Buying your first home can be a daunting experience but Obsidian Financial Services provides the tools to make the process simple and stress-free. We are here to guide through the entire process, from the pre-approval stage to the closing documents.
Let Obsidian Financial help you learn the basics of home purchasing and explore all of your all options with a consultative approach.
Factors to consider:
- How much can you afford and what will your budget allow for monthly housing expenses?
- How much money would you have to contribute to purchase the home?
- How have you paid your other financial responsibilities in the past?
- How stable is the income you will use to continue making the required payments?
Step 1: Getting Pre-approved
Knowing your credit history is one of the most important steps to pre-approval. The higher your score, typically the more favorable lending terms you will be able to secure. Sometimes the difference of 20 points on your FICO score can be the difference of tens of thousands of dollars in interest savings over the life of the loan.
In the past, individuals who purchased a new home traditionally had to put down a 20% down payment. This would be equal to 20% of the purchase price of the home. Now, it can be as little as 0.5-3.5% down for FHA , USDA and VA Loans. As a buyer, you also need to keep in mind that closing costs can be a part of the equation. Closing costs vary depending on your individual situation.
Step 2: Calculating the amount of home you can purchase.
Consider your entire budget: how large are your credit card bills? What are your car payments? How much will it cost you to maintain your new place? What kind of tax deduction can you expect from the interest that you will pay on your new home?
Step 3: Determining the most beneficial loan program.
The wide variety of new loan programs has made it easier for home buyers to purchase a new home. However, it can be difficult to decide what mortgage is right for you and your family. The standard 30-year fixed rate mortgage allows predictable payments and allows you the stability and peace of mind your family may be looking for. If you’re planning on moving after a few years, consider an adjustable rate mortgage, which has lower interest in the beginning and keeps your payments lower for the first few years.
Step 4: Locating a new home.
Finding the right realtor can make or break your home buying experience. Make sure you find a person that you feel comfortable with and who will work to find you the right home. Make a list of the things that you want in your dream home such as number of bedrooms, lot size, location, style of home, and the future growth of your family. Then sit down with your realtor and discuss your wishlist.
Step 5: Making an offer.
An experienced real estate agent will be well versed in the art of negotiation and how to present the most attractive offer. Should you ask for the seller to pay for closing costs? How much did similar homes sell for nearby? How long has this house been on the market? Your realtor can evaluate market conditions and help you make a reasonable offer.
Step 6: Signing a new contract.
When you sign a new contract you are required to pay an earnest money deposit. This shows that your offer is serious and the deposit is typically held by the real estate company. In some states, you will want a real estate lawyer to go over the deal. Typically, buyers can back out if the home inspector finds big trouble or if they can’t find financing or acceptable homeowners insurance.
Step 7: Completing the loan application.
Now is the time that you and your loan officer will finalize the loan program that will be most beneficial. You will sign an initial set of application documents to start the process and lock in an interest rate.
Step 8: Take a Close Look at Your New Purchase
Make sure that your contract is contingent on a home inspection for a detailed and objective evaluation of your home’s interior and exterior. A good inspection will look for mechanical issues, mold and water damage, and any other issues that may be costly to you in the future. You can then negotiate with the seller over needed repairs. Be sure the title of the house is free of any liens.
Step 9: Obtain Home Owners Insurance
Homeowners insurance is required for all mortgages. Typically one year home owners insurance premium will be paid at or before closing.
Step 10: Your closing documents.
This is the time when you meet at your agents office or title company location to sign your loan documents and the new deed to your dream home. Depending on where you live, the keys may be given to you that day or within the next 48 business hours. CONGRATULATIONS! You are now the proud owner of your dream home!