First Time Home Buyer Check List
• Be an informed buyer
• Get your financial picture in order as soon as possible. This is a good time to work on your finances and know your budget thoroughly. You will need to be aware of your potential mortgage payment which would include the Principal, Interest, Taxes, & Insurance (PITI). Any late payments or delinquent accounts can affect your eligibility in the pre-approval process. Since it is an important component, be aware of your credit situation. Know your credit score. If you have a lower score you may have to discuss your score with a loan officer to better your chance at getting pre-approved.
• Familiarize yourself with the mortgage process. Common types of Loans: Conventional, FHA, VA, and Cash.
A. Conventional- credit score driven loans
B. FHA – backed by federal government, allows you to get in with little or no down payment, structure must meet minimum qualifications, good loan for first time homebuyers, not credit score driven
C. VA – allows no down payment, seller may pay all closing costs and prepaid, and no mortgage insurance.
D. Cash – also referred to as no documents
• Documents that may possibly be needed are W2, income tax returns from the past two years, copies of your pay stubs, and bank statements. This will vary with the lender you choose to go with.
• Get preapproved before you look for a home. Difference between Prequalification and preapproval: Prequalification is the process where your lender will look at a basic copy of your credit report and use this information you supply to determine how much mortgage you can afford based on your income. Preapproval occurs when all credit and employment is verified, your Mortgage is approved, and you can begin looking at homes.
• Sit down with your agent and discuss your ideal home.
• Determine your needs and wants to determine what types of houses you should be considering.
• House hunting – Make a score card for each house to help you keep track of the properties.
• When you find a house – Make an offer. There will be option money which takes your potential home off the market to other buyers. Earnest Money goes with the offer and counts towards your down payment (good faith money aside from a down payment that shows sellers that you are serious).
• In addition to a down payment you will need to reserve funds for closing costs. Depending on the type of loan, this cost can range from 2-5%. Your loan officer will have more information on this process.
• Arrange for home inspection. Protect yourself and don't skip this step. You should pay for the inspection. This is different from an appraisal. The home inspector will look for hidden problems within the home. Through the home inspection you will learn about any issues that may prevent you from buying the home. This may include mold problems, foundation issues, collapsed plumbing, electrical, HVAC, insulation, or a damaged roof. Additionally you may be able to negotiate a lower price if the house needed home repairs.
• Once you have made an offer and it has been accepted it will go to escrow. The escrow holder will work to make sure all documents, money and other necessary information is together before you close. Escrow is set up to protect the buyer, the seller and the lender. It can take time to complete escrow, although the time depends on the circumstances around your purchase. Once everything is completed you will sign the closing papers.
• Compare and secure homeowners insurance
• Make moving plans
• Secure final loan
• Do a final walk through
• Move into your new home and enjoy it