Buying A Home in Six Easy Steps!

Purchasing a home is one of those things that everyone wants to do, but very few people understand. Just like most other things, buying a home is a step by step process. American Intermutual Agency is here to break down each of the six steps to purchase your new home.

Step 1: Choose a Loan/ Get Pre-Qualified

When you begin the home buying process, the first step is for the buyer to find the right home loan for them. They can choose from a conventional loan or one of the three government home loans.

Government-guaranteed loans offer several benefits, which range from more lenient eligibility requirements to several money-saving benefits. The Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), and the Department of Veteran Affairs (VA) administer these government-backed loans. Each one of these loans has incentives, which remove some of the costs that come from the homeownership process.

- FHA loans offer a low 3.4% down payment requirement, low monthly payments, low closing costs, and a credit score requirement of 580.

- USDA loans offer a $0 down payment requirement, low monthly mortgage insurance payments, and flexible credit score requirements.

- VA loans offer a $0 down payment requirement, no mortgage insurance premiums, low monthly payments, and no prepayment penalties. However, each loan has its eligibility requirements, which the applicant should research before applying for any of them.

Once the applicant does their research and finds the right loan to meet their needs, the next step is to get pre-qualified. The pre-qualification process is simple and only requires that a loan officer and the applicant have a meeting. During the meeting, the applicant and the loan officer will discuss the applicant’s income, assets, and debts. Based on that information, the loan officer will give out a determination as to the loan amount qualified for by the applicant.

It is important to note that none of the information that the applicant submitted has gone through the verification process. Therefore, the amount that the applicant is pre-qualified for might change once the pre-approval process gets started.

Step 2: Get Pre-Approved

Unlike getting pre-qualified, going through the pre-approval process for a loan will require that the applicant submit documentation about their finances. The loan officer will do a credit check on the applicant while also verifying their income and assets.

Once all that information is accessed and verified, the loan officer will determine the amount for which the applicant qualifies. Afterward, the applicant will be able to start looking for a home that they might be eligible for based on the amount that the loan officer pre-approved them for earlier. At this time the applicant should also get a Certificate of Eligibility.

Step 3: Shop for a Home

When looking for a home to purchase, the applicant will do so based on a variety of factors. These include their wants and needs, as well as any requirements by their pre-approved home loans. For example, VA loans require that the property does not have any health or safety hazard concerns.

Once the applicant finds a home that they like, and it meets all the property requirements for the loans, the next step will be to make an offer on the property.

Step 4: Make an offer

Making an offer on a property requires that the applicant and their real estate agent meet and begin the underwriting process. This process will have the lender go over the applicants’ credit history, income, cash reserves, equity investment, and financial assets.

The process can take anywhere from two to ten days. Subsequently, once the underwriting process completes, and the offer is approved, the applicant must put the property through an inspection and an appraisal.

Step 5: Get the property Inspected/ Appraised

The appraisal and the inspection are not the same, but they still must be done to determine if everything checks out with the property.

The inspector will inspect the property itself by testing its appliances as well as its electrical wiring and foundation. The inspection will be completed by an independent home inspector who will provide the applicant with a report of the property when he or she finishes their investigation.

The appraiser will do a quicker inspection of the property and its amenities; however, their main concern will be determining the property’s fair market value. They will do so by checking current market trends and the sales of other similar properties in the area.

Step 6: Close on the Home and Become a Homeowner

Once the inspection and the appraisal finish on the property, and the underwriter approves the applicant for the loan. The next and final step will be for the applicant to close on the property and sign the loan documents turning the applicant into a homeowner.

Phil Georgiades is the CLS for FedHome Loan Centers, a brokerage specializing in first-time buyer home loans. He has been practicing real estate for 22 years. To learn more about programs available to you or apply for a home loan, click here.