What is the Timeline for Purchasing a New Home?

Here is a timeline for purchasing a new home that will help you plan.

1. How much home can you afford?

• Determine your price range. Here’s a simple way to approach it: start by adding up your total monthly take-home income and then subtracting all of your non-housing monthly expenses. Consider that what money is left could be applied toward the down payment for your new home, but understand that you may need to save more.
• Figure out your debt-to-income ratio. This is an important factor for mortgage lenders in determining your eligibility for a home loan. If your debt-to-income ratio is higher than 25%, lenders may deduce that you’re carrying an unsustainable amount of debt. The lender may be: 1) less likely to extend you a mortgage loan, 2) require a higher down payment amount or 3)require a higher down payment and charge you a higher interest rate.

Additional factors to check to help find your price range for a new home:

• Mortgage payment — The principal and interest you pay to your lender.
• Property taxes — The money you may have to pay to your city, county and state to support schools and public services.
• Homeowner association fees — The fees you may have to pay if you live in a condo, co-op or home with a neighborhood association.
• Utilities and maintenance — The costs to maintain and repair your home, as well as fees for utilities like water and electricity.
• Closing costs — The additional fees paid to cover the legal costs of buying your home.
• Homeowners insurance — The cost of insurance to help you cover costs of property loss and damage in the event of theft, fire, storm and other potential covered risks to your home and possessions. Factors like where the home is located, its age and condition will figure into the price.

Is there enough money in savings for a modest down payment?

Do enough research to know typical home prices in your area. Decide whether you have (or can save) enough money for a 20% down payment, or explore the possibility of a 5% down payment with private mortgage insurance.

Step 2: Define your needs and wants

What are you looking for in a home? Understanding the difference between needs and wants when looking at potential homes helps you prepare to look at potential homes:

Needs. What are the deal-breaker attributes that you can’t live without? You can start with these questions:

• Is there a particular layout, or location or essential characteristics that would be difficult to change after you move in?
• How many bedrooms? How many bathrooms?
• Do you need a neighborhood within a good school district?
• Is your preference a one-level layout?
  

Wants. Also, are there things that could be changed or added after you move in? Could you add a fenced-in yard? A pool? Could you change wall colors? Flooring?

Separating your needs from your wants can help you save time in the house-hunting process. It also helps keep emotional thinking from steering you toward a home that may not be the best fit.

3. Now it’s time to get pre-approved for a loan.

This will help you know if you would qualify for a loan and how much money that would be. Knowing this helps you pinpoint which types of houses you would qualify to purchase. Pre-approval also helps sellers take you more seriously.

Want to speed up the purchase process? Being pre-approved can speed up the escrow process significantly.

Paperwork needed for pre-approval:

• Your credit scores
• Loan application
• Two months of pay stubs
• Three months of checking and savings account statements
• Two years of W-2s and 1099s
• A copy of your driver’s license

3. Find a realtor.

Once you have this basic information together, you’ll need to find a realtor to help you find a home. He or she will have access to home listings in the area you want to live. You can also start looking at homes online. This will help your real estate know the types of homes you’ll want to see. We would love to have the opportunity to work with you.

4. Find a house and make an initial offer.

After you have found your realtor, you can then begin the process of looking at homes that fit with where you want to live, the specifics you desire in your new home, and your price range.

Do your research. Go to open houses, look at listings online, and learn about the neighborhoods and homes in your price range. Buying a home can be a significant commitment with life-changing implications. Putting in the time and effort at the beginning to identify your needs (and the range of home listings that meet them) can be well worth it in the end when you have found the perfect home.

Once you find a home that you like, you and your real estate agent can decide on what offer you want to make.

5. The sellers might counter offer.

But, be prepared for the seller to come back with a counter offer above your initial offer. You can discuss with your real estate agent whether you would like to accept the amount they are asking, or suggest a price somewhere in between what you initially offered and what they are now asking you to pay.

6. If the seller does not accept your offer.

Your real estate agent can discuss with you whether it is worthwhile to go back to the seller with an updated offer. Then you could decide to look at more houses.

7. If the seller accepts your offer.

There may be further negotiations (your realtor will help walk you through this), but once they are done, your offer is accepted.

8. Your mortgage broker sends you a Good Faith Estimate (GFE).

Once you have an accepted offer, if you don’t already know a mortgage broker, your realtor will be glad to recommend one to you. The mortgage broker will send you an estimate (GFE) of closing costs, principal plus interest payments, and escrow payments (insurance and property taxes) based on your accepted offer.

9. Set up home inspections.

Then you and your realtor may ask for a home inspection in your agreement with the seller. Depending on the house you choose, you might have: a general inspection, a separate sewage inspection, a termite inspection and/or a mold inspection. Based on the recommendations of those inspectors you might need to ask the sellers to make some repairs to the house as part of their agreement with you.

10. Start the loan process.

• Start with locking in a rate on your loan
• Then, your loan is sent for underwriting
• Then, you’ll be able to put a deposit from your down payment into escrow

11. Pay for the house appraisal.

This determines the $ value of the house. If it appraises higher than the amount you need for your loan, you are good to go. If it appraises lower than the amount you need to purchase the house, you may need to either negotiate with the seller or find additional sources of funding.

12. Finish the loan process.

At last you can put the rest of your down payment and the closing costs in escrow, sign the paperwork,
and you become a home owner!

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