Question

Review the 5-step home buying process detailed would concern you the most and why. What would you make sure to do in the key steps you have identified? If you are a current homeowner, do this exercise as if you are buying a new home. What might you do differently? the same? as you did before.

Answer 1

Answer:

Stage 1: Prepare your finances before leaving the gate

Make sure your finances are in order, so you know what you can realistically afford. Use a mortgage calculator to estimate your budget given your income, debt, savings and other financial obligations. Check your credit score and compare your debt to income. You should be able to comfortably pay your full mortgage payment (including taxes and insurance) each month. And you likely need money up front for a down payment and closing costs.

• Prepare for the costs of being a homeowner.
• Use a mortgage calculator to estimate potential monthly payments.
• Find out how credit scores can affect mortgage interest rates.
• Calculate your debt-to-income ratio. The lower it is the more likely you are to get a mortgage.
• If you don’t have a 20 percent down payment, look at other options.

Stage 2: Land on a loan that’s right for you and prequalify

Now that you have a budget, you’re in a better position to meet with a lender and discuss loan options, current interest rates and how much you can borrow. Once you find a loan that fits your needs, get a prequalification letter, which estimates your borrowing power based on your financial information. Keep in mind prequalification is not a commitment to lend. You will need to submit additional information for review and approval. Still, having this letter in hand when you make an offer shows sellers you are serious and gives you some negotiating leverage.

• Find out if you should get a fixed- or adjustable-rate loan.
• Learn about nontraditional and government-insured loan options.

Stage 3: Zoom in on your property and get your offer accepted

Now that you know what you qualify for, the fun of looking for homes with your real estate agent can begin. Save time and emotional energy by narrowing your search to homes that fit your financial criteria. Preview property online, and have your real estate agent show you only listings that are right for you. When you find a match, your agent can help you make an intelligent, informed offer. If it is accepted, a purchase contract is drawn and typically contains a good-faith deposit (“earnest money”) that you are willing to put in escrow to show your commitment.

• Avoid common mistakes of prospective homeowners.
• Know the extra costs involved in buying a house, from insurance to inspection.
• Learn how mortgage points can lower your monthly payments.

Stage 4: Hold on through the mortgage process

Once the seller accepts your offer, it’s time to apply for a mortgage. You typically 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, including your approximate interest rate, monthly payment and closing costs. Review this document carefully. To move forward, you need to verify your income and assets. This requires extensive documentation, which is necessary for the lender to ensure you’ll be a successful homeowner who can handle loan payments over the long term.

• Get an overview of the appraisal and inspection process.
• Make sure your loan estimate reflects what you discussed with your lender.

Stage 5: Coast into your closing

You’re almost home. Once your mortgage is approved and at least three business days before you close, you receive a closing disclosure. It lists the fees you must pay, which typically total 2 to 5 percent of the home price. Read this closely and tell your lender if anything seems off. Know what to bring to your closing such as your ID and any payments that are due. If you have a cosigner, that person needs to be there. Most of the time is taken up carefully signing forms. Once the loan closes which may take a couple days the funds go to the seller, you get handed the keys and the home is yours.

• Know what to expect at your closing.
• Learn about closing costs.
• Create a timeline for your move.