Happy Fall, As your trusted real estate agents, we thought it worth bringing your attention to the state of the house sales market.We have been used to homes coming on the market and
First Time Homebuyers - A 12 Month Guide To Your New Home
A real yard, a home to decorate any way you would like and bigger rooms and closets. Your dream of making a move from renting to owning is exciting to most first-time homebuyers. It can also be harder to navigate than most expect. The following 12 month checklist will help most first-time homebuyers side step the common mistakes, for example: paying too high of an interest rate or picking the wrong home.
12 MONTHS OUT
Check Your Credit Scores. Get a copy of your credit report from a reputable source. We recommend annualcreditreport.com. The three credit bureaus are Equifax, Experian and TransUnion, and are required to give a free credit report once a year. If you check this ahead of time, you can avoid last minute mistakes and have them corrected before you make an offer.
Determine How Much You Can Afford. Meet with a lender of your choice to find out how you can afford and what type of home you would like to own. Your lender will look for a total debt load of now more than 43% of your gross monthly income. This is called debt-to-income ratio. The ratio will include your future mortgage and any other debt you may have. This will include credit card debt, auto loan and student loans.
If you would like to look at this before you meet with a lender, there are plenty of calculators on the web that can help you with this such as this one.
Make A Down Payment Plan. Most conventional loans do require a 20% down payment. If can afford to do this, do it. Your loan will cost less and you will get a lower interest rate. Don’t worry if you can do the full 20% there are programs that can help. FHA offer loans with as little as 3.5% down payment. It will though require a Mortgage Insurance Premium, which will increase your monthly payment. The US Department of Housing and Urban Development (HUD) can provide you a list of nonprofit home buying programs by state. Check with Credit Unions and your employer, they may even have assistance programs to help you.
If you do plan a savings strategy, keep in mind that the banks like to see stable funds. They like to see the funds stay in your account for 60 to 90 days before applying for your loan. You can always use a financial gift from a family member or bonus you may receive closer to the time of your purchase.
9 MONTHS OUT
Prioritize What You Want Most in Your New Home. Deciding what is most important to you in your new home, for example: how far from work are you? A big yard? Open floor plan? A quiet street with kids or no kids? This will help you make a better decision on what type of home you would like to buy. Remember, it’s a joint decision and it’s better to work this out ahead of time. Make a list of must haves and what trade-offs you are willing to remove.
Research Neighborhoods and Start Visiting Open Houses. This is where the fun begins. Use a property search site such as realtor.com to help you find out about neighborhoods, public transportation and cost of living.
Start visiting open houses to get an idea of the type of homes in your price range and which neighborhoods you like the most. Seeing homes that you like will keep you motivated to continue reducing your debt and saving for your down payment. You may also use our home search at Madison Home Search to search for homes and save your favorites.
Budget for Miscellaneous Home buying Expenses. Some of the miscellaneous upfront costs could or will include: a home inspection, title search, property survey and home insurance are just a few examples. Cost can vary by location, but you can budget a couple hundred dollars. You can start saving now for these expenses.
Start a Home Maintenance Account. A good habit to start now is putting a little aside each month. This will help fund any maintenance issues, repairs and home emergencies that may arise. It’s enough to have to call a plumber, but to pay credit card interest can make another unnecessary monthly payment.
6 MONTHS OUT
Collect your Loan Paperwork. Banks require specific paperwork when it comes to mortgage loans. Below is a list of what they will want:
W-2 Forms – or business tax returns if you are self-employed – for at least 2 to 3 years
Personal tax returns for the past 2 to 3 years
Your most recent pay stubs
Credit Card and all loan statements
Your bank statements
Addresses for the past 5 to 7 years
Brokerage account statements for the most recent 2 to 4 months
Most recent retirement account statements, such as 401 (k)
If you start collecting these documents, it can lessen the stress when it is time to get your loan.
Meet Your Lender and Buyers Agent. Set up an appointment with one of our experienced buyer's agents. A Buyers Specialist will work in your best interest and will try to find you the right property regardless of the seller’s agent. A Buyer's agent will also work you all the way through the closing process. And best yet, a buyer's agent is FREE to you. They are paid by the seller at closing.
Meet with your lender. We highly recommend local lenders - it's best to avoid online lenders. It is important that you look for a Mortgage Broker that will look for competitive loan rate for you among multiple lenders. A bank can only look at their own products.
We work with some excellent lenders who have always treated out clients well. Let us know if you need recommendations.
3 MONTHS OUT
Get pre-approved for your loan. If you have been following this timeline, your credit scores, paperwork, and down payment should be on track. You have researched your lenders and buyer agents. Now it is time to start working with them. Now is the time to get pre-approved for a mortgage.
Make an appointment with your lender and bring all your paperwork. They will run a credit check on you and will let you know how much of a loan you’re approved for. It at times make sense to borrow less than the maximum amount the lender allows. This will allow you to live comfortably. Draw up a budget that includes mortgage payments, insurance, maintenance and everything you may have going on in your life.
Start Shopping for Your New Home. Now that you are pre-approved, start shopping. Your Buyer’s Agent will be able to target homes in your price range. This way you won’t waste your time looking for homes you can’t afford.
1-2 MONTHS OUT
Make an Offer on a Home. It could take 4 to 6 weeks to close on a home. If you have a firm move out date, make sure to leave enough time to deal with any problems that may arise to delay closing.
Get a Home Inspection. One of the first things you will need to do after you get an accepted offer is to have a home inspector look at the property. If the home inspector finds something that may need repairs, that is an example of something that could delay closing.
In The Last Month
Triple Check that all your financial documents are in order and review all lending documents before closing. The home stretch! If you have been keeping your documents up to date and your down payment is in reserve, the last final steps are the easiest. Reviewing your mortgage documents can be the most difficult. Your agent will help you through them.
Get Insurance on Your New Home. Don’t forget to secure your insurance before closing. You will need to bring proof of insurance to closing.
Do a Final Walk-through. You will usually do a final walk-through of your new home a day or two before closing. This is to make sure the home is in the condition you and the seller agreed upon.
Get a Cashier’s Check or Bank Wire for the Cash Needed at Closing. Make sure to get an exact amount of cash need for closing. You should get that a few days before closing. Once you have this you can secure a cashier’s check or arrange to have the money wired. Personal checks are not accepted.
That is it! Congratulations on Your New Home!
Over 24 years I have helped thousands of families to make home moves. That is 25 years of experience and expertise. I have also continued learning and sharpening the "tools" of my trade. I've see....
Latest Blog Posts
A real yard, a home to decorate any way you would like and bigger rooms and closets. Your dream of making a move from renting to owning is exciting to most first-time homebuyers. It can