Mortgage Advice

Your Step-by-Step Home Buying Guide

July 31, 2014

Buying a house is one the most exciting purchases you will ever make. It’s also one of the most complicated purchases you will make. To make your home buying experience smooth and successful from start to finish, we’ve put together this step-by-step home buying guide.

Step 1: Get pre-approved
Before you start searching for the perfect house, it’s wise to get pre-approved for a mortgage loan. By answering a few simple questions and providing your mortgage lender with some financial documentation, they can help you determine how much you’re eligible to borrow and help you answer the question, “how much house can I afford?”. With this information, you’ll be able to narrow your search and focus on finding homes that meet your requirements and fit within your budget. With a letter of pre-approval in your hand, realtors and sellers will see you as a serious buyer.

Step 2: Meet with a realtor
Once you’ve received a letter of pre-approval, meet with a realtor to define your wants and needs. Because you already know how much you’re eligible to borrow and what price range you’re looking to stay within, a real estate professional can help you find houses that fit within your parameters.

Step 3: Find your dream home
Once you’ve started working with a realtor to define the types of homes you’re interested in and the area you’d like to move to, the fun part begins. You’ll be able to tour houses and spend time assessing the details of each property. When it comes to finding the perfect house, our partner Bill Park of Keller Williams Realty put together some housing hunting tips to help you find the one. Once you’ve found your dream home, your realtor will help you make an offer and draft a purchase agreement.

Step 4: Have the house inspected
Once your offer is accepted, we strongly advise you to schedule a private home inspection. Although home inspections aren’t required for purchase, it is a wise investment to make. A home inspector will ensure the property you are purchasing is structurally sound and doesn’t contain any major defects. They will also notify you of any repairs or maintenance the house needs. This allows you to budget for any home improvement expenses ahead of time and take care of any repairs when you move in. Once you are satisfied with the home inspection, it is time to formally apply for your mortgage.

Step 5: Apply for a loan
At this time, your loan officer will collect the financial documentation needed to process your loan. After you’ve submitted the necessary documentation, your loan will move into processing where a loan processor will prepare your application for underwriting.

Step 6: Order an appraisal
While your loan is being processed, your lender will order an appraisal of the property on your behalf. Having an accurate appraisal will also help your lender determine the maximum loan amount and derive the loan-to-value (LTV) ratio.

Step 7: Obtain homeowners’ insurance
Buying homeowners insurance is a critical step in the home buying process and is required for closing. The sooner you start shopping for homeowners insurance, the smoother your closing process will be. Give yourself adequate time to consult with an insurance broker, compare policies and submit the necessary documentation to your loan officer.

Step 8: Expect to receive “conditional approval”
Before your mortgage application can receive the official stamp of approval, an underwriter may request additional documentation and approve your loan with conditions. This is a normal part of the loan process and simply means that there are additional requirements that need to be completed before your loan is approved. To ensure your loan moves through the underwriting process quickly, be prepared to send the requested documents to your loan officer as soon as possible.

Step 9: Receive the clear to close and schedule a closing date
After all of the necessary documentation has been collected and all of the conditions have been met, the underwriter will approve your loan and issue a “Clear to Close.” At this point, you’ll want to work with your loan officer and real estate agent to schedule a closing date.

Step 10: Obtain your HUD 1 Settlement Statement
Prior to closing, the title company will prepare your HUD 1 Settlement Statement. This document outlines the details the fees associated with your home purchase, including your down payment and closing costs. Before the big day, your lender will contact you to go over this document and explain what paperwork you’ll need to bring to closing.

Step 11: Close on your home
Before you close on your home, it is wise to take one final walk through of the house with your realtor. On the day of closing, make sure to have the appropriate funds wire transferred, or bring a cashier’s check made payable to the title company. You will also need to bring your drivers license and proof of homeowners insurance. After you’re finished signing all of the necessary paperwork, the title of the property will be transferred into your name and the house will officially be yours.

As you’re going through the home buying process, use this list as your ultimate guide. Be aware that some mortgage programs, such as FHA 203(k) renovation loans, MSHDA down payment assistance programs and USDA Rural Development loans, may have their own unique set of guidelines and require additional steps throughout the process.

Do you have any questions about the home buying process? Send us a message or leave a comment below. We’ll get back to you with an answer.