Buying a new home
People ask, when should I start looking and what do I need available, so I am ready to put an offer on a new home. Here is some helpful information to think about.
12 Months Out - You should check your credit score. determine how much you can afford. (Mortgages should be no more than 20-30% of monthly income.) and make a down payment plan. Most conventional mortgages require a 20% down payment, FHA offers loans with only a 3.5% down payment. The U.S. Department of Housing and Urban Development (HUD) can provide a list of nonprofit homebuying programs. Also, check with credit unions and if a veteran, check if you qualify for a VA-backed loan.
Note: Banks like you to “season” your money or have stable funds in your account for 60 to 90 days before applying for a loan.
9 Months Out - Prioritize what you most want in your new home, what is most important in your new home.
- #Beds / #Baths
- Location of master
- School system
- proximity to work.
- Size of backyard
- Floor plan
- type of street
Research neighborhoods, budget for miscellaneous homebuying expenses approximately $500-$800, and start a home maintenance account.
6 Months Out - Collect your loan paperwork. Banks are very particular when it comes to mortgage loans and they demand a lot of paperwork.
- W-2 forms — or business tax return forms if you are self-employed — for the last two to three years.
- Personal tax returns for the past two to three years
- Your most recent pay stubs
- Credit card and all loan statements
- Your bank statements.
- Addresses for the past five to seven years.
- Brokerage account statements for the most recent two to four months
- Most recent retirement account statements, such as 401(k)
If you start collecting these documents now, it will lessen the stress when it is time to get your loan. Bonus: Looking closely at your loan documents each month will also help you stay focused on saving for your down payment and keeping your debt-to-income ratio low.
- Research lenders (I can provide contact information for a few mortgage brokers)
- Mortgage brokers will shop for a competitive loan rate for you among multiple lenders, unlike a bank, which can only offer its own products.
3 Months Out - Get pre-approved for your loan. (Ensure it is based on a credit check, not just income based.) At this point, if you have been following this timeline, your credit score, paperwork, and down payment should be on track. You have done your research on lenders.
- Make an appointment with your lender or mortgage broker and bring all your paperwork.
- Draft a budget that accounts for mortgage payments, insurance, maintenance, and everything else you owe.
- Start shopping for your new home.
- Make an appointment for us to meet in person at the Realtor’s office.
- Let me know your requirements and criteria and we can target homes that meet your priorities/price range.
- Realtor schedules a few showings for the upcoming days.
2 Months Out - Make an offer on a home. It usually takes at least four to six weeks to close on a home. So, if you have a firm move-out date, allow enough time to deal with any hiccups that can delay closing. One of the first things you will want to do after an offer is accepted is have a home inspector look at the property. If the home inspector finds something that needs repair, that is a common example of something that can delay closing.
In the Last Month - Triple-check that all your financial documents are in order and review all lending documents before closing. Do not make any big purchases. You are in the home stretch! If you have been keeping your documents up to date, and your down payment is in reserve, these final steps are the easiest. Reviewing the mortgage documents is probably the most difficult and I will guide you through them.
- Get insurance for your new home. Do not forget to secure insurance before closing. You will need to bring proof of insurance to closing.
- Do a final walk-through of your new home, usually a day or two before closing, to make sure the home is in the shape you and the seller have agreed upon.
- Get a cashier’s check or bank wire for cash needed at closing.
The closing company will notify of what is required at the closing table. Normally 2.5-4% of the selling price. We will negotiate closing costs as part of the buying offer process to have the seller pay a portion of or all your closing costs.