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The Homebuying Process for First-Time Homebuyers

Being a first-time homebuyer involves a lot of work, but it will be worth it in the end! We’ll walk you through the steps from getting your finances ready to getting the keys.

Buying a home is a long and, sometimes, overwhelming process. That’s especially true for a first-time homebuyer. However, with some self-education, good planning, and preparation, the process can be smooth and less stressful. Let’s take a look at the 11 steps of the homebuying process and what to expect along the way.

Step 1: Prepare your finances

Before you begin the homebuying process, ensure you’re financially ready to handle a mortgage. Here are some tips for preparing your finances ahead of the homebuying process:

• Set a realistic budget. How much house can you actually afford? Before you start your search, take some time to determine how much house debt you can carry. Consider your existing and expected income as well as ongoing expenses. 
• Boost your credit score. If you’re thinking of buying a home within the next year, take steps now to bring your score up. Make full and on-time payments, avoid opening too many new credit cards, and keep your credit utilization low. You’ll also want to check your score before applying for a home loan to ensure you’ll qualify for a mortgage. 
• Save for a down payment. If you haven’t already done so, start saving for a down payment now. 

Once you have your finances worked out, you can start shopping for a mortgage.

Step 2: Choose a lender

When choosing a lender for your mortgage, you can decide to use your current bank or credit union, another financial institution, or to utilize the services of a private lender. 

When researching potential lenders, look up online ratings and reviews. Also, look for lenders that offer excellent service experiences, reasonable closing costs and fees, transparency about the loan process, and favorable loan rates. Don’t be afraid to ask potential lenders all your questions; they should be more than willing to provide you with answers. 

Step 3: Get pre-qualified for a mortgage

Once you’ve chosen your mortgage lender, you can apply for pre-qualification on your loan. Getting pre-qualified for a mortgage before you start your search will make the homebuying process easier. It will also help ensure you keep your search within your budget.

Depending on your lender, the pre-qualification process can take a few weeks, or just a few days depending on how quickly information is provided to the lender. The lender will ask for your financial history and other personal information. If you have a co-borrower, the lender will need this information about them as well. If the information you provide is satisfactory, as is your credit report, the lender will begin constructing the details of your loan.

When they have determined how large a loan you qualify for, they will grant you a pre-qualification letter. This letter can be a good bargaining chip if you find yourself competing against another borrower for the same property.

Step 4: Find a real estate agent

A real estate agent can help you find the perfect home that fits your budget and preferences. They have access to a broad range of homes on the market and can negotiate on your behalf.

Step 5: Find your dream home 

Once you’ve been pre-qualified and have a real estate agent, it’s time to start shopping for homes. Here are some tips to keep in mind as you look for your dream house: 

• Know what you want. Make a list of your must-haves before you start house-hunting. Is a large backyard a deal-breaker for you? Do you need a specific number of bedrooms? Knowing what you want will help you narrow down your options.
• Be prepared to negotiate. The seller may counter your offer, so be prepared to negotiate on the price. Your real estate agent can advise you on the best course of action.
• Beware of red flags. Inspect a home thoroughly before considering it for a purchase. Look for structural issues, like doors that don’t close, cracks in the foundation and sagging ceilings as well as the presence of mold and unexplained smells. 

Step 6: Make an offer

Once you’ve found the home you want to buy, you can put down an offer. If your offer is accepted, the deal will officially be “under contract”. This means you’ve made an offer on a home which the seller has accepted, but there are a number of contingencies that must be addressed before the sale is finalized. At this point, you’ll likely need to pay “earnest money,” or a portion of the down payment. 

Home sales are typically under contract for 4-8 weeks, though this can vary with each lender and sale. You won’t be sitting around waiting for the closing, as you’ll need to complete steps 7-10 at this time. 

Step 7: Get your mortgage

As soon as your offer has been accepted, your mortgage lender will get to work on the details of your loan. If you’ve gotten pre-qualification, you should have most of this ironed out already, though the final number-crunching will depend on the loan amount, the property value, the type of mortgage you choose, and the size of your down payment. Throughout this time, you’ll need to provide your lender with various financial documents and sign a host of documents as well.

Step 8: Schedule a home inspection 

Hire a professional home inspector to thoroughly check out the home. This will reveal any issues with the home that you may not have noticed. If the inspection uncovers any major issues, you may be able to negotiate with the seller for a lower price or require the seller to complete repairs to your satisfaction.

Step 9: Obtain homeowner’s insurance

Homeowner’s insurance is necessary to protect your investment. Shop around for the best rates and coverage and make sure you have a policy in place before the closing date. 

Step 10: Schedule an appraisal

The home appraisal, which determines the actual value of the home, assures the lender they are not lending you more money than the home is worth. Your lender will likely choose the appraiser and schedule it on your behalf. 

Step 11: Close and move in

Congrats – you’ve made it! You’re ready for the closing, which is when the property will change hands. Be sure to set aside several hours for the closing and to come prepared with all the funds you need to cover the remainder of the down payment and all closing costs and fees. 

Once you’ve closed, the home is yours. All that’s left to do now is to pack up and move in. Best of luck in your new home sweet home!

To learn more about owning a home, visit our FREE Personal Finance Program!

All information presented on this page is for educational purposes only and doesn’t constitute tax, legal, or accounting advice. It is to be considered as general information, not recommendations. Please consult with an attorney or tax professional for guidance. All Credit Union loan programs, rates, terms, and conditions are subject to credit approval and may change at any time without notice. Subject to Membership requirements.
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