From this chronological, step-by-step explanation of the home-buying process, you will learn everything you should be thinking about and doing at each point of the process. Sure, the process may still be difficult, stressful and draining at times, but at least you’ll know what to expect and understand what’s happening at every point along the way. You don’t have to rent forever if you don’t want to. (For resources on deciding if you’re ready to be a homeowner, see To Rent or Buy? The Financial Issues and To Rent or Buy? There’s More to It Than Money.)
| |RateShield Approval locks your initial interest rate for up to 90 days on 30-year conventional, FHA and VA fixed-rate purchase loan products. Your exact interest rate will depend on the date you lock your rate. Once you submit your signed purchase agreement, we’ll compare your rate to our published rates for that date and re-lock your interest rate at the lower of the two rates for an additional 40 to 60 days. Quicken Loans reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Quicken Loans. This is not a commitment to lend. Additional conditions or exclusions may apply.
Following a decline in homeownership after the Great Recession, homeownership rates nationwide are above 64 percent as of the first quarter of 2018, according to the U.S. Census Bureau. While homeownership has not returned to its historical peak of 69.2 percent in 2004, it is edging upward again after hitting a 50-year low in mid-2016 at 62.9 percent.
Some other things home buyers can do to turbocharge their scores is to bring any past-due credit card balances current and stop using credit cards altogether — but don’t close the accounts once you pay off the balance. It looks good for you to have established and available credit, as long as you don’t use it. That means keep that Old Navy card and Visa gas card open, even if you no longer use them. The longer you’ve had the account, the more it enhances your score.
If a lender sees some late payments or other blemishes in your credit report, this can lower your odds of getting a loan with a great interest rate, or perhaps even jeopardize your chances of getting any loan at all. So, it's essential to know your score, and take steps now if necessary to bring it up to snuff. Here's more on how to check your credit score and what number is best to buy a home.
When you’ve made an offer that’s within your budget, your Realtor will prepare the paperwork for you to sign and will submit it, along with your pre-approval letter and your earnest money, which is a good-faith deposit of about 1 percent of the purchase price. All this usually happens quickly, especially if other buyers are interested in the same property.
"Many first-time homebuyers will begin to look at properties prior to speaking with a lender, but this is a huge no-no," says Colin McDonald, a licensed real estate agent at Berkshire Hathaway HomeServices Blake, in Delmar, NY. "Most Realtors or sellers will not start to show houses to buyers until they've actually spoken with a lender and can provide a pre-qualification letter."
Buying a home is one of the biggest financial decisions you’ll make in your life — and one of the largest sources of stress for many first-time buyers is the financing process. Unless you’ve done a ton of research, getting a mortgage can feel confusing or even a bit overwhelming. The good news is you can have a smoother and less stressful experience by avoiding these common mistakes:
Once the buyer has found the perfect home, it is time to make an offer on the property. This is an area in which a real estate agent is invaluable. He or she will base the offer price off of comparable homes that have sold recently in the area. The agent will draft a contract that is agreeable to the home buyer. The contract will include the price of the offer, as well as terms that the seller and the buyer will need to meet in order to achieve a successful transaction. The agent will ensure that the contract meets all of the necessary legal requirements.
If your available cash doesn't cover your needs, you have several options. First-time homebuyers can withdraw up to $10,000 without penalty from an Individual Retirement Account, if you have one, though you must pay taxes on the amount. You can also receive a cash gift of up to $15,000 a year from each of your parents without triggering a gift tax.
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!
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.
To begin, check your credit report to make sure there are no errors on it. Credit reports from each of the three major credit reporting agencies: Equifax, Experian and TransUnion, are available for free once every 12 months. If there are errors, then contact each agency and report the mistake. You can also check your credit score for free with Bankrate. The goal is to raise your credit score before you shop for mortgages.