Steps In Buying A House Explained

Advice On Steps In Buying A House

Buying a home can be one of the most exciting time in your life but can also be a very stressful process. A home purchase is one’s biggest investment in their lifetime and one of the biggest moments of one’s life. Preparing prior to deciding to go home shopping will make the process much easier and less stressful. There is more to just finding a realtor and finding a mortgage loan officer in buying a house.

Purchasing a house is an investment in your future and the home buying process does take much research and planning. There are many home buyers who are clueless and not prepared when buying a house and eventually end up giving up during the home buying process. We will cover the steps in buying a house on this blog where it will make the home buying process easier where you will understand from selecting a real estate agent to eventually closing on your home loan and getting the keys to your dream home.

Steps In Buying A House: Buying Versus Renting

Before you jump into buying a house, think about whether you are ready to become a homeowner. You should consider the pros and cons of buying a home versus renting a home and the responsibilities and commitment that come along with being a homeowner. Just because you have the financial means and the down payment and closing costs for a home purchase does not mean that you are ready to commit in being a homeowner. Here are some thoughts you should think about when thinking in buying a house:

  • Are you mentally and physically ready to make a change from being a renter to being a homeowner by being able to handle the maintenance of a home that you will be responsible for with being a homeowner?
  • Can you comfortably afford the monthly mortgage payments and housing expenses such as the property taxes, homeowners insurance, homeowners association fees that comes along with being a homeowner?
  • Do I meet the minimum credit requirements and income requirements to qualify for a home loan?
  • Are you ready to stay in one place for the next three to five years. One advantage of being a renter versus a homeowner is that you do not have to commit to a particular place for an extended period of time where as a homeowner, you cannot plan on moving every year.
  • Do you know what you are looking for in a home?
  • Are you ready to commit in saving for reserves in the event of potential repairs on your new home purchase. As a homeowner, you need to realize that you cannot just call your landlord if the kitchen sink or toilet is not working or if your furnace needs major repairs. You are responsible for all maintenance and repairs to your home.
  • Consider the neighborhood you want to settle in for the next three to five years besides the size of the home, the number of bedrooms, the yard size, the square footage.
  • Consider the type of home you want to buy. Is it a condominium? Is it a town house? Is is a single family home with a large yard? Is it acreage? Remember that if you buy a home that sits on many acres, there are maintenance that you need to consider. I live on 6 plus acres and it takes me literally more than a day to mow my yard with a riding tractor plus over 5 gallons of fuel. On weather where it rains often, you may need to mow more than once a week. It is extremely time consuming and can be costly not just with fuel but the maintenance of your riding tractor.
  • After you have evaluated your situation and weighed the pros and cons of buying a home versus renting and decided to become a homeowner, then it is now time to move to the next steps in buying a house.

Steps In Buying A House: Finding The Right Mortgage Lender

 Most home buyers will need financing when buying a house unless they are extremely wealthy and can fork over the couple of hundred thousands of dollars needed to purchase the home with cash. Choosing a mortgage lender who you can work with is extremely important. Not all mortgage lenders are the same. Any mortgage lender can approve and originate and fund a mortgage borrower with 800 FICO credit scores and low debt to income ratios. However, the world does not work this way and many mortgage borrowers may have had credit issues or debt to income ratio issues so you need to select the right mortgage lender who specializes in the type of income and credit profile you fit in. The great news is that you do not have to choose a mortgage lender that is in your city, county, or state. The mortgage process is all electronic and the chances are that you will never meet your mortgage loan officer even if he or she is located down the street from you. You can choose a mortgage lender that is in a different state and in a totally different time zone because all mortgage transactions is done electronically via email and faxes and mail.
Most mortgage loan borrowers will get recommendations of mortgage lenders from their friends, business colleagues, or family while others will start looking for mortgage lenders online. Most mortgage loan borrowers who get referrals of mortgage loan officers from family and friends will also Google that particular loan officer online and check on their testimonials and reviews online. The Internet can be both a great tools and yet a dangerous one for loan officers.  Loan officer should realize that it is difficult to get a positive review by borrowers, however, poor reviews are really easy to get and one negative review by an unhappy borrower can spread like wild fire and ruin one’s reputation so it is extremely important that the loan officer make sure that every mortgage loan applicant gets treated with the utmost respect and get the service they deserve.

Steps In Buying A House: Getting Pre-Approved

Once you have selected on which mortgage lender to use, the next step is getting pre-approved. In order for a mortgage loan officer to issue a pre-approval letter, they need to run your credit. The pre-approval stage of the mortgage process is the most important part of the whole mortgage approval process. The main reason of last minute mortgage loan denials or extreme stress during the mortgage process is because the mortgage loan originator has not done his or her due diligence prior to issuing the pre-approval letter.

Here the list of items that the mortgage loan officer will need from you and to review prior to issuing a solid pre-approval letter:

  • Your mortgage loan officer will need to pull your credit and thoroughly review not just your credit scores but your overall credit report and look at your payment history as well as your prior derogatories and the public records on them and see if you meet the waiting periods after bankruptcy and foreclosure and make sure that all government loans are current and not in collections. (The credit burears are the bureaus of Experian, Equifax, or TransUnion)
  • Your income tax returns from the last two years will need to be provided and reviewed by your mortgage loan officer.
  • Proof of employment of the past two years.
  • Paycheck Stubs from the past 30 days and W2 Forms from the past two years.
  • Two or more forms of Identification of the borrower and/or borrowers such as borrowers driver’s license, social security card, passport, or other forms of valid identification cards.
  • Current bank statements for the past 60 days.
  • Proof of extra income such as child support income, alimony income, part time income, social security income, pension income, bonus income.

Steps In Buying A House: Hiring A Real Estate Agent

Once you are armed with a solid pre-approval letter by a mortgage loan officer, the next steps in buying a house is hiring a real estate agent.  Finding a real estate agent that you feel comfortable with and can get along is as important as finding the right mortgage loan originator for you. Many times home buyers will get referrals from friends and family or search online and read the testimonials and reviews of the real estate agent.

When choosing a real estate agent, you should select a real estate agent who is local and has the experience in the neighborhoods and locations that you are shopping to purchase a home and has stellar reviews and testimonials. There are so many professional real estate agents that I know of who really go above and beyond for their home buyers and home sellers and put their clients ahead of themselves. Contact me at 262-716-8151 or email me at gcho@gustancho.com if you are looking for a phenomenal real estate agent. You are not obligated to hire a real estate agent and can change real estate agents during your home buying process. Once you have hired a realtor and are armed with a solid pre-approval letter, you can now start shopping for a home and enter into a real estate purchase contract.

Steps In Buying A House: Searching For Your Dream House

Your real estate agent will most likely email you homes that fit your needs in the right neighborhood. There are many open houses on weekends where it is highly recommended that you attend.  Just because the pictures look good does not necessarily mean that the home and its surroundings are going to suit your needs. Never purchase a home via site unseen. You will regret it even if it is an investment property or second home.

Always visit multiple homes and refrain from entering into a real estate purchase contract on the first home you see. After visiting multiple homes, you will eventually find the home of your dreams and can enter into a real estate purchase contract.

Steps In Buying A House: Putting In An Offer On A Home

You will always want to make a reasonable offer on a home. Low balling a home seller is not recommended and most low ball offers will not even get a counter offer. Make sure you ask for a sellers concession so you do not have to come up with any closing costs and all you have to worry about is the down payment on a home purchase. Make sure you have an attorney to thoroughly review the real estate purchase contract. On states where you do not use a real estate attorney, make sure you read all of the line items of the real estate purchase contract and make sure you add the contingencies such as appraisal contingencies, home inspection contingencies, and most importantly, financing contingencies on the real estate purchase contract.

Once you have an executed real estate purchase contract from the home seller, turn it in to your mortgage lender so they can start the mortgage approval process.

Steps In Buying A House: Homeowners Insurance

All mortgage lenders will require that you have sufficient homeowners insurance coverage. One year’s homeowners insurance will need to be paid at closing. The minute you have an executed home purchase contract, start shopping for homeowners insurance. Homeowners insurance premiums can vary so make sure you get multiple quotes and compare apples to apples and get the best bang for your buck. Your real estate agent and/or mortgage loan officer can give you several names of a homeowners insurance agent or you can check with your current auto insurance or other insurance provider for a quote.

Steps In Buying A House: Home Inspection

Mortgage lenders do not require that a home inspection be done. Home inspections is totally optional and most home inspection fees may vary from $200 to $500. Many home buyers want to save the home inspection fees and decided not to get a home inspection. Home inspection is highly recommended, especially for older homes. Unless you are extremely knowledgeable in home construction and repairs or have friends or family who you can trust that can inspect the home for you, a home inspection is an insurance policy that is worth its weight in gold.  A home appraisal is required by all mortgage lenders, however, a home appraiser is not a home inspection and far from it. A home appraiser will note obvious defects but will not thoroughly inspect all aspects on the home.

Steps In Buying A House: Mortgage Approval Process And Closing

The mortgage process is a true process where it can become stressful at times. Once you submit the real estate purchase contract to your mortgage loan officer, your loan officer will ask you to provide updated documents such as updated 60 days bank statements, update paycheck stubs, and will ask you any other changes in your credit, income, and employment profile. A mortgage processor will be assigned to your mortgage loan file and the mortgage processor will be in contact with you for any documents that he or she will require. The mortgage processor’s main job is to make sure that the file is ready and in a ready format for the mortgage underwriter to underwrite your mortgage loan application and issue a mortgage loan approval with as little conditions as possible. Once the mortgage processor submits your file to the underwriting department of your mortgage lender, a mortgage underwriter will be assigned to your mortgage file. A typical underwriting turnaround time is around 48 hours for a mortgage loan underwriter to underwrite a mortgage loan application and issue a conditional mortgage loan approval. Once a conditional mortgage loan approval is issued, the file goes back to the mortgage processor. It is the mortgage processor’s job to work with the mortgage loan officer in getting the conditions requested by the mortgage loan underwriter from the mortgage borrower. Once all of the mortgage conditions have been provided to the mortgage processor, the mortgage loan processor will submit the mortgage file in for a clear to close . Once a file is submitted in for a clear to close, the underwriter will check off on all of the mortgage conditions and may issue a clear to close or may come up with additional mortgage conditions where it goes back to the mortgage processor to repeat the process again. Normally, a competent experienced mortgage underwriter will not request for more conditions after the first initial conditional mortgage loan approval. However, I have seen many times where an incompetent mortgage underwriter will issue additional conditions over and over where it drives everybody nuts. Once a clear to close is issued, that means that the mortgage lender is ready to fund the mortgage loan. The closing department of the mortgage company will coordinate the closing with the title company and closing docs will be sent out to the title company and the wire will be sent out to the company as well.  The home buyer as well as the home seller will meet at the title company to sign off on the home closing. The home seller will get the proceeds from the sale of their home and the home buyer will get the keys of their new home purchase.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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