OK, so you want to buy a house? Now what? Well the first question you should ask is, Can you afford a house? So here are 10 steps every home buyer should take.
Step 1. Pull all your income documentation (2 Years Taxes Federal only, pay stubs, W-2's, 1099's, K-1, any 1120's or 1065's you may have) and plop it down in your home office, kitchen table or foot stool. Income for a mortgage loan is calculated by using gross income. Or your wages before taxes if you are a wage earners. If you are self employed, then we typically use tax returns to calculate your two year average earnings. We don't use Gross Income for this, but there are "add backs" to your income, or deductions we add back to your income calculation. That is why it is important to provide your mortgage professional with complete and accurate information at all times. Curious what an underwriter has to review?
Step 2. At this point, you should be investigating who you will contact to start your application process with. You will then send all the items collected in Step 1. to that person by fax, email, overnight, or pigeon if you are so inclined.
Step 3. Once your mortgage professional determines how much house you can afford you should begin your shopping. There are a million good sites both by Realtors and sites like www.Realtor.com and www.Zillow.com and search for houses in the price range you are looking for, in the neighborhoods and cities you'd like to live in. Your mortgage professional will give you and your Realtor (To be named later) a Pre-Approval, Pre-Qualification Letter or something similar to that. This letter will outline your approval amounts, terms, and your overall strength as a buyer. This letter will be shared with the Seller and Listing Agent when they consider your offer to purchase. There is never anything confidential on these letters.
Step 4. Once you determine if there are homes in your price range, in the areas you want to be in, you should begin interviewing Realtors. Find someone knowledgeable about the home buying process and someone that really knows the home buying process. Like choosing a mortgage lender, choosing a Realtor, should always include a large consideration of experience. There is just no replacing real world experience.
And let's not forget this is what may amount to the largest financial decision of your life.
Step 5. OK, We've got a Realtor and a Lender. Now you are going to get even more professionals involved. From home inspectors, to title and escrow, to home warranty to hazard insurance. You are going to need A LOT of other people involved in this home buying process. This is where your lender and realtor can provide a bunch of help. If experienced, they will have referral partners for just about every product you need and their prices are going to be competitive. If you are trusting them with finding and financing your home. You will most likely be able to trust their referrals. But with everything - get on the internet and double check stuff. It can't hurt. Be educated about the things you know and Be educated on the things you don't. If there is ever ANYTHING that you don't understand... Call a time-out and make someone explain it to you.
Step 6. You're Approved! So at this point, you are really only Pre-Approved. You've got a Realtor, You've got a Lender--- Well go find a house already!!
Step 7. You've Found It!! The house of your dreams. It's got everything.... Well you better believe that everyone else wants it then too! Time to get your offer in quick. Your Lender prepares a specific pre approval letter geared to the house you want and the offer price your Realtor will make. This is critical time. Do you offer high or lower than list? Do you offer a higher down payment to look stronger? These are items your experienced Realtor will help guide you though.
Step 8. The Offer. You did it! The offer is in. You went list, you feel good. Your Realtor is getting good feedback - and sure enough they accepted. You are in escrow. You've written your deposit check already. It better be from an account where the money was seasoned for a couple months. Now your lender will have another list of items they will need from you. Remember Lending is paper intensive. The best way to deal with this amount of paper to BE ORGANIZED. Have a file. Have it organized. Gather and keep all documents together at all times. Take them to work with you. Remember a smart phone takes pictures. A great way to get pictures of drivers licenses and social security cards to your lender.
Step 9. In Escrow = In Hell - Lean on your Realtor and Lender when you are in escrow. They will be a guiding beacon of light in a time that will feel very dark at times. There is always a lot of back and forth and few fees you will usually have to advance. Typically the escrow deposit, appraisal fee, home inspection fee, homeowners association certifications, then of course the remainder of your down payment and fees. Although you can usually covers all your closing costs with the price of the new mortgage - just ask a seasoned vet how to do that
Step 10. Closing you are there. There is usually a lots of hustle around your closing date. There could be a rate lock set to expire, a credit report that will need to be run again. Always an updated pay stub and bank statement condition it seems....But if you stay on top of everything and respond to requests quickly, you should get your loan documents to the table in a timely manner. Make sure your drivers license or ID is updated and current for your notary and relax your hand for a lot of signatures. You'll feel like a rockstar by the time we are through. Once done your docs get sent to a bunch of different places (county recorder, lender funding department, title, etc.) and your loan is prepared to fund. Once funding occurs you are aren't the actual owned until "we record" a term basically noting the deed transferring title has been recorded with the county...At that point you are a homeowner. A good Realtor and Lender can help even after closing. You may have questions about payments, home owner repairs, moving, what have you. Chances are your professionals will have the answers to the questions you have. We've seen it all as experienced real estate and mortgage professionals.
And congratulations you now own a house!
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