You’ve decided to jump into the homeownership world, but you are nervous about some of the aspects that might arise. Nuvill's guide breaks down this exciting process into five manageable stages.
Step 1: Prepare your finances before searching for your ideal home
Before you start looking at houses you might fall in love with, let's make sure you can afford it first! Realistically, you need to estimate your budget with your income, savings, debt, and other obligations you have. You don't want to put yourself in a stressful situation so you should be able to comfortably pay your full monthly mortgage payment for the foreseeable future. Also, when it comes to buying a home, you need to make sure you take into consideration your down payment and closing costs. But the good news for first time home buyers is that most buyers put down less than 20% (which is what most conventional loans call for, unlike FHA loans).
- Prepare for the costs
- Find out what you credit score can do for you when it comes to purchasing a home
- Use a mortgage calculator to estimate a monthly payment
- Determine your debt-to-income-ratio. The lower the percentage the better!
- If you are planning on putting less than 20% down, explore your other options with down payment assistance programs in Colorado.
Step 2: Find the best loan type for you and prequalify!
You have figured out your finances, budget, and determined what you can afford! You are now in a position to talk to a lender about loan types, interest rates, and the amount you could potentially borrow. When you discuss which loan type fits your situation best, you will need a pre-qualification letter. Remember: a pre-qualification letter is not a 100% commitment from the lender to give that loan amount to you. The lender will have you submit a bit more information to be fully approved. But having this letter with you when you decide to make an offer lets the home seller know you are a serious buyer!
- Are you going with a nontraditional or government insured loan?
- Determine if you choose a fixed or adjustable rate loan.
Step 3: Find your perfect home and give an offer a seller can't deny!
This is where the fun begins! You and your real estate agent can start to look for homes that fit your criteria. Use Nuvill's home search tool that allows you to search for certain areas, certain price points, and more! Save time, and most importantly make sure you find your dream home in before someone else does. Create saved searches so you get automatic updates on new listings! When you and your agent are able to find what you’re looking for, your agent can help you make a smart offer! Once a purchase contract is in place, you will most likely have to put down a deposit (earnest money that is put into an escrow account to show you are fully committed to purchasing this listing).
- Learn about mortgage points and how they can lower your monthly payments.
- Know what goes into a purchase of a home; inspections, home insurance, etc.
Step 4: Mortgage Process
Congrats! The seller has accepted your offer and now it is time to apply for a mortgage loan. Within 3 days of submitting your application to the lender, they will get back to you with a loan estimate. This will include what your monthly payment will be, the interest rate, and what closing costs will look like. Make sure to thoroughly read this! They will want you to verify your assets and income. This process will be a bit tedious and long, but don't stress, this process is lengthy for everyone!
- Make sure to overview the appraisal and inspection with your real estate agent.
- Your loan estimate is what you discussed with your mortgage lender.
Step 5: Closing
You’re almost able to step into your new house as a new homeowner! The next step is going to be that you receive your closing disclosure which lists the fees you will be responsible for (usually 2-5% of your home price). Then you'll want to make sure you talk to your real estate agent to discuss what you should bring to closing: ID, payments, cosigner if you have one, etc. During closing, there is a bunch of paperwork and an exchange of funds. Once the funds are with all the parties, you will get the keys to your new home!
- Know what you should expect at closing by talking to your real estate agent
- Discuss your closing costs and make sure you understand them.
- Know your moving schedule, and ask for movers or family to help you ahead of time.