Purchasing a new home can be an intimidating and big life experience. We can help.
The first steps to purchasing your own home are to get your financial situation sorted out and make sure your credit is in order. Once pre-qualified for a mortgage, the home search process (the fun part) begins. We can help connect you with a Realtor expert to make this process as seamless as possible.
It is important to keep some things in mind before you settle down. Is the neighborhood great? Is the area appreciating? Does the home have the room you need for family growth? How is the job market in the area and how close are your favorite hot spots? Consider these when going through the home search process.
Here is a breakdown of the steps to take when buying a new home:
Polish your credit
Good credit can lower your mortgage interest rates, potentially saving you hundreds of dollars a month. The first step is to know where you currently stand. The First Option team would be happy to help order your Credit Report and review your credit with you. We can then talk to you about the next steps with home buying in mind!
Start saving for a down payment and closing costs
You might hear someone tell you that you need a big down payment. And, having less debt is not a bad idea! But, these days, the amount of mortgage products have exploded. First Option has products that require no down payment and others that require more. With that said, not every program works for every borrower. The best advice is to have a savings goal for your down payment and to start working on it as soon as you can. Talk to a First Option Loan Originator about how much you currently have saved and how much you want to have at the end of your goal. With that information, we can help advise you on the right way to go.
Calculate how much house you can afford
As a rule of thumb, many suggest that buyers spend 25-30% of their pre-tax income on housing. That would roughly be a home price of three to four times your income. These are general estimates and it’s necessary to consider your entire budget. How much are your credit card bills, student loans, and children’s tuition? How much will your new palace cost to maintain? What other bills do you have monthly? Yes, this can be a lot to consider. Our Loan Originators can talk you through different payment options that work with your budget. Remember that we are here to help!
Get pre-approved – Shop for a mortgage
The amount of new finance options make it easier to buy a home, but harder to pick which mortgage is right for you. Our mortgage experts help you navigate the options and choose the best mortgage for you. Your lender will help you by calculating your monthly expenses, including principal, interest, taxes, and insurance. A pre-approval will let you pounce on the right house.
Shop for a home
Make a list of the features you want and don’t want and include your whole family in this process. This will help eliminate homes that you shouldn’t even consider. Having a real estate agent represent your interests is critical and helps to narrow down possibilities. First Option Mortgage can help connect you with one of our preferred Realtor Partners to ease the decision making process. Typically, the seller pays the sale commission, which generally runs 5-7%, split between the listing agent and the selling agent representing the buyer.
Make an offer
Now, you know which direction you want to go with the payment and price. And, you have a pre-approval in hand. You are comfortable and confident. Now, it is time to make an offer! This is the part where the realtor really helps. They will evaluate market conditions, look at the cost of similar homes nearby, and help you make a reasonable offer.
Sign a contract
There may be some back and forth when negotiating the price and terms of the deal. You’ll also want a home inspection (below). But, once there is agreement on both sides, you will sign the final contract. You may be required to pay an “earnest money deposit”. It is simply a way to show that you are committed to the transaction. The deposit does not go away. It is used to help with the down payment when you receive your loan. In some states, and in some situations, you’ll want a real estate attorney to go over the contract with you.
Get a home inspection
Make sure your contract is contingent on a home inspection that includes a detailed and objective evaluation of the property. After the inspection, you and your realtor will negotiate the price and/or terms of the contract based on needed repairs and items found by the inspection.
Shop for homeowners insurance
You are going to need homeowner’s insurance to protect your new investment. There are many options. Generally speaking, the insurance companies will give you a better deal if you combine your auto and home policies.
After the contract is signed, First Option is back in action! We will have you sign the application and give us a few documents that we need to process your loan. We’ll order the appraisal (to confirm the value) and the title (to make sure all the old loans will be cleared) and we will send your file to an underwriter. The underwriter may need a few additional items to make a decision. And, once everything is cleared, you will be CTC (clear to close)!
You’ll meet at your local First Option office, lawyer’s office, or Title Company to sign papers. Then congratulations, you just bought a house and will receive the keys to your new home!
Sergeant Kenneth J. Guidry
HHC 3/156 Infantry