Buying Your First Home: The Process from Start to Finish

Buying Your First Home-The Process from Start to Finish-150x150There may come a time in your life when you decide it’s the right time to stop renting or living with your parents, and look for a place of your own. Whether you are looking for a house or an apartment, buying a home for the first time can be an intimidating process, and you are probably afraid not to make a mistake that will cost you more money or jeopardize your chances of becoming a home owner.

Finding the right home, obtaining a good mortgage loan, and moving into a new neighborhood are all steps necessary to becoming a home owner, but there’s nothing to be afraid about. By simply doing a little research, and getting to know all the steps, you will realize that this whole process is actually pretty straightforward. Here’s what the home buying process involves, from start to finish.

Find Out How Much You Can Afford to Pay

The first thing you need to do after you decide to buy a home is find out how much you can afford to spend on your first house or apartment. Having a budget is very beneficial, as it will help you in your search for a home, and it will keep you from spending more than you can afford, without even realizing it. Mortgage calculators can be very helpful in finding out how large of a monthly payment you can make and how big of a mortgage loan you can take out. Keep in mind that you will have to pay interest which, depending on several factors, can make your overall loan value much higher. Also, remember that you will probably have to make a hefty down payment and pay closing costs, which are also expensive.

One of the main factors that will affect how much you’ll be paying in interest is your credit score. You are entitled to one free credit report check per year, so you should make sure everything is in order before applying for a mortgage loan. The higher your credit score will be, the better mortgage loan and interest rate you will qualify for.

Find a Good Lender

The only way to find the right lender is by shopping around, asking your friends and family, or simply talking to various lenders. There’s a tough competition between lenders, so you would be surprised at how much some of them are willing to negotiate in order to get your business. Ask them plenty of questions in regards to the mortgage loans that they are offering, and only decide once you have found a lender that you feel comfortable with.

Once you have found a good lender, try to get pre-approved for a mortgage loan. This will make buying a home much faster once you find the right one, minimizing the chances that the seller will sell to someone else. Being pre-approved for a mortgage loan will also make you look more trustworthy in the eyes of the seller.

Find the Right Home

Knowing what you are looking for before you start to shop around for a home will surely help you narrow down your options, and find the right home faster. Depending on your budget, you might have to make sacrifices in certain areas, but you shouldn’t stop searching for a home until you find the one that is the closest to what you are looking for.

Besides looking at what the property has to offer, also pay close attention to the neighborhood that the home is located in, the proximity to schools or stores, and the length of your commute to and from work. All of these factors can help you better decide if that is the right home for you and give you more reason to negotiate.

Make an Offer

Most home sellers will set their asking price higher than the home is worth, which means that they are probably expecting you to make a lower offer. The best way of finding out how much you should offer is by looking at what comparable houses in the same or similar areas have sold for recently.

Once you have decided how much you want to offer, contact your real estate agent and proceed with making the offer. Most likely, the seller will make a counter-offer, but that doesn’t mean you cannot make a new offer. Going back and forth too much can cause problems, so it is better to meet the seller half way.

Obtain the Right Mortgage Loan

Depending on your budget, you will have to decide between a fixed-rate and an adjustable-rate mortgage loan as well as the loan term. If you can’t afford a large monthly payment, your best choice is to get a 30-year mortgage loan. However, you should keep in mind that the shorter the loan term is, the less you will be paying in interest overall.

You might also qualify for different types of loans that are designed to help those with lower incomes, such as an FHA or a VA loan. These types of loans are geared towards certain people, so you should do a little research before applying for one of these loans to be sure that you fit the criteria.

Close on Your New Home and Move In

Before closing on your mortgage loan, you should get a home inspection to make sure that there are no major issues with your new home. This is one place where you wouldn’t want to try to save money, because finding a problem like roof damage before it’s too late can save you a lot of money in the future. Closing costs will be fairly high, but you will only have to pay them once.

After everything is paid and signed, you can start to move in. You can use a moving company, or just do everything yourself with the help of your friends and family.

Buying a home is not a scary process once you get to know the basics. Of course, you can always encounter some unpleasant surprises along the way, but a little research goes a long way when buying your first home.

Tackle the Loan Closing Process with this Preparation Guide

Tackle the Loan Closing Process with this Preparation Guide-150x150The last step needed in order to become a home owner and secure a mortgage is the closing. The closing involves signing a number of documents and paying a few fees as well. This step can prove challenging and overwhelming for most people. Being prepared beforehand can make the loan closing less confusing and a much easier overall experience.

What is the Loan Closing?

When closing a loan, the ownership to a property is transferred from one individual to another, while the person who buys the property receives a mortgage loan. Loan closing is a fairly complicated process, and it involves key decisions that will save you or cost you money.

The closing takes place at the office of a closing agent with someone working for the lender or the title company. Sometimes the closing agent can be a lawyer that was hired by you or the lender. The closing agent’s job is to inform you of what documents need to be signed and collect all of the paperwork from the buyer, the seller, and the lender.

During the meeting with the closing agent, you will discuss and agree upon the terms of your mortgage, your loan will go into effect and you will receive the loan, and the ownership of the property is transferred to you. Completing all of these steps requires the reviewing and signing of several documents.

Who Attends the Loan Closing?

Depending on state law and local customs, several people will be involved in the loan closing. People who are usually involved in the sale of a property are the seller, his or her real estate agent, your real estate agent, and the closing agent, who will usually be an attorney or a closing officer who works for the lender. If you are buying a property together with a spouse or a partner, all the people whose names are on the mortgage will have to be present or have an appropriate representation. If you are buying a unit in a new development, such as an apartment complex, multiple homebuyers will be present at the closing. Sometimes the closing can be private with only you and the closing agent present.

You can also hire a real estate attorney to assist you with the closing. Some legal questions can’t be answered by the closing agent, so having a real estate attorney present is a good idea, especially if you are buying a property that is for sale by owner. Your real estate agent doesn’t receive the commission until the loan is closed, so having additional people represent you will make sure that your best interests are being protected. Hiring a real estate attorney may cost you some money, but it will help you avoid more expensive issues that could arise in the future.

What You Need to Provide

The closing agent and the lender will be responsible for getting most of the documents ready for your closing, but there are some that you will need to provide. One document that you will have to bring to the closing is your homeowner’s insurance policy and proof of payment. Many times the lender will need to take a look at your insurance policy before scheduling the closing.

Another document that you will have to bring to the closing is a check for all of the closing costs. You have the right to receive a copy of the HUD-1 Settlement Statement at least one day before the closing. All the fees that you will be required to pay should be negotiated before the closing.

Closing Costs

How much you will have to pay at closing depends on many factors, but here are some of the fees that you will need to cover before closing on the loan. You can find out from the lender how much this is going to cost you a few days before the closing.

  • Application fee. The application fee is determined when you apply for the mortgage loan, and it covers the processing of your application. This fee may include the property appraisal fee and the credit report cost.
  • Appraisal fee. Also normally charged when you apply for the mortgage loan, this fee represents the cost of an independent home appraisal.
  • Origination fee. Usually charged as a percentage of your mortgage loan, this fee covers the cost of processing your mortgage application and completing your loan.
  • Points. Points are fees that you pay to the lender in order to receive lower interest rates. Usually, a lender will offer you several mortgage loans with different interest rates. The lower the interest rates, the more you will have to pay on points. Points are also charged as a percentage of the mortgage loan. 1 point represents 1 percent of the loan value.

Documents that You Will Be Signing

During the closing process, you will have to sign several documents. Here are the most important ones:

  • HUD-1 Settlement Statement. A very important document, the HUD-1 Settlement Statement contains an itemized listing of fees charged at closing. This document will be signed by both the seller and the buyer, and it is also known as the closing statement.
  • Truth-in-Lending Statement. This paper contains the terms and conditions of your mortgage, including the APR and several other fees.
  • Mortgage note. This document is basically your promise that you will pay back the mortgage loan, repaying your debt with the lender. It also includes the penalties that the lender will charge if you fail to make your monthly mortgage payments on time.

The loan closing process may seem confusing, but it is your duty to inform yourself on all that this process entails and do your homework before buying a home. Not only will this make things easier for you when the time comes to close the loan, but it could also save you money. Seeking professional help from a real estate attorney is also a great way to make sure that your interests are protected and that you won’t have any unpleasant surprises with your mortgage loan in the future.

Finding a Mortgage Broker

Mortgage-BrokerGetting the best mortgage for your particular situation can be overwhelming, but if you find a mortgage broker or banker whom you trust they can help you with every decision. The key is trusting them. Someone that has been referred by a friend or family member would of course be the best of circumstances.

Some people may not have the luxury of knowing someone in the business or having a friend that has been through the home loan process. In that case, you can contact your local board of realtors or the National Association of Mortgage Brokers for a list mortgage brokers or bankers in your area. Definitely do your research on them and check references.

You want to find out first if they are licensed. This is extremely important. Find out how many lending institutions they do business with and how good their relationship is with that institution. This will allow you to have several choices in programs and rates that will suit you and your situation.

Find out what their fees are and how they are compensated for your loan. Ask the broker about the different loan programs they have access to and how they will work for you. Ask them why you should work with them over anyone else. They are well aware you have many options in this department.

mortgage brokerSome brokers may recommend specific programs because they get paid more on them. Make sure you either trust the broker or you have done your own research and homework on the specific programs. If you have bad credit most likely your mortgage rate is going to be higher than normal, but make sure your broker does not hide fees by raising your interest rate on you. This occurs more frequently with people whom do not have good credit.

Finally, be cautious of anyone that tells you exactly what you want to hear. Always remember, it is their job to sell you a program and they make money when they do. A good broker won’t force a particular program on you.