Eight Easy Steps to Home Ownership
Purchasing a home may seem complicated, but the various professionals, from realtors to home Mortgage Bankers and title officers, take care of most of the details along the way. See for yourself. Here’s what you can expect:
Step One: Determine your purchasing power
Before you begin home shopping, it helps to get a feel for what your budget is. That way there are no surprises later and you can enjoy home ownership rather than look at is as a burden.
To figure out your purchasing power, consider the following items: monthly income, monthly debts, down payment amount, loan closing costs, and your credit history.
Step Two: Pre-qualification
Pre-qualifying for a specific mortgage loan amount helps your realtor focus your home search so that you will be looking just at homes within your price range. In fact, many realtors require either a pre-qualification letter or a certificate of pre-approval before showing homes. Pre-qualification begins by speaking with your lender and providing such information as your income and current debts. You won’t have to supply any supporting documentation until you actually start the home loan process. The lender simply uses this information to quickly determine how much you can afford to borrow.
Step Three: Pre-Approval
A certificate of Pre-Approval is the best way of demonstrating your ability to purchase a home. Pre-approval offers are also given stronger consideration than pre-qualification letters alone. You will provide your mortgage lender with documentation such as W-2 Forms, Paycheck Stubs, and Savings/Checking Account Statements. Your mortgage lender will also run a credit report to establish credit worthiness. It requires a little more work up front, but really pays off by minimizing any last-minute problems that may impact the loan closing. And as previously noted, sellers and realtors take home purchase offers presented with a certificate of pre-approval more seriously.
Step Four: Make a wish list
To ensure that your new home meets your needs, we suggest you create a checklist to help you identify and prioritize features you are looking for in a new home.
Step Five: Search for a home
Now we get to the fun part: searching for your ideal home! There are several ways to do this. You can browse the homes for sale in the classified section of your local newspaper, visit open houses, or find a realtor. A realtor not only has access to homes not always advertised in the paper, but will help you locate homes that meet your price, size and other criteria.
Step Six: Make an offer
Typically the homebuyer or the realtor will present an offer to the seller or their representative that includes the following information:
- The proposed offer price
- Seller concessions (if applicable)
- Financing contingencies (if applicable)
- Home inspection contingencies (if applicable)
- A specific outline of what is to be included in the sale of the home
- The “earnest money” deposit amount to be tendered with the offer
After the seller reviews your offer, they will either accept it, reject it, or make a counter-offer. Any change to an offer is considered a counter-offer. An offer does not become a contract until both parties accept it. After acceptance, you and the seller will sign a home purchase agreement to finalize the deal.
Step Seven: Lock-in an interest rate
After signing a home purchase agreement, you’re ready to lock in an interest rate. This freezes your interest rate and protects you against market fluctuations for a specific time period.
Step Eight: Closing
After you lock-in your rate, your lender will go to work to close your home loan. A processing specialist will schedule an appraisal and will make certain that your file is complete and ready for final underwriting review. While all of this is going on, your escrow and title companies are working to gather the proper paperwork and approvals. Once all escrow conditions are met, the home loan is ready to fund, record, and close.
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