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Congratulations on your decision to move forward and purchase your first home! As everyone knows, owning a home is the American Dream. There are many benefits to owning your own home rather than renting, but as you are well aware there is a lot involved. You need to educate yourself on all your options, what to be prepared for and what to look out for. This website is designed to walk you hand-in-hand through every step of the process, from how to determine what you can afford all the way through closing the mortgage and moving into your new home. With this website you will have a complete roadmap with every tool you could possibly need to be thoroughly prepared. Many people feel intimidated and overwhelmed by the whole process but as long as you take a little time and prepare yourself it becomes an exciting process. After all, you are buying your first home. Enjoy yourself! Happy house hunting! Sincerely, The Staff at Homeland Lending
10 Steps to Buying Your First Home If you are like most people, you are probably asking yourself, “Okay, so where do I begin?” Here are the 10 steps of the process from start to finish:
1. Determine what you can afford The very first thing you need to do is write down all your monthly expenses, such as car, insurance and credit card payments as well as how much you spend every month on things like food, tuition and gas. Be sure to list ALL monthly expenses so you have a clear picture of what you are really spending every month. The easiest way to do this is simply fill out a Financial Worksheet on our website. The next thing you will need to do is determine what your expenses will be once you purchase your new home. For example, in addition to a mortgage payment you will also need to take into consideration property taxes, higher utility bills and homeowner’s insurance. To determine what your mortgage payment will be, use the Mortgage Payment Calculator on our website. Now divide your monthly income by your total monthly expenses, including your new mortgage payment, monthly property taxes and monthly homeowner’s insurance. This will give you what is known as your Debt-to-Income Ratio which every lender uses to qualify you. You need to make sure your Debt Ratio is below 50% in order to qualify for a mortgage. If your Debt Ratio is over 50% you either need to lower your price range, payoff some existing debt or maybe find a home with lower property taxes. 2. Determine where you want to live Believe it or not, the location of your home may be more important than the house itself. There are many things to consider when deciding where you want to live:
One thing you might want to consider is that you can always do some remodeling and make improvements to your home but you cannot move it. For this reason most buyers are willing to compromise on specific characteristics and preferences in order to purchase their home in the best location. 3. Get pre-qualified for a mortgage Your loan officer will need the following information to complete a mortgage application and get you pre-qualified:
Once your loan officer has a complete application they will pull your credit report (Please refer to the section on our website titled “Know Your Credit”). You will then receive a letter stating you have been pre-qualified which you will need to show to your realtor before they will begin showing you houses. Now that you have determined your price range and location it is time to begin looking for your dream home. The first thing to consider is what type or style of house you want. There are many different types and styles of houses, from ranch to colonial, bi-level to split level, Federal to Victorian and condominium to town house. Please refer to the section on our website titled “Types of Houses” for an explanation of each. Next, be certain to write down all specific characteristics you are looking for. For example, you might want a house with a pool or a fireplace, or maybe you are only interested in homes with large yards. Now you have narrowed down your search criteria considerably for your realtor because you now know:
Since you will most likely still be looking at quite a few homes, it is a good idea is to take notes on each house you look at, writing down all characteristics each does or does not have as well as pros (new construction, newly remodeled, etc.) and cons (needed repairs, tiny yard, etc.) you see while touring the home. An even better idea is to take pictures in addition to notes! Once you find a house you like it is time to make an offer. Consult with your realtor and look at other comparable homes listed for sale and ones that have recently sold in the immediate area to determine a reasonable offer. Keep in mind that current economic and housing crisis has created a fantastic buying opportunity for people like yourself. This is what we call a Buyer’s Market because the odds are in the buyer’s favor. Prices are at an all-time low so it is a perfect time to buy. You should definitely have an attorney representing you at this point. What you don’t know could end up hurting you. For example, the contract should definitely contain a Mortgage Contingency, which states if you are unable to obtain financing for whatever reason you are entitled to your deposit being returned to you. If the contract does not contain this clause and something unforeseen happens to prevent you from getting approved for a mortgage you will lose your entire down payment. At this point it is definitely a good idea to get a home inspection done by a licensed home inspector. Even if the house appears to be in great shape and even if it is new, there may be some hidden problems you need to know about before going any farther. There may be termite or water damage you don’t know about and even brand new homes may have structural problems due to poor construction. Again, what you don’t know may hurt you so take every precaution to protect yourself. Now you have found a home, placed your offer, the offer has been accepted by the seller and you have done an inspection. It is time to turn back to your loan officer and move forward with obtaining financing. You have already been pre-qualified for a mortgage, which simply means that according to the information you gave to the lender along with your credit report you qualify for a mortgage. Now it is time to send all the necessary paperwork to your loan officer to submit for approval. Here is a list of the items you will need to submit to the lender:
If self employed, you will need the following additional items:
Once you have submitted all these items to the lender and they have reviewed everything they will order an appraisal. When the appraisal is complete, the lender will review it and if there are no problems they will issue a clear-to-close. This simply means that you are approved for the mortgage and may head to closing. This whole process from submitting all your paperwork to getting the clear-to-close usually takes about three to four weeks. It is now time to go to your attorney’s office and sign all the paperwork for your mortgage. (One thing to keep in mind is New Jersey is a Marital State, which means if you are married and this property will be your primary residence your spouse will definitely need to be at the closing to sign a few things even if they are not on the mortgage or the Deed.) Once everything has been signed you will receive the keys to your new home! Time to celebrate! Although moving is not usually very fun, you should certainly enjoy this move because after all, you are now realizing the American Dream…you are moving into your own home! So do yourself a huge favor and be as prepared as possible to make the move as easy and pleasant as possible. Please refer to the section on our website titled “Moving” for helpful information and tips. |
