Buying a home is a big decision, and can seem overwhelming to anyone. You may be wondering if now is a good time to take on the responsibility, or if you can truly afford a home of your own. Buying a home may be the right choice for you. There are many considerations to think about before finalizing your decision to buy.
Common Reasons to BuyBenefits of homeownership include:
- Pride of Ownership
- Appreciation Potential
- Mortgage Interest Deductions
- Property Tax Deductions
- Potential Equity Growth
Home Purchase options…the choice is yours!Fixed-Rate Mortgages:
- 30 Year
- 25 Year
- 20 Year
- 15 Year
- 10 Year
The Purchase Process
Whether buying a home for the first time, buying a second home or considering investment property, you should take steps to protect your investment and financial health. No matter what type of property you’re eyeing, take these precautions as you navigate the purchase of any piece of real estate.
Understand Your Finances
Having a sound financial foundation and a down payment are crucial to buying a home. Ordering a credit report and knowing your credit score is a good first step. This will allow you to be aware of and address any issues on the report before you apply for a loan and serve as an accounting of your monthly debt obligations. A complete understanding of your financial situation will give you a good start in the buying process.
Determine a Down Payment
The more you contribute to a down payment, the lower your monthly mortgage payment. At Bridgeway Financial, our Mortgage Professionals can suggest ways to build the amount you have available and can help you review additional sources for down payments that you may not have considered. Determining how much money you will need for a down payment enables you to be prepared to buy when you find the right home.
Prequalification assures that you will be prepared to purchase when you find the right home. It also helps you strengthen your position when negotiating with the seller as they will know that you are a qualified buyer. A Bridgeway Financial Professional can help you prequalify now.
Select a Real Estate Agent and Find a Home
Every real estate market is different. An experienced real estate agent can help you select the right home and guide you through the purchase process.
Make an Offer
After finding the perfect home, you will need to consider how much to offer, the amount of the loan you will need, the terms of the loan, and when you would like the loan process to be completed--also referred to as "closing." Making an offer is generally done through a real estate agent. The agent will work on your behalf to negotiate with the seller or seller’s agent.
Loan Processing Period
Once the offer has been accepted and the terms of the purchase have been agreed upon, you will enter the loan processing period--a time when the legal and financial processes of purchasing a home take place. During the loan processing period, you will work closely with your Bridgeway Financial Professional. You’ll receive guidance regarding inspections, appraisals, and other deadlines all of which are required to ensure a smooth and timely closing.
Closing and Funding
Once the legal and financial processes are completed, you are ready for your loan to "close." Closing (also called "Settlement," or in some states, "Escrow") is the date you sign your final paperwork. Typically your real estate agent will coordinate a time and date convenient for you, the Seller, and the escrow or title companies. Funding occurs when all papers have been signed, all conditions have been met, and the Seller and other parties are paid. On a purchase, funding typically occurs on the day of the closing or on the next business day.
Once all contracts have been signed and the loan has funded, you will receive the keys to your new home. Whether you intend to move in immediately, or do work to prepare it for you, the home is now officially yours!
Buying a home is a rewarding experience, but it’s also a big financial commitment – especially if this is your first home. These useful tips can help you make the right choices from start to finish.
Keep your credit looking sharp
We want to offer the best interest rates and terms possible, so it’s important for you to manage your credit responsibly during the months before you buy a home. If you open new accounts, move large sums of money from one bank account to another or max out your credit cards, your credit scores will likely be negatively affected. So be sure to avoid any of those activities until you’re settled in your new home.
Add up the true costs of a home before you buy
Keep in mind that a home’s purchase price doesn’t include the costs you’ll incur after move-in. For example, if you buy an older home, you may find yourself paying more for homeowner’s insurance. Buying a condo or townhome, or a home located in a subdivision? Be sure to ask about homeowner’s association (HOA) fees and dues. You’ll also need to factor in the annual costs of maintaining your home.
Get pre-approved for your loan before you shop
While it’s smart to be pre-qualified for financing, it’s smarter to get pre-approved. Realtors® and home sellers will know that we’ve already reviewed your finances and have decided how much we can responsibly lend you. Being pre-approved can also save time, as you can concentrate on viewing the properties within the price range set by your pre-approval.
Remember, you’re buying a house – not dating it
We all know how easy it is to fall in love with a house, especially if it looks just like the home you’ve always dreamed of. But if you make a major purchase decision based on your emotions, you’ll risk an expensive heartbreak. Before you commit, make sure your new home is a sound investment that fits your budget, with no major structural problems or hidden expenses.
Get a good education about your new location
If you’re planning to buy in an unfamiliar neighborhood, check out the local public schools before you buy – even if you don’t have school-age children. A property in a sought-after school district may be worth considerably more when it’s time to sell. And if you’ll be driving to work, get up early and test-drive your potential commutes from different neighborhoods before making your choice. You may discover that the shortest commute isn’t the fastest.
Can I get my loan approved before I start shopping for a home?
Yes! We offer both pre-qualification and pre-approval services. If you’re looking for the fastest route to closing, our pre-approval program helps get the paperwork out of the way first. Once you’re pre-approved, you’ll have a real advantage over others in a hot real estate market and sellers will know you’re serious! Pre-approval also means you can focus on the enjoyment of shopping for a home.
How much house I can afford?
This depends mostly on the loan program you decide to go with. There are a wide range of programs that fit a variety of lifestyles and needs. Each will offer different rates and terms, and have different requirements for down payment amount, credit and income. Speaking to one of our mortgage advisors will help you narrow down your options and determine the price you can afford.
At Bridgeway Financial, we will help you sort your financial information to help you figure the price range in line with your budget. We will typically look at your income, credit, debt and assets. Your assets will show how much money you have for a down payment, closing fees, points and other costs you may need to pay to close your loan.
In addition, be sure to ask if there are any local or state down payment assistance programs that you may be able to qualify for.
Getting pre-approved is the best way to find out what loan programs you qualify for, and how much you’ll be able to afford within those programs. A pre-approval will be provided by Bridgeway Financial at no cost.
What’s the difference between pre-qualification and pre-approval?
Simply speaking, pre-approval is a more formal process and is a conditional agreement between you and your lender, whereas pre-qualification is an informal overview and discussion about your finances and ability to obtain a loan.
During the pre-approval process, your income, assets and credit will be documented and verified. This will help you in the home buying process because sellers and real estate agents take home buyers with a mortgage pre-approval more seriously, and may give you an advantage. It can also help you get connected to a real estate agent more quickly, as some won’t work with home buyers without a pre-approval.
Pre-qualification will give you a good idea about what you can afford, including a loan amount estimate. At Bridgeway Financial, both of these processes can be accomplished over the phone.
How much money do I need to buy a house?
This all depends on the price of the home you want to buy. Standard conventional financing generally requires at least a 5 percent down payment, but there are other conventional loan products available that allow a 3 percent down payment for first time home buyers. Our Federal Housing Administration program allows home buyers to put just 3.5 percent down. Our VA home loans have $0 down for those Veteran buyers who qualify.
There are other costs beyond the down payment, though. You’ll need to factor in closing costs, homeowners insurance, pre-paid interest and property taxes. If you want a better idea of how much you’ll need, reach out to one of our mortgage advisors.
Is there anything I should avoid doing before applying for a loan?
Yes! We strongly suggest that you don’t make any major changes in your current banking or spending habits, such as opening new credit accounts or making large withdrawals. A job change can also adversely affect your application, so you may want to postpone your next career move until you’re settled in your new home.
What information do I need to provide to obtain a purchase loan?
We’ll need to see some income-related information, such as:
- Signed Purchase Agreement
- Last 2 years Tax Returns
- 2 years W-2 forms on all borrowers and current paystub
- 12 months cancelled checks for verification of rent/mortgage
- 2 months copies of personal bank statements
- Asset Statement (401K, Brokerage Accounts, Mutual Funds, Stocks, etc)
- Signed loan application
- Mortgage Statement or Coupons/rental agreements
- Borrower's signed authorization
- Driver's License and Social Security Card
- Self employed – two years federal tax returns with all schedules
- Name, address and account numbers for all deposit accounts and loans
- If applicable – divorce decree
- Name and address of landlord if renting
- Verification of support payments (income and expense)
This information will give us an idea of how much you can afford, and how much you already have that can go toward your down payment, closing costs and other funds needed to close the loan.
Depending on the underwriting review, you may need to provide some additional information.
How long does it take to buy a home?
It typically takes 30 to 60 days to make a purchase. It is this time period that dictates when your loan closes. This time period will be agreed upon by both you and the seller.
Do I need a home inspection?
This isn’t required but highly advised. Even though a home might look perfect on the outside, a home inspection will tell you if there are underlying concerns that may cause problems later on. A home inspection can show you if there are problems that may be costly and time-consuming to fix in the future. If there are, you can change your mind, or address the issues with the home seller. At the very least, a home inspection can give you peace of mind in your purchase.
What happens at the loan closing?
When it’s finally time to close the loan, you may meet at a designated settlement office such as a title company or attorney’s office. You will review and sign all documents in the presence of a notary.
You will also have to pay any remaining fees at the loan closing. This usually includes the down payments and closing costs, and other applicable fees. You have several options to make these payments, including:
- A certified check
- A cashier’s check
- Money wired to the title company
Your loan processor will walk you through the whole process and give you advice on what needs to be done next. Once all the fees are paid and the documents are recorded, the home is officially yours!
Can I do anything ahead of time to speed up the home loan process?
If you haven’t reviewed your credit reports in the last 12 months, you can request FREE copies from the three major credit agencies at www.annualcreditreport.com. Review each one carefully and request corrections if you spot any errors. This will help our staff obtain your correct credit score quickly when you apply for financing.