Steps to buy your own home
The path to your own home
The path to home ownership can have its ups and downs. But for most, the adventure is worth it. According to the 2019 Bank of America Homebuyer Insights Report, 93% of current homeowners say it was worth the challenges and difficulties they faced in obtaining their own home. Learn all the details of the process, from creating a budget and prequalifying for a mortgage, to the closing of your own home loan.
Step 1: first of all, you must prepare your finances
Don’t go see houses yet. Make sure that all your finances are in order, to know how much you can really pay. Use a mortgage calculator to calculate your budget based on your income, debts, savings, and other financial obligations. Check your credit score and compare your debt-to-income ratio. You should be able to comfortably make your full mortgage payment (including taxes and insurance) each month. And chances are you need money up front for the down payment and closing costs. The good news is that most first-time buyers make a down payment of less than 20% of the full payment.
Step 2: choose the right loan for you, and pre-qualify
Now that you have a budget, you are in a better position to meet with a lender and discuss options, current interest rates, and how much you can borrow. Once you find a loan that meets your needs, get a prequalification letter, which calculates your ability to apply for a loan based on your financial information. Don’t forget to keep in mind that prequalification is not a loan commitment. You will need to submit additional information for review and approval. Even so, having this letter in hand when making an offer shows sellers that you are a serious and trustworthy person and gives you some advantage in negotiating.
Step 3: focus on your property and make them accept your offer
Now that you know what you qualify for, you can start the fun of looking for homes with your real estate agent. Save time and emotional energy by narrowing your search to houses that fit your financial and economic criteria. Preview the property online and ask your real estate agent to show you only the options that suit you. When you find a house that meets the criteria, your agent can help you make a smart and informed offer. If accepted, a purchase contract is drawn up that generally contains a good faith deposit (“down payment”) that you must be willing to give as a security deposit to show your commitment.
Step 4: stay firm throughout the mortgage process
Once the seller has accepted your offer, it is time for you to apply for a mortgage. You usually have 45 to 60 days to fulfill your purchase contract, so you need to move fast. Within three days of submitting your application, your lender sends you a loan estimate, which includes an estimate of your interest rate, monthly payment, and closing costs. Please review this document very carefully. To continue, you need to verify your income and assets. That requires extensive documentation, which is necessary for the lender to ensure that you will be a successful homeowner who can meet long-term loan payments.
Step 5: proceed calmly until you reach the closing
You’re almost done. Once your mortgage is approved and at least three business days before it closes, you will receive a closing disclosure document. It is a list of the charges you must pay, which are generally a total of 2 to 5 percent of the house price. Please read it carefully and tell your lender if you notice anything strange. You must know what it has to bring to the closing, such as your identification and any payment you have to make. If you have a joint signer, that person needs to be present. Most of the time is taken to carefully sign the forms. Once the loan is closed; Which can take a couple of days, the funds go to the seller, you get the keys, and the house is yours!