FAQ
1. The first step in the process is to start with homebuyer education.
This should consist of a HUD approved first time homebuyers workshop, coupled with an individual session with a housing counselor. The workshop will give you a solid foundation for the entire process; starting with financing, home selection, negotiation, closing and finally keeping your new home. There is a wealth of information to be gained from the industry professionals that speak at each session. The individual sessions with the counselor will be specific to your individual situation. The discussion will center around credit, employment, budget and savings.
2. The most important thing to do, after you have completed your counseling, is to is to speak with a lender. Why? Well, you need to find out:
- What loan product fits your needs.
- How much house you can afford. This will take into account your current income, debt ratio & cash availability.
Having this initial conversation with a lender before looking at homes will ensure that when you find the home that suits you best, you are ready to move forward with the process of making it yours. Buyers who wait to talk to a lender until after they have found the home of their choice risk losing that home to another buyer who has already done their homework.
3. Pre-Approval vs. Pre-Qualification
- A pre-qualification can be done by anyone, and most lenders no longer offer this type of thing. Basically a credit check is done to be sure your score is sufficient, and a verbal accounting of your income vs. debt is taken to be sure your ratio is at a level that would allow you to afford a monthly mortgage payment.
- A pre-approval is obtained from your lender by taking the prequalification process a step further with verification of your income through submission of your last two years tax returns, your last two months paystubs, and your last two months bank statements.
It may sound like a lot of work just to get ready to look at homes, but serious buyers know that they will need to go through this step anyway. Pre-approvals are what sellers are looking for from someone who presents an offer to buy their property.
4. FINALLY! The search for your new home begins.
- Have a conversation with your Agent about your wants and needs in a home, your intended time frame, your current living situation, and any future life-changing events you anticipate.
- Check Homesdatabase.com and choose the homes you want to visit.
- Visit homes with your Agent so they can offer advice and guidance.
- Find the home that suits you best and move forward with your purchase.
5. When you are ready to make an offer you will need 2 things:
- That pre-approval letter from your lender.
- Earnest Money Deposit of 1-2% of the offer price. Remember your offer, if accepted, is a BINDING CONTRACT. You are showing the seller that you are serious by offering the Earnest Money Deposit up front. Your deposit is accounted for at settlement, so don’t worry that you are paying anything above the agreed purchase price.
6. Negotiate any counter offers from the seller until everyone is comfortable and happy and the sales agreement is signed.
Believe it or not, you are now only part of the way through the home buying process. During your contract (escrow) period for the next 45 to 60 days (or longer) your agent will be working hard to manage all of the players involved in your home purchase transaction. These include your lender with their loan processors and underwriters, the title company, the sellers and their agent, any home inspectors, appraisers, surveyors, insurance companies, etc. It is only when everything has been completed that settlement occurs, and you receive the keys to your new home.
