If you're thinking about buying a home, the first step is getting organized. You'll want to choose your real estate professional carefully and commit yourself to them so they can learn your likes and dislikes to make your home-buying process easier. Choose a professional who has specific knowledge of the local market.
Doing some preliminary planning before you begin your home search will make the entire process more manageable and less overwhelming. As part of your initial game plan, you should:
Make a "wish list" to decide which features are absolutely essential, which are nice "extras" if you happen to find them, and which are completely undesirable. The more specific you can be about what you're looking for from the outset, the more effective your home search will be. Also keep in mind, that in the end, every home purchase is a compromise.
Create your own personalized "wish list" and when you're finished filling it out, share it with your real estate professional.
Understand your budget and stay within your comfort zone. Speak to a reputable mortgage lender and obtain a pre-approval. This is extremely important so when you find that perfect home you'll be ready to make an offer. This is a requirement for a listing agent and their seller to take your offer seriously.
Keep in mind that there are two different types of documents a lender can provide to you. One is a pre-qualification and a pre-approval -- they are very different.
Pre-Qualification determines how much you can borrow based on information you provide to the lender with your overall financial picture, including your debt, income and assets. After evaluating this information, a lender can give you an idea of the mortgage amount that you qualify for. A Pre-qualification generally does not include an analysis of your credit report or an in-depth look at your ability to purchase a home.
What's next? You'll schedule and complete your home inspection then your lender will order the appraisal. The appraisal must come in at or above sale price. If the appraisal is short, you may have to renegotiate with the Seller or "close the gap" with additional money down if you want to proceed with the purchase. Your real estate professional will play an integral part of helping you if the need arises.
After the appraisal is complete, all final required documentation to obtain financing will be submitted to underwriting. At this time, all verification will be updated, including verification of employment.
You'll need to start shopping for your homeowners insurance, sometimes called hazard insurance. This is a lender requirement to protect both your interests and the lender's interests.
Once the underwriter issues the final approval, a clear to close (CTC) is provided to the lender and the closing attorney/title company is notified so your closing time can be scheduled.
You will be notified approximately 3 days in advance of closing, of the balance that you will be required to bring to the closing. Typically those funds will be in the form of a bank check or a wire transfer. Your closing agent will provide this information to you. Once closing is complete, the closing attorney/title company records the necessary documents at the Registry of Deeds or Town/City Hall, the lender distributes funds to the closing attorney/title company, the seller receives their proceeds, and the home is yours!
TIP: Hold off on opening or closing any credit cards or credit line. Don't make any major credit card or car purchases once you receive your Pre-Approval and until your final closing on your home. Monthly payments you're obligated to pay and total debt will be counted against you, and could reduce the amount of the mortgage loan at the time of final approval. Though you've been pre-approved for a mortgage, that approval is subject to last-minute evaluation of your financial situation, and a spending spree for appliances, furniture and other goodies intended for your new home may wreck your chances for buying it and could ultimately jeopardize your escrow deposit. Speak to your lender if you have any questions.