Attaining homeownership has always been the American Dream! What better investment than a place to call your own, while enjoying the many benefits that come along with it. We’ve created a simple step-by-step process for people looking to purchase a home and better understand the intimidating process. Always make sure to go with a reputable loan officer who will take the time thoroughly explain the programs that are available and which one best suits your needs and future goals.
Step 1: Check your credit score. This should always be the first step when applying for any type of loan. Reviewing your credit score ahead of time will give you an idea of which programs you may qualify for. Keep in mind that your lender is going to check all three of your FICO scores (i.e Experian, Equifax, and Transunion) – knowing just one may leave you in the dark.
You may be surprised how each credit score may vary. For instance, it’s not uncommon to have a FICO score of 690 with one bureau, while the next lists 673 and the last 681. Some programs such go as low as 580 and others may require at least 640 or higher.
Step 2: Save up money for the required down payment. Some mortgage programs allow a minimum of 3.5%, while 20% is preferred. Understand that when you get into this new home you’re going to have to fill it with furniture and make the home yours. Many people forget about this and end up in an empty house for months because they didn’t save money.
Step 3: Figure out how much you can afford. For most buyers we recommend the mortgage payment not to exceed 28-30 percent of your gross monthly income, with other debts included not to exceed 36-40 percent. If you’re looking at more expensive property you won’t want your housing payment to exceed 45 percent of your gross income and 55 percent including other debts.
Use our free mortgage rate calculators here to determine a comfortable mortgage payment for you.
Step 4: Contact your preferred loan officer to get an exact idea of what you qualify for. Determine what documents will be required for pre-approval. Average closing time for new purchases is around 17-30 days with cooperation needed from all sides of the transaction including buyers, sellers, their agents, escrow officers, loan officer, processors, underwriters and funders.
Step 5: Find a local realtor in your area that is reputable, who knows how to win an offer and is a strong agent. Make sure this realtor has your best interest at heart, many of these people just care about the money and you can in most cases weed out them from the bunch after speaking with them. The loan officer you’re working with might have an agent to recommend in your area that they’ve worked with in the past.
Step 6: Once you’ve made it to step 5, you’re ready to start making offers on properties! It’s a very competitive market in 2013 and some properties are sold in a matter of days – or hours. It’s crucial that you stand out from the rest of the pack and show the seller know you’re a creditworthy buyer – make the seller anxious to sell you their property! Have your pre-approval letter on hand. This will show maximum loan amount you’re prequalified for and what program you’ve decided to enter.
You’re now one step closer to homeownership!
Step 7: Finalize with your loan officer how you want your new loan structured, whether you want to have some or all of the closing costs credited through a higher interest rate or if you would like to pay for the closing costs out of pocket and even buy down the interest rate.
Step 8: Satisfy all remaining conditions and the loan officer will order the loan documents which go in doc audit for 24 hours. Once that is complete we can order the loan documents for signing, send them over to escrow to schedule a notary. The loan documents will be returned to the lender and funding is coordinated from there.
The process is now complete, the funds will be dispersed and you’re ready to start moving in!