Buying a home is the most significant investment most of us will make in our lifetimes. Given this, it may not come as a surprise that the process involved with becoming a homeowner is much more complicated than the everyday purchases we make at the grocery store or even the car dealership. If you’ve never been through the process before (or if it’s been a while), this simple roadmap will help clarify each step in the journey to homeownership.

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Phase 1: Personal Finance Prep Work

In any situation that involves major financial decision making, it’s a good idea to lay some groundwork before you actually dive in. When you’re thinking about buying a home, that means cleaning up your personal finances and doing some initial detective work on where you might want to live. This should all happen before you speak to a mortgage lender or a realtor so you can boost your chances of successfully applying for a mortgage and getting a fantastic rate.

Step 1. Pay Off Debt

Do your best to pay off any debts that might make your debt-to-income ratio unfavorable. Of course, not everyone has a ton of extra income each month to use in paying off debt, but the more you can pinch pennies, the better off you’ll be as you move through the homebuying process.

Step 2. Boost Your Savings

If possible, try to build up your savings and assess your finances to determine how best to finance a down payment on a new home. Remember, though, that not all mortgages require a substantial down payment. In fact, some of the mortgage types we offer don’t require any down payment at all. Still, it never hurts your finances to save, and stricter budgeting can be a way to build up a nest egg for home decor and improvement projects.

Step 3. Do Some Research

If you don’t already know, research the city or neighborhoods you’re interested in living in. Is there part of a city that’s more appealing to you than others due to the proximity to good schools, work or outdoor spaces? Is there a particular street in a neighborhood you’d want to avoid because it backs up to a highway? Start looking around so you can be informed when you start your search for a new home.

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Phase 2: Mortgage First Steps

Contrary to what you may think, the next step after getting your finances in order isn’t to start looking for a house. Homeowners look carefully at each offer they receive, and offers that don’t come with an official mortgage pre-approval typically aren’t taken seriously. Life gets complicated for sellers when a pending sale falls through, so they like to minimize risk as much as possible. 

Missing out on pre-approval can also be harmful for the buyer. If you make an offer without getting your mortgage application submitted and pre-approved, you could end up buying more house than you can actually afford. So, you’ll want to find a mortgage lender to work with, often before you even find a real estate agent. 

Step 1. Apply

The first step to pre-approval is to actually get started on your mortgage application. Before you submit an application, you may want to meet with your local Mortgage Specialist first so you can get to know them and ask any questions you may have. Then, you’ll fill out your application and submit financial documentation to provide more information about you as a borrower.

Step 2. Sign Initial Disclosures

Initial disclosures are official forms that contain essential information for you to understand as a borrower. They include things like state and federal rules that you need to be aware of, plus some initial details about the loan you’ve been offered. When you sign these disclosure documents, you’re indicating that you understand the rules and terms as explained. 

Step 3. Get Pre-Approved

Pre-approval is an initial acknowledgment that a borrower is trustworthy. You’ll get pre-approved before you even know which house you’re going to buy, so this is an initial approval that you’ll later complete with more information once you get through Phase 3. Learn more about the benefits of our Direct Advantage Pre-Approval Certificate.

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Phase 3: Finding Your Dream Home

Step 1. Find a Realtor and Start Looking

With a pre-approval in hand, you’ll be in a great position to make appealing offers, even in competitive markets. That means it’s time to find your real estate agent if you haven’t already (your Mortgage Specialist is happy to make recommendations) and find the house you want to buy.

Step 2. Make an Offer

An offer is a formal show of interest in a home for sale. Your realtor can tell you more about getting your offer accepted. If the offer is rejected, you can either change it to be more appealing or, if that’s not possible, move on to another home. When your offer is accepted, you’re clear to move forward.

Step 3. Home Inspection

Home inspection is the last step in the initial buying process. You want to make sure the home is up to code and that you are aware of any maintenance or structural issues before you go any further in trying to purchase, so this step is vital. Factors such as region and loan product may impact the outcome of the inspection.

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Phase 4: Moving Your Mortgage Forward

You’ve found the right house and made a successful offer, then had the home inspected. Congratulations! If everything is still in order at this stage and no major dealbreakers were uncovered in inspection, you’re ready to formally dive in.

Step 1: Home Appraisal

Though they may seem similar at first glance, inspection and appraisal actually serve two different purposes. The inspection gives you, the buyer, important information about the condition of the property you’re buying. The appraisal, on the other hand, is a formal assessment of whether the property is actually worth what you’ve offered to pay. This tells the lender whether it’s a good idea to complete the loan. 

Step 2: Submit for Conditional Approval

After the appraisal, if no major issues were uncovered, your Mortgage Specialist will help you submit your application for conditional approval. This again isn’t the final step—it’s one last chance for us to look at the sale, including all the information obtained in the appraisal, and determine whether you need to do things like obtain flood insurance or close certain credit accounts.

Step 3: Meet Conditions

Your Mortgage Specialist will help you do what’s necessary to meet your approval conditions. Once you do, you can move forward to the final phase!

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Phase 5: The Home Stretch

You’re almost there! Just a few more steps and you’ll own a new home.

Step 1: Final Approval

You’ve met your approval conditions, and your Mortgage Specialist has helped you seek final approval for your home loan. If everything’s in order, this should be a simple process.

Step 2: Signing and Funding

When your final approval comes in, you can actually complete the purchase! You’ll sign your loan documents and a final real estate purchase agreement to make it all official. Then, your loan will get funded, the county will record the purchase and the seller will receive their payment.

Step 3: Get Your Keys and Move In!

After funding, that’s it! You’re a homeowner! You can move in and enjoy your new property.

A Trusted Companion for the Journey

This may seem like a complex process at first glance, but the good news is that it all feels a lot more simple when you have a friendly mortgage expert by your side. Contact your local Directors Mortgage branch today to ask some initial questions and get the process started!