Do you want a real or larger yard or maybe closets bigger than your average refrigerator? How about the freedom to decorate and paint however you darn well please! Making the switch from renting to owning is exciting, but many rookie home buyers find the process more difficult to navigate than they expected.
This is why we created our First-Time Home Buyer Checklist. The 12-month timeline will help you sidestep common mistakes, like paying too much interest or getting stuck with the wrong house. (Yep, it happens!)
Your may have been already planning and saving for a new home so you may find yourself already in the middle of the 12 month plan.
12 Months Out
Check your credit score. Review your credit report at annualcreditreport.com. The three credit bureaus (Equifax, Experian, and TransUnion) are each required to give you a free credit report once a year. A Federal Trade Commission study found one in four Americans identified errors on their credit report, and 5% had errors that could lead to higher rates on your mortgage. Avoid last-minute surprises by checking your score well before you're ready to make an offer. Review the reports thoroughly and request any errors you find to be removed. Be sure to to pay off any debts turned into collections that may be affecting your credit scores.
Determine how much you can afford. Lenders look for your total debts to be no more than 43% of your gross monthly income (this is called the debt-to-income ratio). This number includes your potential future mortgage payment and any other debts, such as a car loan, student loan, or credit card balances you currently have.
Understand your mortgage options Conventional loans require a between 5% - 20% down payment. If you can swing the higher down payment, go for this type of mortgage. Your loan costs will be less, and you'll get a better interest rate.
FHA is mortgage option for buyers with average credit scores and only requires a 3.5% down payment. However, they do require mortgage insurance premiums (PMI), which will increase your monthly payments.
VA loans are for our country's veterans and allows them to buy a home for no money down with a 0% down payment.
As you're planning your strategy to save for your down payment, keep in mind that mrtgage providers like you to "season" your money. This means, they like to see that you've had stable funds in your account for 60 to 90 days prior to applying for a loan.
Need help with coming up with the cash for a down payment? Most lenders will allow you to use a financial gift from a family member.
9 Months Out
Prioritize what’s most important to you in your new home. Proximity to work? A big backyard? An open floor plan? Being on a quiet street? You'll make a much better decision about which home to buy if you prioritize wants and needs. If you’re buying the home with a spouse, family member or partner, now is the time to work out any differences you may have in your wants and needs list and compromize to to avoid frustration and wasted time.
Budget for miscellaneous home-buying expenses. Buying a home may have some additional upfront costs like new furniture or appliances, upgrades or hiring a moving company?
Start a home emergency fund. Start the good habit now of putting a little aside each month to fund maintenance, repairs, and emergencies for your new home. It's no fun to have to call a plumber, electrician, or handyman. It's even worse if you're paying interest on that bill because you put the expense on a credit card.
6 Months Out
Collect the required paperwork. Lenders have a lot of requirements before they will agree to give you a mortgage. They need a lot of paperwork. What they'll want from you includes:
- W-2 forms — or business tax return forms if you're self-employed — for the last two to three years
- Personal tax returns for the past two to three years
- Your most recent pay stubs
- Credit card and loan statements
- Your bank statements
- Brokerage account statements for the most recent two to four months
- Most recent retirement account statements, such as 401(k)
If you start collecting and making copies of these documents now, it will lessen the stress when it's time to apply for your loan.
Visit with a Team Ringgold REALTOR®. A buyer's agent will be happy to sit down with you to review the process of buying a home and answer any questions you have about the process. They will work in your best interest to find you the right property, negotiate with the seller's agent, and guide you through the closing process. Your agent also can introduce you to a reputable local lender who's familiar with first-time home buyer programs.
3 Months Out
Get pre-approved for a loan. If you've been following this timeline, your credit score, paperwork, and down payment should be on track. You've done your research on lenders and met with a buyer’s agent. Now you'll need to get pre-approved for a mortgage.
Make an appointment with your lender and bring or send them all your paperwork. After reviewing your paperwork and doing a credit check, they will be able to tell you how much of a loan you're approved for and what your estimated monthly payment will be. Evaluate your budget and take into consideration your new house paymeent and consider borrowing less than the maximum the lender allows so you can live comfortably and still have a little money left over each month.
Start shopping for your new home. One you're pre-approved, your buyer's agent will be able to target homes that meet your wants and needs in your price range and send you the current active homes for sale and notify you when the newest homes become available.
Make an offer on a home. Once you find the perfect home, your agent will walk you through all the required paperwork. It usually takes 30-45 days from the day your contract is accepted until you close and get your keys.
Get inspections. After an offer is accepted, your agent will scheule inspectors to look at any items that are concerning to you about the property. An inspector finding something that needs major repair could delay closing.
Be prepared to provide your lender with additional information. You're in the home stretch! If you've been keeping your documents up to date, and your down payment is in reserve, these final steps are the easiest, however your lender may request a few more items from you as you approach closing. They will also make sure you have insurance for your new home before closing.
Do a final walk-through. The purpose of the walk-through of your new home, usually a day or two before closing, is to make sure the home is in the condition you and the seller have agreed upon.
Get a cashier's check or wire funds to the title company for closing. Make sure you get the exact amount needed for closing. You'll get that number a few days before closing so you can secure a cashier's check or arrange to have the money wire transferred. Regular checks will not typically be accepted.
That's it. Congratulations! You are a homeowner!
