In this edition of the Mortgage Minute we look at the 7 steps of the home buying process.
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Step #1: Getting Prepared
Not only do you need to gather all of the documentation that is going to be needed for your loan, but you also need to be ready with the maximum figure that you are willing to pay on a monthly basis.
The easiest way to do that is to do a monthly budget. (Download a worksheet here). List all the incoming money as well as all of the outgoing money. Don’t forget to make adjustments for the things that are going to change once you’re in your new home. For example: if you’re living in an apartment but now you’re moving to a single-family home then you need to make allowances for things like a higher water bill because after all, now you’ll have a lawn to water.
That budget should give you a good idea of how much you will actually have available to apply towards your new housing payment. Then you need to decide, do you need to give up some of the luxuries like your nights out on the town and subscription to different services so that you can afford a bit more home? Or are you happy with your target payment?
Step #2: The pre-approval
The second step of the home buying process is the pre-preapproval. During the pre-approval process your lender is going to check your credit to verify your credit scores and debts. Your employment, income and assets will also be verified. Based on all of that information, it will be determined how much you can actually be approved for and you will be given your target sales price. This step is crucial to a successful home search. Why? Check out the video and blog to find out.
Step #3: Finding a Realtor
Now, why do you need to work with a realtor? Well because they have a lot more information available at their fingertips than you and I do. When you’re online googling properties in your area and getting all sorts of information, a lot of it is actually out of date it. Realtors are able to give you a true list of properties available based on your criteria like the number of bedrooms, size, location, etc as well as the maximum price that you are working with. They an even set you up to receive real-time alerts when new properties hit the market.
Text NEEDAGENT to 44222 to get an introduction to a Realtor in your area
Step #4: Shopping process.
The next step of the home buying process is shopping. During this step you and your realtor will go out and look at all of the properties available that fall within your criteria and budget.
Step #5: Making an offer
Once you find the perfect home, your agent will prepare your offer. This is a BIG part of the home buying process. Your offer will include the amount that you’re willing to pay for the property, how quickly you are willing and able to close escrow as well as the amount of the earnest money deposit you will be providing. What does is an earnest money deposit? Check out the video more info.
Step #6: Escrow and financing
If your offer is accepted, the next step of the home buying process is the escrow process and financing.
What does being in escrow mean? It means that you are officially under contract to purchase a property. During this step you’ll complete the formal loan approval process which includes initial loan disclosures, an appraisal of the property and satisfying any pending underwriting conditions.
You may also want to order a home inspection. So why do both an appraisal and a home inspection? To find out the difference between the two, check out the video for more info.
Step #7: The closing process.
During the closing process you will sign your final legal loan documents in front of a notary.
You will also be providing any remaining funds necessary to complete your down payment and/or closing costs. In California, once your signed loan documents come back to the lender, your loan is funded then the paperwork is sent to be recorded. Once the county recorder’s office confirms the recording, the home is yours!
So there you have it, the seven steps of the home buying process
If you have any questions about that or any other mortgage or real estate related topic please reach out to me.
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