Finding Your New Home
First-Time Homebuyer: 10 Steps to HomeownershipBuying a home is an exciting experience, but it can also be overwhelming. It will probably be the single largest purchase you ever make and it requires thoughtful planning. Therefore, all first-time homebuyers should take a few things into consideration before they head down the path of homeownership. Here are ten important steps to follow when purchasing a new house.
1. Evaluate Your NeedsYou’re emotionally and financially ready to buy a home, but wonder where to start. Your first step should be to evaluate what you need in a piece of real estate. Do you want more square footage for your family? Would you prefer to reside in an urban, a suburban or a rural area? Is an outdoor space important to you? What amenities are necessary and what can you live without? Make a list of wants and needs to help facilitate the entire home-buying process.
2. Get Pre-ApprovedOnce you've decided to purchase a home, you should contact United Heritage Credit Union to get pre-approved for a mortgage loan. A pre-approval is a written commitment from a lender affirming that a borrower would qualify for a certain loan amount based on credit information and income under a lender's guidelines at that time. This means that the lender has reviewed and verified your information to determine your borrowing power.
Obtaining a mortgage loan requires the lender and borrower to work closely together from loan application to closing, so be prepared to provide information and documentation to the lender as needed. If you choose United Heritage for your home loan needs, we’ll guide you step-by-step through the entire mortgage loan process – from pre-approval to move in. Learn more about UHCU mortgage loans.
There are numerous reasons why it’s a good idea to get pre-approved early in the process of purchasing your home. A pre-approval can:
- Provide you with an accurate idea of how much you can borrow.
- Demonstrate your financial strength and ability to follow-through with the purchase.
- Give you an advantage over those who aren’t pre-approved in a competitive real-estate market.
- Help speed up the underwriting and loan approval process.
- Allow you to recognize and fix potential, unknown errors on your credit report.
3. Work with a Real Estate ProfessionalWe strongly recommend you use a Realtor to help you find a home that meets your needs. Realtors have access to information you may not be able to obtain on your own. Take time to meet with a few Realtors before committing to one and ensure you’re comfortable with whomever you choose. A good Realtor will communicate with you frequently, helping you stay focused on homes that meet your specifications and are in your price range.
4. Search for a HomeAfter you’ve firmly established your borrowing power with a pre-approval letter from United Heritage and determined a prospective house payment that fits within your budget, you can work with your Realtor to begin house hunting. It’s important to start looking at neighborhoods before narrowing your search to individual houses. Consider factors such as each neighborhood’s proximity to your workplace, quality of the schools (if you have or are planning to have children), traffic flow, medical care availability, demographics, as well as distance to shopping and restaurants. Remember to remain flexible and accept that you may not find every feature you’re looking for in one place – refer to the prioritized list you made in Step 1 and make a decision that best suits your needs.
5. Make an OfferOnce you find “the house”, it’s time to make an offer! After consulting with your Realtor, you will determine how much to offer the seller in a written agreement or contract. A few items that may influence the amount you offer the seller are: the asking price, market conditions, recent home sales in the area, condition of the property and how badly you want the home. Your Realtor will prepare the documents that will make your offer official and will present it to the seller, or the Realtor who represents the seller. This contract is designed to protect you and the seller throughout the sales process.
6. NegotiateOnce you make an offer, the seller can respond by agreeing to your offer, declining your offer or making a counteroffer. A counteroffer provides you with what the seller is willing to negotiate. At this point, you can either agree with their terms or make another counteroffer. The seller can also decline the counteroffer. This process continues until you come to an agreement that satisfies all parties. Negotiable items include purchase price, closing costs, closing time period, repairs, landscaping, appliances, furnishings, painting and financing.
7. Hire an Inspector and Obtain Homeowner’s InsuranceAll offers should be contingent upon a thorough home inspection. For your own protection, it’s important to hire a qualified professional home inspector to go over every inch of the house you want to buy. The inspector will administer tests and give you insight regarding the home’s actual condition. If there are any serious issues with the house, you can request the seller make needed repairs, renegotiate the purchase price to absorb repair costs or withdraw your offer.
You will also need to provide proof of homeowner’s insurance at the closing, so you should work with your insurance company to obtain coverage beforehand. It’s important the lender’s investment, the equity in your home and your personal possessions are fully insured. You may also want to consider additional home warranties for such things as plumbing, wiring and structural defects.
8. Prepare for ClosingYour United Heritage home loan representative will make sure all necessary documentation is prepared and delivered to the appropriate title company location on the appropriate date. You will receive a document that outlines the costs and fees you’ll pay at closing. You’ll need your valid driver’s license, a certified check (if applicable) and any additional documents your individual circumstances require. In most instances, you will take a final walk-through of the property before the closing to ensure the home is in an agreed upon condition for transfer of possession. Because of the complexity of the transaction, you may need to allocate a few hours to sign all of the documents and complete the closing.
9. Close the SaleClosing the sale is when home ownership is legally transferred from the seller to the buyer – it’s a real estate sale and a mortgage transaction. At the closing, you will sign documents that will put you in possession of the home and finalize your mortgage loan.
10. Establish Residential ServicesOnce you’ve closed the sale of your new home, it’s time to establish the services you’ll need when you move in – such as electricity and/or gas, water, cable/satellite/internet, and trash/waste. In addition, you may need to start paying homeowner association fees, other annual taxes or landscaping costs.
The best first-time homebuyers do their homework beforehand and are prepared for each stage of the purchasing process. By following the steps we’ve outlined above, buying your first house can be a thrilling and an enjoyable experience. At United Heritage, we want to make financing your home as simple as possible. Get pre-approved today with no upfront costs! Apply now.
How Much House Can You Afford?If you’re like most Americans, the question isn’t, “Am I going to finance my new home?” But rather, “What mortgage payment can I afford?” Before you begin hunting for a new house, there are many factors to consider. Things like credit score, debt-to-income ratio and down payment requirements all affect how much you’ll be able to borrow.
The home loan industry now has guidelines in place that assist individuals in determining the amount of mortgage they should be able to borrow and repay. The new Qualified Mortgage (QM) rule states that your maximum monthly mortgage payment can be no more than 43% of your monthly gross income. These “qualified” mortgages are considered safe by the Consumer Financial Protection Bureau because they fall within established, good borrowing and lending practices.
At United Heritage, we want to make sure you can comfortably manage the mortgage we finance. The first step is to review your finances and determine if moving into a new home is feasible. Nobody knows your spending habits better than you. During this process, you should consider the increase (or decrease) in monthly utility bills, HOA dues, annual taxes or hazard insurance that you may incur with a new home. For example, if you are moving into a larger home, these monthly costs may increase significantly. Also, consider any upcoming major expenses that may affect your debt-to-income ratio (e.g. auto purchase, medical bills, college expenses, wedding, etc.). UHCU offers calculators that can help you estimate if you qualify as a borrower, what your monthly mortgage payment might be and how much you’ll be able to borrow. UHCU’s local loan specialists are also available to assist you in calculating your approved mortgage loan amount.
Visit our Mortgage Loans page to learn more about UHCU mortgage loans or submit a free, convenient online mortgage loan application.
How to Make Your Home Offer Stand Out in a Competitive Market
Housing markets across Texas are booming and mortgage rates are lower than they’ve been in years, so there’s hefty competition in the buying market. Frequently homes have offers on them before ever being listed on the market. If you’re in the market to buy a new home, we’ve got some suggestions for how to make your offer stand out and be noticed!
We’ve suggested getting pre-qualified for any loan before, but for mortgage loans it’s especially needed because of how quickly houses are being purchased. The average time a house spends on the market is decreasing. Your pre-qualification letter lets the seller know that you can back your offer and have the funds lined up to make a purchase. It shows that you are coming to the table already prepared. Many sellers won’t even consider an offer that isn’t backed with a pre-qualification letter.
To get pre-qualification, we suggest that you start the process 10-15 days before you begin looking at homes. Our loan specialists will help you get the right documentation together and lead you through the process. We’re offering some of the lowest rates in our organization’s history and our loan specialists are experts at getting you the best loan for your unique situation.
Offer Your Highest Bid
Being upfront with your highest bid is most likely the key factor to the seller considering your offer. In a seller’s market, they may have several bids coming in as soon as the house is on the market and they will consider the highest bids first. Because many homes are selling over asking price, it’s best for them to see your best offer up front.
Carefully Consider Your Contingencies
Even if you have the highest and quickest offer, if you include several contingencies in your offer, you may be eliminated from the set of considered offers. The fewer contingencies in your offer, the more appealing your offer may be. Make sure you have the time and finances to cover areas such as appraisal findings and inspections. Most financing contingencies can be avoided with your pre-qualification letter.
Increase your Earnest Money
Your earnest money is typically a small percentage of the asking price and is a way to let the seller know you are serious about the offer. Don't worry, if the offer isn’t accepted you get the cash back. Often, there may be multiple bids submitted over asking price for a home, but a larger earnest offering may be what makes your offer the most appealing. Make sure to work with your loan specialist to make sure you’re offering a contract that you can live up to and afford.
Be Cautious about Personalized Offers
In the past, buyers have written letters to sellers in an effort to personalize an offer and make a connection with a seller. While we aren’t suggesting that you skip this step, we’d be remiss to let you know that in some areas of the country, this is no longer allowed due to the chance of violating fair housing rules. Those rules state that a buyer cannot be excluded for consideration due to being a member of a protected class and often, these letters mention things such as age, family status or education. If you decide to write a letter, make sure that you are highlighting your financial offer and focusing on how you can make the buying/selling process easier for the seller to avoid any legal concerns.
Being prepared is your best bet for getting an offer accepted. Know the market you are looking in, partner with a great agent and have your finances in order and you’ll be all set to make an offer that is attention-getting. Contact us today to get your pre-qualification started!