Buying a home requires a lot of time, effort, and money. As it is the largest financial investment that most people will make in their lives, it’s a process that also requires a lot of decision making. Therefore, working with an experienced real estate agent, mortgage loan officer, and other real estate professionals helps make the process more manageable, and you can get the guidance you need in buying your dream home.
Below are the steps you can expect during the homebuying process:
Step 1:Assess your financial situation and the housing market.
The first things to keep in mind when you want to buya home are how much house you can afford, where you would like to live, and more. Do you have money saved for a down payment?Are home values increasing or decreasing in your desired neighborhood, and how is your credit score? Based on these factors, you may decide that the timing is best for you to buy now, or perhaps you’d like to wait until you can improve your credit score or save more money for a down payment. Speak with your Cross Timbers Mortgage consultant, who can help answer your questions.
Speaking of credit scores, make checking yours one of the first things you do before starting your home buying process. You can get free credit reports from all three credit reporting agencies at least once per year. If you find any errors in your report, dispute them immediately so they can be resolved before you apply for a home loan.
Step 2: Get pre-qualified and pre-approved for a mortgage.
Before you start touring homes, you’ll need to know what you can afford. The best way to do that is to get pre-qualified for a mortgage. You can get your mortgage pre-qualification through a loan officer rather quickly by providing your income, savings, and investment amounts. Your loan officer will tell you what mortgage amount you could potentially be approved for based on that information.
Then you can start your mortgage pre-approval process, which involves providing financial documentation, including W-2 forms, paycheck stubs, bank account statements, and more. The lender’s underwriter also considers your annual income, credit score, debt-to-income ratio, projected down payment amount, and other criteria to approve you for a specified mortgage amount.
When you’re pre-approved, you’ll receive a pre-approval letter. This letter confirms how much home you can afford and shows sellers that you’re a serious buyer. This comes in handy in a hot market when you’ll likely be competing against other buyers for the same home, and it gives your offer more weight.
Step 3: Make a list of your home must-haves.
Once you’ve been pre-qualified, or even pre-approved, and you know your home budget, make a list of all the features you want in your new home. Things to consider include the number of bedrooms and bathrooms, square footage, outdoor space, neighborhoods, schools, and work commute.
Step 4: Find the right real estate agent.
According to Zillow, in 2020, 85% of buyers used a real estate agent during some part of their home search. Typically, sellers pay the buyer’s agent commission, so working with an agent is a cost-effective option for buyers that brings a ton of value. A buyer’s agent can help you determine offer amounts, negotiate on your behalf, and connect you with other housing professionals, like mortgage brokers, attorneys, contractors, and more. Your agent handles the home buying process by staying on top of and managing all the moving parts.
Once you have your agent on board, they can start arranging for you to tour houses within your budget and those that have the features you desire.
Step 5: Make an offer.
When you find your dream home, you can make an offer using a CMA as your baseline. A CMA is a comparative market analysis prepared by your agent that shows the home’s market value based on comparable recent sales in the same area.Your agent can help you determine a fair offer price and advise if you should leave some room for negotiation, depending on the current market.
There are other things to take into consideration when making an offer. First are disclosures, which are known problems with the house that may need repairs, put the home at risk for flooding, or other such issues. The closing date is another factor. You or the seller may request a longer or shorter closing window, which usually takes about 30-40 days after the contract is executed. Contingencies are another consideration, which are agreements between the seller and buyer that certain things need to occur for the sale to move forward, such as an appraisal and home inspection, which are typical in most home sale transactions.
Step 6: Schedule the inspection.
According to Zillow, 82% of buyers schedule an inspection on homes they intend to buy. This is the only way to discover if the home has any significant underlying issues. Your realtoror loan officer should be able to recommend a trustworthy, licensed home inspector, or you can search online based on homebuyer reviews.
Home inspections are usually scheduled within a week of the contract being signed and are attended by the buyer and their agent. It’s a good way to get a better understanding of the home’s inner workings. After the inspection report is completed, you’ll have time to review the findings with your agent and decide if further negotiations are needed based on any major issues found. This could be requesting that the seller fix the problem before closing or lower the sale price for you to fix it when you become the owner.
Step 7: Secure your financing.
Even if you’ve been pre-approved, you still need to officially submit your mortgage application.
You’ll need to provide updated financial statements from those you had offered for your pre-approval, and it’s best to respond to requests quickly to prevent any delays in the process.
Your mortgage loan officer will hire a home appraiser and schedule the appraisal. If the appraisal matches your offer price, you should be one step closer.Suppose the appraisal comes in above your offer price. In that case,this means you’re purchasing the home for a price below market value, which gives you instant equity.If the appraisal comes in low,your mortgage won’t be approvedfor the full loan amount. You’ll need to either make up the difference between the appraised value and the offer price in cash or try to renegotiate the sale price with the seller. If you believe the appraisal was incorrect, you may be able to request a new appraisal from your lender.
Step 8: Purchase homeowners insurance.
You’ll need proof of homeowner’s insurancebefore closing, so if you already own a home, ask your existing agent to open a new policy for your next home. If you don’t own a home, shop around for a policy. Your lender may be able to help you coordinate a policy that can be paid through your monthly escrow account.
Step 9: Close on your home.
You may decide to do a final walkthrough of the home on the day before or the morning of the closing to assure that any agreed-upon repairs were made, and that the home’s condition has not changed since you made your offer.
At the actual closing, you’ll spend a few hours signing paperwork, and you’ll need to bring funds that cover about 3%-5% of the sale price to pay your closing costs. Once the signing is complete and the sale is recorded, you’ll receive the keys to your new home, and the house is yours!
If you’re looking to buy a home, contact the loan experts at Cross Timbers Mortgage for your pre-approval, so you can home shop with confidence!