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Steps to Buying a Home
Step 1: Check Your Credit Report & Score
Before beginning the process of buying a home, it is a good idea to check your credit score. Lenders want assurance that you will honor your commitment to re-pay the loan, and the credit score provides a good indication of this.
AnnualCreditReport.com provides a free report, CreditKarma.com too. Credit bureaus such as Experian and Equifax, or some credit card companies too such as Capital One.
The higher the score, the more opportunities will be available to you. Many institutions require a minimum 620 score. Checking your score will also enable any errors to be resolved prior to the loan application process. It will also enable you to determine if you need more time to improve your score. Even if your score is lower, talk to a lender to see what options you have. We have trusted Lenders we can refer you to.
Step 2: Determine your Budget
Before you start the home search process, you need to know what you can afford. This enables you to set your expectations and prevents disappointment. Check out our online mortgage calculator for an estimate of what you can afford.
It’s important to remember that there will be additional monthly costs too such as property taxes and homeowners insurance. You’ll need to ensure that you have sufficient savings to cover the down payment. This will vary between 3 and 20% depending upon the loan type you take out. A lender will be able to advise you on which type of mortgage is best for your needs.
Step 3: Choose Real Estate Agent and Lender
Who you work with does make a difference. Ask friends/family or colleagues for recommendations. Choose a couple to speak with and take the time to understand how they work. Are they a full-time agent, how well do they know the area, do they work alone/will you be dealing with them or a junior agent, what experience do they have? We offer potential clients to speak with any of our previous clients and have full transparency.
Again, when searching for a lender, it’s worth asking for recommendations. Make sure you speak to several, it’s important to compare all costs and requirements. Work with someone who will guide you through the process.
Once you have found your lender, it’s time for a pre-approval. The lender will need to examine your proof of assets and income, your credit score and verify your employment. The pre-approval letter will confirm what the lender is willing to lend you. In this market, it is essential to be prepared and have this ready in case you
Step 4: Time to Search for a Home
Make a list of ‘must-haves’ and ‘wishes.’ Know what you are prepared to compromise on if necessary. Old or new, large yard or small deck, city or suburbs? Are you prepared to undertake work, or do you prefer new? Other factors to consider - acceptable commute time, school districts, and access to retail outlets.
We also suggest exploring areas to see the community you are interested in.
Step 5: Make an Offer
In this market, you need to ensure that you are prepared to place an offer as soon as you’ve found the right home. Ensure that you’ve taken the time in advance to explore the neighborhood, and have answered any outstanding questions – school districts, commute times etc.
Your Real Estate Agent will provide you with information on recent comparable home sales and guide you on pricing. Remember, it’s not all about price, contingencies matter too! There are many other factors to consider apart from price. Your Real Estate Agent will guide you through the contingency options. In a competitive market, it may be tempting to waive them all, be certain that you understand the consequences of doing so.
It is easy to feel overwhelmed, and this is where a good agent will be essential ensuring that they advise and negotiate strongly on your behalf. It is not always about being the highest bidder, other terms are also important, and we have many homes this way.
Step 6: Offer Accepted, Time to Finalize your Mortgage
You’ve been successful and are mutual on a home, congratulations! It’s now time to finalize your loan. Back to the lenders for final discussion, do you want a fixed-rate or adjustable-rate mortgage? Looking into the future, do you anticipate a change in your financial situation? Should you lock in the interest rate? Remember, some lenders will waive fees, or help with closing costs – it’s worth asking! Ensure that you choose someone who will guide and support you.
Your Real Estate Agent will introduce you to additional external parties who will assist in ensuring a smooth transaction. A Title search will be carried out to ensure that the property has a marketable title and investigated further if there are any issues. Escrow will prepare and review documentation, forwarding it to the underwriting team once your lender has submitted the paperwork.
Step 7: Prepare to Close
There are many parts to the closing process, on average, 25-35 days from offer to close is standard.
You will be offered the opportunity for a final walk-through a week prior to closing. Use this time to identify any problem areas.
The lender will take a final review of the file, and it is extremely important that no lines of credit are applied for during this time.
Closing costs will be disclosed and you will be given a final number on the amount outstanding, considering and credits such as earnest money, down payment, and lender rebates. An appointment will be made for you to complete the final outstanding paperwork and make payment.
Step 8: Congratulations! Move In.
Closing day – at closing, property ownership will be transferred to you once several steps are complete. The transaction cannot be finally closed until the funds are transferred, the deed and mortgage are filed, excise tax records updated (where necessary), and recording numbers are issued by the county records office. Upon completion of this, it’s then time for you to receive the keys. Congratulations!
MORTGAGE CALCULATOR
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