The Home Buying Process In A Nutshell
A home is a big purchase – likely the biggest one you’ll make in your life, and for many buyers, that can be a little intimidating. You want to make sure you’re making the smartest financial decisions for your household – both now and in the future – and that you’re choosing the right property, at the right price and at the right time.
But how do you do that? What steps should you follow to ensure home buying success?
Step 1: Get Pre-approved
The first major step in the home-buying process is to get pre-approved for your loan. Though this will require an application, it is not to be confused with full-on loan approval. Your pre-approval will be based on basic information about your income, monthly costs, credit score and other initial data you provide. Actual loan approval will come later on, once you send in documentation to support this information.
Pre-approval is simply a lender’s stamp of approval, essentially green-lighting you for a future mortgage loan. When pre-approving you, the lender will also give you a maximum loan amount they can lend you, which you can then use to guide your home search. Your pre-approval can also be a great negotiating tool when bidding on homes, as it gives sellers confidence in your ability to follow through on an offer.
Step 2: Find Your Home
Once you’ve been pre-approved for your loan, you can use your pre-approval amount to guide your home search. Keep in mind that your pre-approval amount is the maximum your lender will give you. Use it as a guideline to find potential properties, but don’t feel like you have to use the full amount on your new home.
When you’ve found a property you love that is in your price range, it’s time to put an offer on the home. Your real estate agent can help you through this process, so be sure to send them your pre-approval letter. They may be able to use it to negotiate on your behalf – particularly if you’re caught up in a bidding war.
Step 3: Send in Your Documentation
After the seller has accepted your bid, it’s time to work with your loan officer again. They’ll request various documents to verify your income, employment, monthly costs, bank accounts and assets, and they’ll pull a full credit report to ensure nothing has changed since your pre-approval. Be sure to keep in touch with your loan officer often during this process, and respond quickly to their requests. The faster you can provide the needed documentation, the quicker you will close on your home.
Your lender will also order an appraisal to verify the home is worth the loan they’re giving you. If there’s a discrepancy between the appraiser’s value and your offer, you can either negotiate with the seller, pay the difference out of pocket or pull out of the transaction. You will also want to secure a home inspection, as this will ensure the home is safe to inhabit and up to all local building codes.
Once your information has been verified and deemed acceptable by an underwriter, you’ll lock in your interest rate and your loan will move into the final stages of the process.
Step 4: Close on Your Home
On closing day, you’ll head to the title company to sign your final documents, pay your down payment and closing costs, and get the keys to your new property. Your real estate agent may or may not accompany you to this meeting.
Be sure to bring these items to closing:
- A cashier’s check for your down payment and closing costs
- Your driver’s license or state-issued ID
- Proof of your homeowner’s insurance
- Any paperwork that has not yet been turned over to the title company
Once all is said and done, you’ll be all set to move into your new home!