If you are looking to buy a new home, don’t do anything until you have the tools and information you need to assist you in obtaining your new home. The following are some important steps that will help make the home buying process go smoothly:
Step 1: Am I ready to buy?
The first step is figuring out if homeownership is right for you. It may or may not be and this decision depends on a combination of your personal and financial priorities. A good start is asking yourself:
- Do I have good credit? If you recently missed payments (30 days) for rent, mortgage, credit cards, auto loans, etc., you may want to consider waiting to buy a home until your credit improves so can qualify for a lower rate.
- Do I have enough cash saved up? You'll need to have enough cash reserves to cover your down payment and closing costs. In addition, you'll need to have enough reserves to cover 3 to 6 months of total monthly housing expenses (principal, interest, taxes, & insurance).
- Am I financially stable? If there's a chance that you may be laid off soon or your job situation changes, you may want to hold off on buying right now.
- Am I comfortable with what I can afford? It may make more sense to continue renting if you know you can't afford to buy a home in an area you wish to live in.
Before you buy, you may want to consider the added responsibility that can come with owning a home. You should also consider the barriers-to-entry of owning—the down payment,
closing costs, mortgage interest, property taxes, insurance and upkeep—against the advantages of homeownership which includes growing equity, potential tax deductions, and the additional space a new home may provide.
Step 2: Shore up your credit
Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report.
Make sure the facts are correct. Fix any problems you discover by contacting the Credit Reporting Agencies directly. It may help your credit score.
According to the law, you're allowed to receive one free copy of your credit report per year. You can do this by visiting AnnualCreditReport.com. Scores range from approximately 300 to 850; generally, the higher your score, the better loan you'll qualify for.
Step 3: Crunch some numbers
If you want to know what you may qualify for based on preliminary information, instantly get real-time mortgage rates.
Find out how much home you can really afford based on actual (verfied) information. It's absolutely free--no cost to you. Get the answers you need first before making one of the biggest financial decisions of your life.
Step 4: Get pre-approved
With TrueFi, you not only can find out your actual maximum amount you can borrow and the estimated cash required to close, you can also print your online pre-approval letter. Not to be confused with pre-qualification (which is simply an initial review of your finances), a pre-approval is a firmer commitment on behalf of the mortgage company
and is a more formal process, which includes a credit check and verification of your income & assets.
Don't waste your time looking at homes outside your price range. Get the peace of mind knowing that you are pre-approved and that you know exactly what you can afford. Getting pre-approved will put you in a better position to make a serious offer when you do find the right house, because the
seller knows that your offer is solid. You get negotiating power with a stronger offer, especially when competing with other buyers.
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Step 5: Find a real estate agent
Once you've been pre-approved and have an idea of what price range you qualify for, you can start to work with a real estate agent to come up with a list of potential homes for you to visit. It is important to find an agent who will have your interests at heart and can help you with
strategies during the search and bidding process. You'll be spending a lot of time together, so it's important to find someone with whom you are totally comfortable.
To search for a local real estate agent or Realtor®, click here. Why use a Realtor®? Here are 6 reasons.
Step 6: Search for your home
Now that you know how much you can afford to spend, it's important to find the right home, in the right neighborhood.
You will need to make a list for the type of area you want to invest in. You'll need to consider things like drive time to work and major destinations, area schools, grocery stores, amenities such as swimming pools, tennis courts, parking, etc., and the demographics of the surrounding area.
Like TrueFi has done for online mortgages, there are some great websites that allow you to find homes that are for sale, research neighborhoods, demographics, etc. such as Realtor, Trulia, and Zillow.
Step 7: Make an offer and get ready to negotiate
Now that you've found the dream home you want, you have to make an offer. In deciding the amount of your offer for your future home, you should consider several issues—the asking price vs. comparable home sales, market conditions, other offers, how badly you want the home,
the home's condition—just to name a few.
Your real estate agent presents your offer to the seller's agent who in turn presents it to the seller. Most offers stipulate a response within 24 to 48 hours. They either sign your contract agreeing to your offer, decline your offer, or submit a counter-offer. If they present you with a counter-offer, you can either agree with their terms or make another counter-offer.
This process continues until you come to an agreement that satisfies everyone. Once you've agreed on a price, you'll make an earnest money deposit, which is money that goes in escrow to give the seller a sign of good faith.
Step 8: Submit your Purchase Loan Request
Once an agreement has been reached on the offer and you have a signed purchase contract, it's time to visit TrueFi and submit your purchase loan request. You'll answer simple questions, upload documents, select the loan that you qualify for, and submit your loan. Completing and submitting your loan request is free. TrueFi charges 1/2% of the loan amount only if the loan closes.
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Step 9: Schedule a home inspection
You have a right to inspect the home you've made an offer on, and indeed, most purchase agreements are contingent upon inspection. We encourage you to hire a qualified professional to inspect the home. If there are any serious problems, like cracks in the foundation, water damage, or a leaky roof, you may get a credit, the chance to lower your offer, or withdraw it altogether.
A thorough inspection is an objective examination of the home, from top to bottom, inside and out, including heating, cooling, plumbing and electrical systems, walls, floors, ceilings, foundation, roof, gutters, spouts, insulation and ventilation, major appliances, garage, etc. The inspector you hire should check everything and leave you with a detailed report
listing the condition of each item, as well as recommended repairs.
Step 10: Prepare for closing
Close on Your Home
Once your application for a mortgage loan has been approved and you have received a commitment letter, the final step before you can call the house your own is the closing, or settlement. The closing is the completion of a real estate sale and loan transaction. It's the final step in the home buying process. At closing, you will sign the mortgage loan documents, the seller
will execute the deed to the property, funds will be collected and disbursed and the closing agent will record the necessary instruments to give you legal ownership of the property. You will also get the keys to your new home! The closing of a mortgage loan is a legal process, with many details and requirements. But a general description of closing practices can help you through the process.
Set the Time & Date for Closing
As soon as you receive firm approval from the lender who is making your mortgage loan, you should confirm the actual date of loan closing. The timing of your closing is important. You'll want to schedule it to your best advantage. For instance, you might want to schedule it toward the end of your lease so as to not pay unnecessary rent, or, if possible, around the time of the closing of the home you're selling.
The settlement date also has to allow adequate time to assemble all of the required documentation. Most lenders require at last 3 to 5 days advance notice of the closing date in order to prepare the loan documents and get them to the closing agent. If repairs or maintenance on the property are a part of the lender's commitment, there must be time to complete them. The real estate agents involved in the sale transaction and the lender are often the best people to coordinate the closing arrangements.
Review Closing Costs
A day before your closing, you will review your final closing costs. You'll be required to pay your closing costs and down payment at the settlement. It's important to know before the closing date how much money you'll need at closing. You typically need to come to the closing with a certified check for the closing costs, including the balance of the down payment.
Be Sure To Do a Walk Through
It's customary to take a final walk through of the property shortly before the closing to make sure the home is in the condition you expect it to be. Within 24 hours prior to the actual closing, you and your real estate agent should make a final inspection of the property to make sure any required repairs have been completed, all property described in the sale contract, such as kitchen appliances, carpeting and draperies are present and that no recent fire or storm damage has occurred.
Prepare Closing Documents and Closing Costs
There are standard documents and exhibits that are commonly required for a loan closing, regardless of jurisdiction, and your mortgage lender typically completes these documents.
Step 11: Attend the closing meeting
For the most part, your role at closing is to review and sign the numerous documents associated with a mortgage loan. The closing agent should explain the nature and purpose of each one and give you and/or your attorney an opportunity to check them before signing. A brief description of the major documents may help you understand their purpose and significance.
A closing can be attended by any number of people and may or may not include the seller, the lender, you, the seller's mortgage holder, respective attorneys, the real estate agent, the managing agent (if it's a condo) and the title company representative.
Congrats!! When everything has been signed and the closing agent is satisfied that all of the instructions for closing have been complied with in full, you become the owner and are given the keys to your new home!