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Home Buying and Mortgage Tools

HOMEBUYING TIMELINE
I want to buy a home within the year - what do I need to do to get ready?

CREDIT REVIEW

1. REVIEW YOUR CREDIT REPORT.

2. BUILD AND ENHANCE CREDIT

Do you need to increase your score? Do you have enough credit? What can you do to solve both of these issues?

Before you contact a Realtor or mortgage lender, you need to know if your credit is good enough to qualify for a mortgage. This is the time when you should pull your credit report and take the necessary steps to ensure you have built up a sufficient credit history and that your score is as high as it can be. The higher your credit score, the better the mortgage rate you'll qualify for. This also will leave you plenty of time to correct any errors or inaccuracies on your report which may trip you up later.

WHAT CAN YOU AFFORD?

1. WHAT'S YOUR INCOME?

2. ASSESS YOUR DEBTS

Tally up all debts, short and long term. Paying down you debts will improve your credit score.

3. HOW MUCH SAVINGS DO YOU HAVE?

What can you do to increase your savings if necessary?

4. SEE IF YOU PREQUALIFY FOR A MORTGAGE

Use a calculator to see how large a mortgage you qualify for. This is not the same as a preapproval. See Month 5 for that information.

5. WHAT TYPE OF MORTGAGE FITS YOUR NEEDS?

Perhaps the most important question you need to honestly answer when you're thinking about buying a home is "How much house can I afford?" Take inventory of your monthly income versus your monthly debts as well as your savings to figure out how much you can put toward a down payment and how much you can afford to pay each month. Also, this is a good time to assess your future goals and plans to help you determine which loan product will best fit your needs.

WHAT KIND OF HOME DO YOU NEED?

1. CONSIDER TRANSPORTATION OPTIONS

2. HOW ARE THE SCHOOLS RATED?

3. WHAT AMENITIES DO YOU WANT?

Think about your must-have items, including number of bedrooms and bathrooms, a multi-car garage, pool, fireplace, eat-in kitchen, finished basement.

After you determine how much house you can afford, you need to figure out what kind of home you need. What is important to you? What amenities does your home need to have? Does your home need to be in an area with great schools? Do you need to live near transportation hubs? How many bedrooms and bathrooms do you need? Do you want a house with a pool, an eat-in kitchen, a fireplace, a finished basement? Once you decide what you need and want, it is time to start shopping.

RESEARCH HOUSING STOCK

1. CHECK OUT NEIGHBORHOODS YOU WOULD LIKE TO LIVE IN

2. WHAT PROPERTIES ARE AVAILABLE THAT FIT YOUR WANTS AND NEEDS?

3. REVIEW THE MARKET'S “PRICE SUPPORTS” – JOBS, SCHOOLS, SHOPPING

At this stage of the game, it's time to start researching the local housing stock. Cruise around the neighborhoods you're interested in, talk to other homeowners and store owners to see if a given neighborhood is right for you.

Viewing homes online is a good way to see what types of homes are available in a given neighborhood, but remember, online pictures can be very deceiving. Save yourself and your Realtor a lot of time by driving past the property before you agree to see it with a Realtor.

FIND A REALTOR

1. FIND AN EXPERIENCED REALTOR YOU TRUST 

2. DISCUSS MARKET CONDITIONS

3. CHECK OUT NEIGHBORHOODS

4. DISCUSS YOUR TIMELINE

5. DISCUSS WHAT TYPE OF PROPERTY YOU'RE LOOKING FOR

6. CAN I AFFORD WHAT I WANT IN THAT NEIGHBORHOOD? 

Homebuyers still name Realtors as their single, greatest source of information during the homebuying process. It's important to find a motivated Realtor you can trust. Engage your Realtors with questions, ask them about current market conditions, let them know when and what you want to buy. Keep in mind that the Realtor is bound by contract to act in the seller's best interest, not yours.

Also discuss what you're willing to sacrifice in terms of amenities.

Finding the right Realtor could make all the difference in your homebuying experience.

RESEARCH OTHER PROFESSIONALS

1. LAWYERS

2. HOME INSPECTORS

3. INSURERS

Once you've chosen the right Realtor, your research isn't over. Other professionals such as lawyers, insurance agents and home inspectors will be involved in your homebuying process, and you'll need time to shop around to find ones who fit for your needs. You won't necessarily need to hire them just yet, but you'll want to have a short list to work from once your transaction really gets rolling.

ORGANIZE YOUR PAPERWORK

1. TAX FORMS

You'll need two years of tax returns at least.

2. ASSET STATEMENTS

Get copies of your most recent savings accounts, stocks, bonds, and so on. Be prepared to provide updates to these documents closer to closing.

3. INCOME STATEMENTS

4. GIFT LETTERS, IF APPLICABLE

If you're receiving money from a family member or friend (for example, a down payment), you'll be required to provide a letter from the person giving the gift stating that the recipient has no legal obligation to pay it back.

Now it's time to get your paperwork organized. This may take some legwork on your part. Mortgage lenders are going to require that you prove your income and your assets. That means showing them income statements, at least two years' worth of tax returns and statements from your savings account(s) and any investments you might have.

If a family member is giving you a cash gift to put toward your new home, you must present your lender with a gift letter from the person giving you the gift, stating that you're under no legal obligation to pay them back.

MORTGAGE LENDER RESEARCH AND THE PREAPPROVAL PROCESS

1. WHICH LENDERS ARE IN YOUR AREA?

Start by researching local lenders, then expand search if necessary.

2. PREAPPROVAL PROCESS

This is where you will bring in your documentation. You cannot get an appraisal until you actually have executed a sales contract on a property. A preapproval will allow you to shop and negotiate with a seller because you can show that you can obtain financing and are a serious bidder. This is not a loan guarantee.

Once your paperwork is organized, it's time to research local mortgage lenders in your area and choose one that's right for you. After you choose your lender, it's time for the preapproval process (not a loan guarantee). You'll need to bring all of the paperwork that you've gathered.

CONTRACTS

1. SALES CONTRACT

Reaching a sales contract may involve offers and counteroffers until you and the seller reach an agreement on the sale price and contingencies.

2. MORTGAGE-RELATED PAPERWORK

This is where that research into the other professionals comes into play.
  • Lawyer to help go over the sales contract (someone to represent your best interest)
  • Home inspector

3. CLOSING

Once you have been preapproved, it's time sign a sales contract. This process can involve offers and counteroffers.When the contract has been signed and your financing is in place, a closing date will be set. The day of the closing you should also schedule a final walk-through to be sure nothing has changed since you last saw the house. When you move into the new house, you'll need to have homeowners insurance in effect.

Your prior research on other professionals—lawyers, insurance agents and home inspectors--will pay off here. The lawyer you choose should represent your best interests and will help you go over the sales contract. You should have the home inspected at this time.

LOGISTICS OF MOVING

1. REVIEW YOUR LEASE AND GIVE PROPER NOTICE TO LANDLORD

2. REVIEW YOUR UTILITY SERVICE

Do you need a new provider? Do you need to transfer or terminate your service?

3. WILL YOU MOVE YOURSELF OR HIRE A PROFESSIONAL?

Professional movers recommend one week per room if you're moving yourself.

4. RESEARCH MOVING (AND POSSIBLY STORAGE) COSTS

As if the entire mortgage-approval process isn't stressful enough, there are also the logistics of moving that you need to worry about. If you're a renter, now's the time to give your landlord the proper notice that you're moving out. You should contact your utility service providers to determine if you'll need to transfer or terminate your service.

For the move, you may want to hire a professional. You should also research storage costs if you can't move all of your items at once.

MOVING DAY

1. PACK!

2. PREPARE FOR YOUR ARRIVAL IN YOUR NEW PLACE

3. WHAT'S YOUR CLOSING DATE?

4. CAN YOU MOVE RIGHT IN OR WILL THERE BE A DELAY BETWEEN MOVING OUT AND MOVING IN?

5. THERE MAY BE NO LIGHTS, HEAT, PHONE OR CABLE WHEN YOU MOVE RIGHT IN

Time to get packing! However, at this stage, packing won't be your only concern: you'll be given your closing date when you'll sign the final paperwork. You should also schedule your final walk-through of the house before you sign the papers.

If you're moving that day, be sure you've arranged for your utilities to be ready that day also.

CONTINGENCY PLAN

1. DON'T LEAVE YOURSELF WITHOUT ANY OPTIONS

2. DON'T LEAVE YOURSELF FINANCIALLY STRAPPED IF THINGS DON'T GO ACCORDING TO PLAN

Last but not least, don't leave yourself without options. What if things don't go according to plan? What if, for some reason, you can't move in as planned--do you have money set aside or living arrangements and storage for all your things? The homebuying process is hardly smooth sailing. However, if you follow this timeline and make sure you're organized, you can avoid any squalls that could wind up costing you money, or even your home.

30 Yr. Fixed - Purchase Rates from Our Lenders in Virginia

Lenders
Rate
APR
Monthly Payment
Quicken Loans
4.050%
4.314%
$961
Last Updates: 12/22/2014 See More Rates
 

Are you ready to buy a home?

Chances are your home purchase will be the largest transaction you embark on over the course of your lifetime. That in itself is reason enough to make sure you’re not only prepared but well-educated when it comes time to buying your home. Shopping for your mortgage is at least as important as shopping for your home, because the right home loan can save you tens of thousands of dollars. Especially for first-time homebuyers, the more you understand about your mortgage and the homebuying process, the better off you’ll be and the more money you’ll save.

Before you begin shopping for a home loan, you need to ask yourself a few questions:

  1. How much home can I afford?
  2. How long do I plan on staying here?
  3. Am I ready?

Affordability

Before you worry about Realtors, property listings or locking in a mortgage rate, you must first determine how much home you can afford. HSH.com offers homebuyers several home loan calculators that can help give you a sense of your level of affordability. Our How much house can I afford calculator is just the tool to get you started. Simply plug in a few sets of numbers (e.g., annual income, projected down payment, your monthly bills) and you’ll get a sense of your price range.

However, while affordability calculators can certainly give you a good starting point in terms of learning how much house you can afford, only you truly know how well a monthly mortgage payment, not to mention taxes and insurance, will fit into your budget and lifestyle.

On paper, you may qualify for a lot more or a lot less than you should spend. So when determining what you can afford, sketch out what you think your life may look like one, five or 10 years down the road. Look at your goals and what kind of money you need to meet them, and where it's going to come from. Decide what payment works for you, and then enter current mortgage rates into our home loan calculator to find a projected loan amount and maximum purchase price.

Timeline

This brings us to the next big question: How long do you plan on living in the house you’re buying? Is this a starter home or a place you see yourself raising your family in? Understanding your life’s plans and future goals is not only crucial in deciding how big a home you should buy, but finding the right mortgage product to match.

Sure adjustable rate mortgages have gotten a bad reputation over the last few years, but if you aren’t planning to stay in your prospective home very long, these adjustable-rate products offer the opportunity to take advantage of even lower mortgage rates.

Yet remember, it’s hard enough to make plans for the upcoming weekend let alone five, 10 years down the road. This is why most homeowners prefer the stability that comes with a 30-year fixed rate mortgage. If mortgage rates do fall in the future, you can always crunch the numbers to determine if a refinance can save you cash each month.

Are you up for the task?

HSH.com visitor and recent first-time homebuyer Eric told us that when he and his wife went to look at houses with their real estate agent, they could tell a home “just wasn’t for them” before even stepping foot out of their car. Yet finding and maintaining your dream home has to do with a lot more than just aesthetics.

Owning a home is about a lot more than simply being able to afford your monthly mortgage payments. There are recurring maintenance costs to consider (you should budget saving at least 2 percent of your home’s value each year for repairs), property management costs to plan for (if the home you’re buying has a decent-sized property, you will have to dedicate a lot more time and money to your investment as opposed to someone who purchased a condo or townhome), and those unexpected emergencies (like your water heater bursting in the middle of the night) that you’ll surely have to deal with.

We asked first-time homebuyer Michael Herley from Coatesville, Pennsylvania what was the one thing he wished he knew before buying his home. “I wish I would have appreciated the gravity of purchasing a house,” he explained. “Don't get me wrong, our place is beautiful and I love it, but the work that goes into everything is much more than one could ever know. Do not think that your work is over once you have found your dream home -- rather it has just begun.”

Continue your education

As Mr. Herley mentioned, once you’ve found your dream home, the work has just begun. On a daily basis HSH.com publishes new information for not only homebuyers but for homeowners as well on a wide-range of topics. We cover everything from how to find the best real estate agent, to mortgage rate forecasts, to home equity loans, refinancing and home maintenance. Good Luck.

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