The Home Buying Process Step by Step
One of the most significant decisions that anyone can make in their life is purchasing a home. Before you start the home buying process and apply for a mortgage, get acquainted with the steps to buying a home. Follow these steps to familiarize yourself with standard terms and milestones, so you understand what to know before buying a house. We will guide you through the process to ensure that you are adequately preparing before you apply for a mortgage.
Step 1: Common Mortgage Terms
Whether you’re purchasing your first home or already have a mortgage, there are a lot of terms to learn and concepts to know. These standard terms will help you understand some of the mortgage terms that you might encounter and what role they play in the mortgage process.
Step 2: Check Your Credit Score
Lenders use a credit score as one resource to determine an interest rate. Establishing a good credit score early on may make it easier to get approved for a loan in the future.
It is essential to understand your annual household income and average monthly expenses to determine a manageable monthly mortgage payment. Understanding how much you can afford will also help you narrow down your property search.
Step 4: Find the Right Mortgage Lender
Choosing the right mortgage lender isn’t always about getting the lowest rate. Many people spend countless hours comparing rate quotes from different mortgage lenders, but often overlook other critical factors that will help determine whether their entire mortgage experience is positive.
Step 5: Get Pre-Approved
A pre-approval also helps you know in advance how much house you can afford. Your financial information will be examined and used to determine what loan you qualify for and for how much. A pre-approval can also aid in negotiating power when making a purchase offer.
Step 6: House Hunting
Once you have been pre-approved and have a specific price range in mind, it is time to start house hunting. Working with a real estate agent can help make this part of the process less frustrating!
After going through the previous steps of the mortgage process, it’s time to get ready to apply for a loan and gather all documentation needed to complete the process!
Step 8: Get a Home Inspection
A home inspection will help you evaluate whether you want the seller to fix anything on the property before closing the sale. During this time, a title examination is also performed to determine whether any liens exist on the property.
Step 9: Get an Appraisal
Mortgage lenders require an appraisal, and some may even need two. By knowing the actual value of the home, you are protected from overpaying for a property.
Step 10: Get a Loan Decision
When the inspection and appraisal are complete, the lender will approve or deny the loan. The loan approval is dependent on any additional documentation and/or actions. In some cases, a counteroffer may happen with alternative loan options.
Step 11: Closing
Schedule a closing date to finalize your mortgage, in which you will review and sign all necessary documents. Your mortgage lender will thoroughly explain all documents to you, ensuring that you understand what you are signing and the terms you agree to for this process.