are looking for a home, think about how you would sell it!
Step 4: Processing & Final Loan Approval
Now that you have found your property and have a signed sales agreement, it is time to process your loan application with your Lender for final approval. This step gathers and verifies all the documentation for your loan. A real estate appraisal will be preformed to determine the value and condition of the property you are purchasing. Your title work, a survey, a house inspection (not the same as an appraisal) and a termite inspection may also be ordered.
Once your file is complete, it is sent to underwriting to validate the documentation provided by you. The underwriter may request addition documentation at that time. Most Lenders’ use automated underwriting systems. This allows the lender to speed up the lending process.
Once your information is validated, you will be issued a final loan commitment. Then you can schedule your settlement.
You should consider:
Be sure to give yourself plenty of time to process your loan. Time is of the essence. When documentation is requested, it is in your best interest to forward the information to your Lender as soon as possible. Often times, your file can not be moved to the next processing step without the necessary documentation. Providing documentation on a timely basis will make your loan application process much smother.
Coordinators, Loan Processors, Mortgage Representatives
We realize that the lending process can be very stressful. There is a lot of work to be done. That is why our Lenders have an informed staff that will help you through every step of the way. If you need assistance with any matter, make sure to contact your Lender directly.
Part 5: Going to Settlement
This is the final step in purchasing your new home. This step is the actual closing of the real estate transaction between you and the seller of the property. Generally, the settlement takes place at the title company. All of the interested parties meet to sign the final documentation. You may be in the room with the seller, the seller’s real estate agent, your real estate agent, your attorney and if the seller brings an attorney. This final step will need to be coordinated with all partied involved.
Once all of the settlement papers are signed and monies are exchanged, you receive the keys to your new home, along with copies of all the closing documents. Congratulation- You are now a proud new homeowner!
You should consider
Your down payment and closing costs:
Request a copy of the HUD settlement statement prior to your closing. This form summarizes the entire financial transaction. It will also let you know the amount you will need at the settlement table. In most cases you are required to bring certified funds to the settlement. You do not want to be short money at the settlement table.
If you are currently renting now, planning the move to coincide with the end of their lease often creates a big dent in the budget. Check with your landlord about an early release or extension of your lease when you consider buying your first home.