Understand the 20 crucial steps to homeownership... from start to finish.
The steps below will demystify the homebuying process. Get a full understanding of the important steps from beginning to end and everything in between; what you know, may not know, and need to know. It's all here. We will be by your side to guide you through the process and get you to closing day.
THE HOME BUYING PROCESS
Getting started. Ready to buy a home? Begin by assessing your finances, setting a budget, and obtaining getting pre-approval for financing. It's important to start your journey properly to avoid headaches in the end. Let's look at steps 1 - 4.
STEP 1 - KNOW YOUR CREDIT
Know your credit. The first step.
Our mortgage loan specialists will conduct a one-on-one consultation and ask a few preliminary questions. We highly recommend allowing us to get a copy of your credit report. We understand sharing your personal information can feel like a vulnerable move, but we promise this is a necessary step. It’s your credit report that sets the stage for the next phase of the home buying process.
STEP 2 - SET A BUDGET
Your budget. Where dreams meet reality.
Your budget defines where your dreams and wishes meet. When it’s time to search for homes, you can look with your eyes wide open. This means we will get the numbers right. Although putting numbers together is not as glamorous as looking at homes, it’s your budget that will help determine how much money you can afford. Having clarity around your budget will soothe your comfort level when you begin exploring buying options.
STEP 3 - KNOW YOUR NUMBERS
Know the numbers. Your financial standing.
Thanks to step 1, you should know your current credit score. However, there are a lot more numbers we calculate on your behalf. The numbers include your debt-to-income ratio, residual income, loan-to-value, interest rate, deposits, closing costs, and loan fees just to name a few. When we begin the process, the earlier we know your numbers, the easier the entire process will be. The good news is, we take care of all these calculations for you.
STEP 4 - MONEY, MONEY, MONEY
Cash is king. You need money.
While veteran home buyers do not have down payments, money is needed for deposits and inspections, appraisal and additional costs. Then you'll need money for closing costs and moving expenses.
The amount you will need is based on your purchase price, loan amount, interest rate, and credit scores. Don’t have enough cash yet? Now is a great time to find ways to increase your savings. Explore your options. Sell something. Work a side hustle. Get a financial gift from a family member. Do whatever it takes to get the money you need.
Clear your mind and breathe deeply. Evaluating your finances objectively and adjusting to new budgets can seem daunting. Keep in mind that achieving financial clarity paves the way for a smooth homebuying experience. Now it's time to dive into the fun part, steps 5 - 8.
STEP 5 - IT'S TIME TO DREAM
Your dream. At your fingertips.
It's time to find your dream home. Here’s where the fun begins. We’ll send you our ‘Dream Worksheet’ to complete. The worksheet is your house-hunting guide; it’s where you write down your needs, wants, and desires. The Dream Worksheet keeps you on track during the home search. Don’t get discouraged if some of the homes you find are not an exact match (and it’s hard to find an exact match) or the house you really love is already under contract. It’s not a setback, it is a step that brings you closer to the home that will be perfect for you.
STEP 6 - YOU FOUND "THE ONE"
Love at first tour. (Or maybe the fifth tour)
You found it, the perfect home! The seller considered your offer and your offer was accepted. Congratulations! Take a moment to celebrate this major step. You’ve worked hard to get this far and you’ve earned it. You are now ‘under contract’.
Being under contract is kind of like deciding to get married. Things have gotten more serious, but you still need to be 100% sure. You’re entering a limited due diligence period. During this time you, your real estate agent (your advocate), and hired home inspectors will take a detailed look at the property’s condition.
STEP 7- HOME INSPECTIONS
Flawed Perfection. The perfect home, except...
Now’s the time to take a really close look at the home you are under contract to purchase. You will contact a licensed home inspector to conduct a thorough inspection. The inspection takes 4-5 hours to complete and the inspector will look at everything from the roof to the foundation and everything in between. After you receive the inspection report, don’t fret over minor cosmetic issues or small repairs you can handle yourself after closing. Focus on big-ticket items that could cause financial burdens in the future. The main things to look for are roof leaks, foundation issues, plumbing, electrical, and heating and air systems to name the top 5 areas of concern.
STEP 8 - ASKING FOR REPAIRS
To fix or not to fix? That is the question.
Every home, even new construction, has issues; some major, some minor. The last thing you want is to buy a home with major problems.
As the buyer, you can request repairs to be completed by the seller. The seller has the option to agree to all the requested repairs, some of the requested repairs, or none of the requested repairs; it is the sole discretion of the seller. Keep in mind, this is an opportunity to negotiate some of the previously agreed upon terms in the sales contract. Anticipate some back and forth between you and the seller. If they do not accept your repair request, there is the option to terminate your contract and continue the process of looking at other homes. You are never stuck with a bad house.
Time to take a breather. You've been on the move, from house hunting and accepting contracts to attending inspections and requesting repairs. Whew! You've reached the midway point. Let's pause for a moment while we prepare your loan for processing, steps 9 - 12.
STEP 9 - APPLICATIONS AND DOCUMENTATION
Every loan has a story. Tell yours.
The application and documentation phase is where you begin to tell your story and share important information as it pertains to your loan. Your documents are written verification and clarification for the info you’ve provided. As we collect your rental history, job history, income, and savings, we will request the supporting documents. The key here is to have all your documents gathered and returned to us as quickly as possible. Don’t get overwhelmed or frustrated over why certain documents may be required. Just remember, if we request a document, it’s because it is needed.
STEP 10 - VERIFICATIONS AND EXPLANATIONS
Disclose and Verify. Everything in writing.
All the information you provided on your loan application requires written verification. This could be as simple as a 3rd party like your landlord, your employer, or your bank to as complex as written letters. This is a time for you to write written letters to explain the circumstances of any outstanding debts, negative tradelines, or your rental history. Verifications allow the lender to feel confident when it comes to loaning you the money needed to purchase your dream home. Information that is disclosed is important to the lender, as it is used to determine your ability to repay your mortgage.
STEP 11 - TITLE AND APPRAISALS
The past and the present... all coming together.
By now you are probably anxious to get the process finished and make plans to move in, but there are still more steps that need to be completed. The closing attorney will perform a title search to confirm whether there are judgments or liens against the property, the current owner, and any previous owners.
An appraiser will assess your property's condition and give an opinion of the property’s value. In rare cases, the home may not appraise for the purchase price. This is an opportunity to renegotiate terms with the seller.
STEP 12 - INSURANCE AND WARRANTIES
Protecting your asset. Your home.
Homeowner’s insurance and a home warranty are both ways to protect and maintain your home’s value. Homeowner’s insurance is required by lenders and covers you from unforeseen catastrophic losses. Home warranties are optional and will protect you from paying out-of-pocket expenses when you have system problems like plumbing, heating, and air. Both the mandatory and optional coverages for your home allow you to sleep at night knowing your home, your most valuable asset, is protected.
Stay Calm. Anticipate additional verifications, the initial underwriting process, and the ultimate approval stage. You're almost there. Inhale deeply, perhaps even a few times, as the finish line approaches. Just a few more steps, and you'll be in your new home. You are on steps 13 - 16.
STEP 13 - PUTTING IT ALL TOGETHER
Pre-Underwriting. The beginning of the end.
In this step, we ensure your documents and verifications are in order before sending them for underwriting. As we urged in Step 9, it’s important to have all your documents organized and ready to go. We will conduct an automated underwriting approval to determine your pre-underwriting approval. The automated system assumes all the information and computations are correct. This pre-underwriting is completed before going to full underwriting.
STEP 14 - INTIAL UNDERWRITING
Loan review. One step closer.
Unlike the initial automated, your loan approval is determined by a real person… the underwriter. The underwriter completes actual verifications including contacting your employer and landlord. Underwriting happens behind the scenes, but that doesn’t mean you won’t be involved. You may be required to provide additional documents or add clarification on things like bank deposits, new inquiries, or new debt on your credit report. Changes in your employment, income, credit, and assets will affect your approval so don’t make any changes with your job, income, or credit until after closing.
STEP 15 - FINAL CONDITIONS
Full loan approval. It is finished.
The final conditions that are sent from the lender are instructions for the closing attorney. The instructions include collecting the required funds for closing, getting the final homeowner's insurance policies, and making copies of your driver’s license.
Take this moment to enjoy yet another major win and break out into your happy dance.
STEP 16 - CLEAR TO CLOSE
It's official. The best 3 words.
When you started this process, it was sort of like the process of finding your soulmate. You dated, got engaged, then were married. In dating, we know ‘I love you’ is awesome to hear. In the buying process, you will want to hear another 3 words. They are, you are ‘clear to close’.
Wow! Your loan is done, finished, finito! Celebrate and relax. The hard part is over. Now it’s time to prepare for a final walkthrough of the property, closing, and moving in.
STEP 17 - FINAL HOME INSPECTION
The final countdown. One last look.
It's time to conduct a final walkthrough of your (soon-to-be) new home! This is your last inspection before closing day. If you had a professional home inspector, they are welcome to look at the property one last time with you. The seller should already be moved out and cleaned the property. Your home should look as expected inside and out. Check that all repairs were completed and personal items have been left or removed based on the contract. If everything looks as it should, take this opportunity to visualize how you plan to transform this empty house to make it into your home.
STEP 18 - IT'S CLOSING DAY!
Closing day! Your keys await.
This is the moment you’ve been waiting for. Remember to take deep breaths and don’t let the worry of signing paperwork take you out of this momentous day.
Avoid doing anything that can jeopardize your loan approval. The lenders will conduct soft verifications behind the scenes. Don’t allow anyone to pull your credit, don’t make any new purchases, and don’t quit or change jobs. After all the papers are signed and the mortgage company releases money to the closing attorney, you will officially own your dream home.
You did it! You are finished. You've been waiting for this exciting moment. As the closing day approaches, take a moment to step back, reflect on everything, and prepare yourself for signing documents and get ready for your upcoming move. Steps 17 - 19.
STEP 19 - MOVING IN
It’s yours. Enjoy. You are home.
The homebuying journey is complete. You’re not dreaming anymore. You’ve taken your dream and turned it into a reality. When the closing is over and you have the keys to your new home it’s time to move in. Moving trucks need to be scheduled, utilities must be turned on, and boxes are ready to be unpacked. Start your moving plans early. Don’t wait until after you close to get your moving ‘to-do’ list started. You made it through the frenzy of buying a home and getting to closing, you deserve to have a smooth move and enjoy your new home.
Thank you for allowing The VA Lady to be on this journey with you.
BONUS: TAX EXEMPT STATUS
Tax-Free. You’ve earned it.
This is a great benefit you do not want to miss out on, as it can save you thousands of dollars a year in property taxes. . The impact of being tax-exempt or having reduced property taxes can have a major impact on your annual budget. Qualified homeowners may be exempt from paying a portion or all of their property taxes due to their status as a veteran, certain disabilities, seniors, or various homestead exemptions. Every state is different when it comes to the guidelines for tax exemption for disabled veterans. Contact your county treasurer’s office for the most up-to-date policy.