Buying a house is an exciting milestone in your life. And with it comes many questions about how to navigate the process and check all the boxes of getting from first inquiry to close.
The stages of buying a house can be broken down into smaller steps where additional decisions and considerations are made. Following the journey outlined below will ensure you’re prepared when the right house becomes available.
Beginning Your Home Buying Journey
Your journey starts somewhere, and while it might not necessarily be the most fun stage of buying a house, it’s the foundation of a process that sets the tone of your experience, so it’s important!
Choosing your lender, gathering documents and assessing your credit, familiarizing yourself with loan options, and getting pre-qualified is what should happen at this point in the process if you want a smooth, hassle-free experience when you find the perfect home.
Choosing the Right Lender
Choosing the right fit for you will be based on your unique situation and preferences. Take time to research and review lenders that align with your needs.
There are a few different types of mortgage lenders to consider. The traditional route is to go through a direct lender, like a credit union. There are benefits of choosing direct like the personal experience you gain by working with someone local. Your credit union will gladly walk you through financing options and explain documents and terms. A credit union lender is also easily accessible should you have a question.
Working with a mortgage broker is another choice. They are independent, licensed professionals who work with lenders and borrowers. They serve as matchmakers between the two. They charge a service fee for helping you secure a loan. While many choose to work with mortgage brokers, there could be potential conflicts of interest here that lead to higher fees and interest rates.
Gathering Your Documents
You will need to gather all relevant documentation regarding your request for a mortgage. These include pay stubs, W-2s, employment verification, W-9s, tax forms, business statements, among others needed as necessary. Make copies for your records and quick reference if any questions from your lender arise.
When providing this information, remember to send all files securely so your personal data is not compromised. Avoid email attachments and instead try faxing over a private IP, using an encrypted file transfer service, or dropping off documents in person.
Assess Your Credit
Your loan acceptance and interest rate will rely heavily on your credit. You’ll want to check your credit report for any errors or discrepancies. Once you know your credit situation, you can move forward with more confidence.
Another factor to think about is your debt-to-income ratio. This should be in the lower range, and lenders like to see your credit utilization rate below 30%. If your credit utilization is above 30%, you may want to pay down your credit cards before looking into buying a house. This way, you can be sure you’ll get the best rates.
Learn Your Mortgage Loan Options
When it comes to home loan programs, you have options! Do your research and explore all available to you.
Bowater Credit Union offers 10, 15 and 30 year fixed-rate mortgages with low fees for refinancing. The added benefit here is an interest rate and monthly payments that remain steady. If you plan to stay in the home for many years this is a great option.
Bowater Credit Union also offers 7/1 fixed to adjustable-rate 30-year mortgages. Your interest rate will be locked in for the first seven years and then fluctuate over the next 23. After seven years, the rate will cap at 2% annually and no more than 5% for the lifetime of the loan. This loan is perfect for most people, saving money in interest and keeping payments low.
Lastly, Bowater Credit Union offers a 30 year variable rate mortgage option. An adjustable-rate mortgage (ARM) gives you access to extremely low interest rates for the initial fixed period. ARMs are great for people who don’t plan to stay in their homes for a long time unless they’re open to refinancing their loans.
Receiving pre-qualification requires getting a letter from a lender that outlines what they are willing to loan out up to a certain amount.
The letter typically has a shelf life of up to 3 months while you search for a home that meets your needs. Your credit union will calculate what you can afford based on your unique situation. This includes checking your credit score, verifying your income, gathering information about your bank accounts, and how much you have set aside for a down payment — ideally, this is 20% or more of the cost of the house.
Having a prequalification letter when viewing houses gives a real estate agent security that you’re a serious candidate with your affairs in order. It also gives you a competing edge when making an offer, especially in competitive markets. Keep in mind that even if you receive a preapproval letter, there is no guarantee a loan will close — it just increases your chances.
Starting Your Home Search
You’ve already chosen a lender, gathered all your documents, and received prequalification. Now it’s time to begin narrowing down your choices.
You have a lot to think through from choosing a real estate agent to selecting homes to view, and ultimately putting an offer in and getting an inspection done. Don’t let this be a source of stress; however, this is the fun part of the homebuying process.
Now is when you have the opportunity to meet with real estate agents, step inside your potential home, and learn what kinds of houses work and don’t work for you. Take the process day by day and reflect on everything before making final decisions.
Choosing a Real Estate Agent
When searching for a home, don’t discount the value of working with a real estate agent. The right agent should understand the kind of house you’re looking for, how much space you need, and they should work for you to find homes within your preferred location and budget.
Selecting a real estate agent is an important aspect of purchasing a home. Take time to interview multiple agents and choose someone you’re comfortable with. You want to ensure they understand your needs and are willing to look for properties that meet your expectations while staying on budget.
Making an Offer
So you’ve found the house of your dreams, it’s in your preferred location, just the space you need, and within your budget — it’s time to make an offer!
When you find the house you can’t walk away from, notify your agent to let them know you’re ready to move forward. Your agent will work with you to write an offer letter that is fair for both parties.
Note any contingencies that may prevent the deal from going through. Be mindful of market trends and the competitiveness of your local market. These are significant components of whether your offer is accepted or not.
During negotiations, remain in control of your emotions. Speak directly, acknowledge closing costs, and be prepared to walk away if necessary.
Don’t Skip The Inspection
Having your potential home inspected is a non-negotiable stage of buying a house. An independent inspector can identify problems like mold or faulty wiring that could cause a fire. Inspections also protect you from buying the wrong property and provide an out if something comes up that you’re not prepared to deal with or fix.
The results of the inspection can be used for negotiation, predicting future costs, and possible upgrades. They also give you the chance to learn of any deal-breakers and ensure your home can be insured.
Closing on Your Dream Home
Once your offer is accepted, you’re in the final stage of buying a house!
Closing has its own steps and processes to work through before receiving the keys to your new home. It takes about 30-45 days for the offer to close. You can expect to do a final walkthrough and receive a seller’s disclosure which a seller is legally obligated to draft. This contains all known defects of the property. Defects could include repair history, foundation issues, infestations, lead paint, or water damage.
Getting home insurance must happen just before closing. Research policy options that best serve your region and climate. Some lenders require a mortgage escrow for home insurance and taxes if you put in less than a 20% down payment. If it isn’t a requirement, you may be asked to pay an annual homeowner insurance premium in advance.
Insurance covers the home in the event of loss due to flood, fire, or any other natural disaster. Insurance also covers any personal belongings due to damage or theft.
Let Bowater Help You Navigate the Stages of Buying a House
Now that you know the stages of buying a house, you can use this information to your advantage in the home buying journey.
But, buyer beware! There are many myths and mysteries wrapped up in the process that you should know about. Don’t let any horror stories or anecdotes scare you off — educate yourself and move through the process armed with all the information you’ll need.
Click below to learn the myths and mysteries of buying a house!
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