1. Check your credit report
Before you decide to let a lender check your credit, look at your own reports. You can do this for free using www.annualcreditreport.com, and doing so before your mortgage application is essential. If you see any mistakes, whether they be errors or outdated information, you can get these items corrected before your lender requests your credit report and score. You might also see items on your report that are legitimate, but you had forgotten about it. The more you know in advance, the better off you’ll be when you fill out your mortgage application. The goal is to ensure your credit reports are accurate, up to date, and reflect positively on you.
2. Get pre-qualified for a mortgage
This is another area where many homebuyers make a mistake. If you start shopping for a home too soon, you’re likely to waste time looking at properties you might not be able to afford. In the worst-case scenario, you fall in love with a particular property and are eager to make an offer, only to find you can’t be approved for a mortgage in that amount.
Pre-qualifying means the lender gives a rough idea of whether you’ll be approved and approximately how much you can afford to borrow. This pre-qualification isn’t a guarantee that you’ll be approved, and it doesn’t mean you have to borrow from that particular lender. It’s just a way of getting a lender to tell you realistically what your price range should be.
Once you have this pre-qualification, then you can start looking for a home without being in danger of overspending; you can avoid looking at homes that might be outside of your true price range. We always caution people not to borrow the maximum amount they qualify for. It’s wiser to stay well within your means, and only borrow what you can comfortably afford.
4. Schedule a Consultation with one of our agents
Our agents will look out for your best interests, making sure you find the best home for your situation, and that your consumer rights are protected during the negotiating process. You will also need other professional help along the way, like home inspectors, insurance companies, contractors, etc. Our agents will be able to make informed recommendations that you can trust more than an online review. It’s VERY rare for a home buyer to navigate the home buying process without a real estate agent. Your agent is paid out of the proceeds of the sale, so their services are completely free of charge to you.
5. Shop for a mortgage
At this point, it’s okay to start shopping around for a mortgage. There are different types of home loans available so get help if you need it to figure out what your best option is. This is the step in the process where you officially fill out a mortgage application, so hopefully, you have already reviewed your credit and made any necessary corrections. The lender will give you a pre-approval for a particular amount and interest rate, so you’ll be able to hone in on the right property to buy. In a hot market, it may be necessary to make an offer fast and sellers give preference to buyers who are pre-approved. Pre-approval tells them that when it’s time to close, you will have the money. Also, do some comparison shopping for mortgage products, and compare the costs from one lender to the other. Make sure you let the lender know that you’ll be shopping for the best rates. They’ll want to put their best foot forward to win your business.
6. Shop for your home
Shopping for your home is the most exciting step in the entire process. However, it can also be the most frustrating step. In a good market, homes won’t stay available for long, so you might feel pressure to make offers quickly rather than lose a property. Try to strike the right balance; don’t move too quickly and pay more than you have to, and don’t go so slowly that every good property is snatched up before you make your offer. Our agents at Frost Realty will gladly help you weigh all of the considerations so that you’re able to make the most informed decision possible.
7. Get inspections
After you make a formal offer on a property and it is accepted by the seller, your lender and real estate agent will work with you to hire inspectors. You will want to know if there are any concerns about the property before you go forward, and your lender will not want to give you money for the purchase unless they know the property is sound. Besides the home inspector who checks out the electrical, heating & cooling, and plumbing systems, you may want secondary inspectors to check for insects, radon gas, mold, etc. The area you’re buying in will determine which specialists are needed to ensure you don’t have other problems. An older home might need more inspections that a newer home. Don’t skip any recommended inspections! Once you have the inspection report, you might want to amend your offer. If there are major repairs needed, you could request the seller complete them, or take some money off of the sale price for you to do the repairs yourself. Don’t turn this part of the process into a way to negotiate a lower price—the point of the inspections is to ensure the house is safe and in good repair.
8. Set up home insurance and utility services
Your mortgage lender will require home insurance. If there is a fire or other disaster, they will want to know that the mortgage will be repaid. You should also make sure the insurance you get is truly enough to cover any potential losses you could suffer. Some things, like flood damage, aren’t covered by traditional homeowners insurance, so you’ll want to get supplemental coverage if you need it. For utilities, the goal is to have services switched to your name on the same day as the loan closing or the next day. If these things don’t coincide, then the seller will want to shut off utilities altogether, and then you’ll have to arrange to have them turned back on in your name. This is a slow process that could leave your home without heating, cooling, running water, etc. The best way to handle utilities is to time things so that they’re never shut off, but transition smoothly from one owner to another.
9. The loan and home closing
The final paperwork to close on the home and the mortgage loan will involve more professionals, like title companies and potential attorneys. You’ll get a disclosure in advance that tells you what fees will be due at closing. All of this paperwork and fees are to be disclosed in advance and are a standard part of every mortgage transaction.
Don’t spend your last available cash on closing costs and fees. You’ve got one last big step to follow, and you’ll need some funds available to complete the process.
10. Time to move in!
Now that you’ve closed the loan, it’s time to move in. Using professional movers will make things go quicker and come with some protection from damage and the like but can get expensive. Moving in yourself will save you money, but involve extra time and stress. It’s important to do some quick repair work while the house is vacant before you move all of the furniture in. Do you need to have carpets cleaned? Patch drywall and paint? As you settle in, take the last steps to make the house truly yours: re-key the locks and change the garage door opener codes. Taking the steps toward homeownership in the right order will ensure you and your family are fully prepared and ready to create a lifetime of memories in your new home!