Your Journey to Home Ownership
Buying a house is an exciting process; especially if it is your first home. It may be a long or short process. But no matter how long it takes you will follow at least four steps throughout your journey to home ownership. First, you will check your credit and examine your finances. Next, you will shop for a mortgage loan. Then you will shop for the right house! Finally, you will move in. Remember, you or other family members will probably live in your new house for the rest of your lives. That is why it is important to understand the steps in the home buying process. This brochure walks you through the process of buying a home.
CREDIT AND FINANCES
Know Your Credit
It is not only important to know your credit scores, but to know your credit. Know the basics about your credit before a mortgage lender pulls your credit scores. It is helpful to write out a summary of your credit history as you know it. What are your monthly payments? If you have been late with payments, write down which ones, how often you have been late, the current status, and explain what led to the circumstances. Also write down your loan and credit card balances. And explain any collections, judgements, or other delinquencies that you think might affect your credit. This way both you and the lender know what to expect when your credit report is pulled.
Know Your Finances
You must cover some part of a down payment (up to 20% of the purchase price) and some closing costs (at least 3% of the purchase price). It is important to know that cash in the bank is not the only source of funds that are acceptable to a lender. Will a relative give you part of your down payment as a gift? If so, have them write a letter stating the amount they will give and include that amount as a cash asset on your loan application.
Do you have an insurance policy with a cash value? Do you have a retirement fund? Include a most recent statement from those policies. These cash assets help you to qualify even if the cash is not on hand. If you need to use these sources, your lender will instruct you how to document the withdrawals or have the gift monies transferred when the time comes.
SHOP FOR A MORTGAGE LOAN
Shop for the Right Mortgage Company
First, determine if you will use a commercial bank, a direct mortgage lender, or a mortgage broker. The best thing to do is call each one and ask what programs and services they offer. They can answer basic questions without taking a loan application or pulling your credit. However, be careful about quoted rates. Make sure that rates ore given for the type of loan you are interested in and qualify for. In other words, if you are looking for a construction loan, don’t compare home improvement loan rates.
Shop for the Right Mortgage
Once you have decided what type of company to work with, they will help you determine the right mortgage program for you. They will present you with scenarios for both fixed and adjustable rate mortgages; for 15-20-30 year loan periods. They will also present loans for your specific financial and credit situation, for first time homebuyers, and for existing houses or new construction. They will also tell you what loan amount you qualify for, what your down payment and closing cost cash contribution should be, and what your maximum purchase price can be.
SHOP FOR YOUR HOUSE
Location Location Location
Take a drive around the communities that you are attracted to. Determine how close they are to good schools, shopping locations, and other things that are important to you. Be sure to note your commute to work from these areas noting accessibility to freeways and main roads. Once you narrow the areas you like, write down what your home should look like and features it should have – how many bedrooms, bathrooms, 2-story or ranch style, older home or newer construction. Once you decide these factors, you are ready to go shopping.
Real Estate Agents
Real estate agents can help you find what you are looking for. The MLS allows the agent to plug in your parameters – price, style, location, size, amenities – and identify several houses for you to look at. The agent will also present your offer to the seller, and help you negotiate contract items such as seller paid closing costs or repairs to be done prior to closing.
Once your loan is approved, the house is appraised and inspected, you will meet with a title company to sign the mortgage and title documents. You will provide a copy of a homeowners insurance policy. The seller will provide a transfer of title, a pest inspection, and general safety inspection or occupancy certificate, if required by your municipality. The title company will provide you an insurance policy protecting against old liens against the property. Once all documents are signed, the items are filed with the real estate department in your county, and YOU GET YOUR HOUSE KEYS!
Remember to do things like submit a change of address at the post office. And, if you are a renter, notify your landlord at least 30 days prior to moving. Also, remember that you will now be responsible for paying property taxes and homeowners insurance. If these items are not included with your mortgage payments, be sure to make billing and payment arrangements right away.
Fannie Mae http://www.fanniemae.com/homebuyers/index.jhtml;jsessionid=JNHAKUJNMMPBVJ2FQSHSFGI?&p=Overview
Freddie Mac http://www.freddiemac.com/corporate/buying_and_owning.html