Great article, very helpful. I love how you mention getting both of the partners’ credit scores in shape and saving money for a down payment. You have to start preparing for a new home long before you actually buy one. My husband and I have been working towards it for a few years, and we are finally ready to start looking! I am so excited and nervous at the same time!
Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18 percent to 22 percent. Equity loan interest is often much less and it is deductible. For many homeowners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home's equity for a variety of reasons such as home improvement, college, medical or starting a new business. Some state laws restrict home equity loans.
Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.
Realize it will be an emotional process. This tip goes for first-time homebuyers especially, Lewis said. Your emotions in the process can range from the excitement of finding a home, the anxiety tied to making an offer or the disappointment of not getting that house. "When you go into the process knowing that you're going to have these huge emotional ups and downs, you can weather them more easily," Lewis said.
What to do instead: Have a frank discussion with anyone who offers money as a gift toward your down payment about how much they are offering and when you’ll receive the money. Make a copy of the check or electronic transfer showing how and when the money traded hands from the gift donor to you. Lenders will verify this through bank statements and a signed gift letter.

Before you head out home buying, you should seek pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies. Each mortgage lender will scrutinize your financial background—such as your debt-to-income ratio and assets—and use this info to determine whether they're willing to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range. And that's good, since a purchase price that's beyond your financial reach will make you sweat your mortgage payment and puts you at risk of defaulting on your loan.
Ask your real estate agent for information on crime rates and the quality of schools around your prospective neighborhoods. Calculate your new commute times to see if they seem manageable. Visit the neighborhood at different times and days to check for traffic conditions, noise levels, and if people are comfortable being outdoors. Only choose a neighborhood that you and your family feel good about.
Homeowners insurance and property taxes very based on your geographic location. Florida has notoriously high homeowner's insurance rates, where they average $161.08 per month. In Idaho and Wisconsin, rates are a bit lower, averaging below $50 per month, according to Value Penguin. Property taxes average higher in New Jersey, New Hampshire, Texas and Wisconsin and they're lower in Louisiana, Hawaii, and Alabama.
Once the offer has been approved, the buyer will need to secure the mortgage. This is done by complete the mortgage application. If a person has not been pre-approved or pre-qualified, it will likely take longer to complete this process. Ideally, a buyer should "shop around" for the best rates and terms. Most buyers choose fixed rates rather than adjustable rates.
Seller wants to sell his house and Buyer wants to buy Seller’s house. Buyer isn’t a millionaire, so Buyer needs to get help from the Lender (bank) to finance this big purchase. Lender agrees to give Buyer a loan under certain conditions (these terms are always advantageous to the Lender so the Buyer must read carefully). Seller and Buyer go through negotiations until they reach the most important substantive terms of their agreement (usually this is the price and a few other things). After Seller and Buyer have an agreement in writing, the closing process begins. The Seller and Buyer need to do their own due diligence to make sure that this deal is a good idea for each of them. Additionally, the Lender has to make sure the property is valued as it should be and that the Buyer will most likely keep its promise to pay the mortgage. After all parties involved – the Seller, Buyer, and the Lender – do their due diligence, they can begin to sign papers and transfer the property. However, if there are any hiccups with any of the parties, the deal may be called off. Otherwise, at closing, title to the property is transferred and the deal is complete.
There are rules lenders follow to determine what you can borrow, such as the 28/36 rule, which says that a homeowner should spend no more than 28 percent of their gross monthly income on housing expenses, and no more than 36 percent on overall debt. But buying a home also comes with significant upfront costs, such as the down payment and closing costs, so you’ll want to make sure you have savings left for emergencies and other unexpected expenses after you close on your new home.
Qualifying for a loan isn’t a guarantee your loan will eventually be funded: Underwriting guidelines shift, lender risk-analysis changes and investor markets can alter. “I have had clients who signed loan and escrow documents, and 24 to 48 hours before they were supposed to close were notified the lender froze funding on their loan program,” says Recchia. Having a second lender that has already qualified you for a mortgage gives you an alternate way to keep the process on, or close to, schedule
“The time to confirm that the Bank of Mom and Dad is ready, willing and able to provide you with help for your down payment is before you start home shopping,” says Dana Scanlon, a realtor with Keller Williams Capital Properties in Bethesda, Maryland. “If a buyer ratifies a contract to purchase a home with an understanding that they will be getting gift money, and the gift money fails to materialize, they can lose their earnest money deposit.”
Right from an escrow account to real estate attorney, all involved services and entities cost money which can snowball into a big amount. Many such services take advantage of consumers' ignorance by charging high fees. Junk fees, a series of charges that a lender imposes at the closing of a mortgage and is often unexpected by the borrower and not clearly explained by the lender, are a big cost. They include items like administrative fees, application review fees, appraisal review fees, ancillary fees, processing fees and settlement fees. Even fees for legitimate closing services can be inflated. If you're willing to speak up and stand your ground, you can usually get junk fees and other charges eliminated or at least reduced.
Now you're getting into serious home buying territory. Once a bank or mortgage lender gives you a price range for a home mortgage, you can go ahead and attempt to get pre-approved for a home loan. In a pre-approval scenario, a mortgage lender will dig deeper into your personal finances. You'll fill out a mortgage application (and pay a fee to do so), undergo an extensive credit check and answer any questions a mortgage lender may have about your ability to repay a mortgage on time, and in full. If you're approved, you'll receive a conditional commitment from a mortgage lender to green light a home loan for a specific loan amount and with a specific interest rate range. A pre-approval document from a lender is pure gold for a home buyer, as it shows a demonstrated ability to procure an actual mortgage, and shows a home seller that you're a serious buyer.
Great article, very helpful. I love how you mention getting both of the partners’ credit scores in shape and saving money for a down payment. You have to start preparing for a new home long before you actually buy one. My husband and I have been working towards it for a few years, and we are finally ready to start looking! I am so excited and nervous at the same time!

Many realtors will not spend time with clients who haven't clarified how much they can afford to spend. And in most instances, sellers will not even entertain an offer that’s not accompanied with a mortgage pre-approval. That's why – if you don't have all cash (how many first-time buyers do do?) – your next step is talking to a lender and/or mortgage broker.
How to avoid this mistake: Talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before you start to seriously shop for a place. The pre-qualification or preapproval process involves a review of your income and expenses, and it can make your bid more competitive because you’ll be able to show sellers that you can back up your offer.
Disclaimer: NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. Pre-qualified offers are not binding. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.
×