First-Time Homebuyer Steps to Success
Buying your first home is exciting but can be overwhelming. Not only must you find the right home, but you must secure financing too. However, getting your first mortgage doesn’t have to be stressful with the right steps.
Here are the first-time homebuyer steps to success to make buying your first home seamless.
Step 1: Maximize your Credit
Lenders first consider your credit score when you apply for a loan. But your credit history is what makes up your credit score. So pull your free credit reports and ensure your credit history is as solid as possible.
Checking your credit early gives you time to fix any errors or make up for mistakes. Give yourself a few months to perfect your credit and increase your chances of loan approval.
Step 2: Save for a Down Payment
Many loan programs require a down payment; even if they don’t, investing your money upfront is a good way to build equity and keep your payments low.
You can use any liquid funds for a down payment, and some borrowers may also be able to use gift money from family, employers, or a charitable organization.
To give you a frame of reference, here are the down payments each loan program requires:
- Conventional loans – 3% for first-time buyers
- FHA loans – 3.5%
- VA loans – 0%
- USDA loans – 0%
- Jumbo loans – 20% – 30%
Step 3: Review your Budget
Before getting pre-approved for a mortgage, review your budget. Know what you can comfortably afford.
Your pre-approval may say one number, but if that payment is too high for you to handle, you should keep it lower. When reviewing your budget, list your bills that will continue when you buy a home, such as credit card and car payments, and include any new bills that come with home ownership, such as:
- Utilities
- Home repairs
- Home insurance
- Real estate taxes
Try keeping your bills, including the new mortgage payment, at less than 43% of your gross monthly income. This allows enough room for disposable income and makes owning a home more feasible.
Step 4: Get Pre-Qualified
A pre-qualification is an estimate of what you can afford. Then, it’s a conversation with a loan officer at Jonathan Torres and Torres Mortgage Team to determine where you stand.
You don’t have to provide any qualifying documents yet, but you’ll tell a loan officer the following details:
- Estimated credit score
- Monthly gross income
- Monthly debt obligations
- Total assets
- Employment information
Our loan officers will review the information and pre-qualify you for a loan program based on the information provided. This isn’t a guarantee of approval, but it estimates how much you can borrow and what your loan payments would be.
It’s a good idea to get pre-qualified six months to a year before you’re ready to buy a home. This gives you time to fix any issues or save more money if you don’t qualify for a high enough loan amount.
Step 5: Find a Real Estate Agent
Buyers don’t pay for real estate agents – the seller covers the cost. But buyers benefit in many ways. For example, real estate agents can help you find homes within your budget, see homes when they’re first listed, and get help bidding on a home.
Real estate agents handle the negotiations, signing the contract, and walking you through the process until closing. Your real estate agent is the person who talks to the seller’s agent – your only job is to make decisions, bid on the home, and secure the financing.
Step 6: Get Pre-Approved
When you’re ready to look at homes, it’s time to get pre-approved. Of course, this is different than getting pre-qualified.
A pre-approval with Jonathan Torres and Torres Mortgage Team means your qualifying documentation went to an underwriter, and he/she reviewed your documentation. If you meet the loan guidelines, they’ll write a letter stating how much you can afford, what loan program you’re using, the estimated interest rate, and any conditions you must satisfy before closing the loan.
To get pre-approved, you must provide the following:
- Paystubs for the last month
- W-2s for the last two years
- Last two years of tax returns (if self-employed)
- Bank statements for the last two months
- Employment information
- Intentions for the home (primary residence, vacation home, investment home, etc.)
Step 7: Find a Home and Make an Offer
With all the puzzle pieces coming together, it’s time to look for a home! You’ll use your pre-approval letter to show sellers you’re a qualified buyer, and your real estate agent will help you find the homes that meet your criteria.
When you find the home you want, your agent will place an offer on your behalf. Sellers have the right to accept, decline, or negotiate the offer. Your real estate agent will handle the details until it ends in a sales contract or the seller declines the offer.
Step 8: Close the Loan
Your final step is to finalize financing. Provide your sales contract and any missing documentation to your loan officer.
The underwriter will order an appraisal and title work on the house at this time. This is to ensure the home is worth enough and there aren’t any liens on the property.
The process can take a few weeks, and once cleared, you are ready to close on your home. You’ll bring the required cash to the closing, sign the mortgage, note, and other important closing documents and receive the keys to your new home!
Final Thoughts
Buying your first home may feel overwhelming, but with Jonathan Torres and Torres Mortgage Team by your side, it will feel easy. We’ll help you through every step to ensure you get to the closing table for the loan if you satisfy the qualifications.
With as little as 3% down, you can become a homeowner even with today’s higher home prices. Contact us today to see how we can help you achieve your dreams of owning a home.
