Buying Your First Home: Your Top Three To-Dos

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For many of us, it’s one of the biggest moves we make, both personally and financially. With a little know-how, you can make it happen now. It all starts with three simple steps: Get ready, get set, go!

1. Get Ready

Do you have what it takes to be a homeowner? If you’re motivated, the energy and time required to purchase your first home will take care of themselves. But, the money? It may not be as much of a hurdle as you think. Once you set a budget and know what you need and can afford to borrow (and how to borrow it!) then you’re on the road to happy homeownership. Get ready with three simple steps: 

Make Sure You’re Credit-Worthy

First, you’ll want to know your credit score. Your credit score plays a major role in determining how much you can borrow and the interest rate that you may qualify for on your mortgage. Before you apply for a mortgage, make sure that your credit reports are accurate and that your score is as high as possible. If you’re just starting out, a lack of credit history may be a challenge, along with high balances on your credit cards. Unsecured debt, like credit cards, should be paid off first. Car loans and student loans are generally less of a problem. If you’ve been paying those off on time every month, this can actually be a big advantage in establishing credit history. Your credit score can also impact the amount of down payment you’ll be required to make. 

Set A Budget 

Next, you’ll want to calculate roughly how much you can afford to borrow and pay each month on a mortgage. Create a budget based on your current income (even if you’re expecting an increase) as well as all of your current monthly expenses, including student loan payments, car payments and health insurance. Understand that your monthly mortgage payments will only be part of your monthly housing expenses. You’ll also need to estimate additional costs associated with your new home, including homeowners insurance, maintenance and utilities and property taxes. Until you find your new home, these will be estimates – but accounting for these first will help you set your price range more realistically.

Determine A Down Payment

Finally, consider your down payment. If possible, you’ll want to put down 20% of the total purchase price. However, there are more affordable options as low as 3.5%. Your lender can help you understand the options based on your financial situation and loan type. In terms of cash on hand, consider the closing costs and that you will typically pay the first year of your homeowners insurance a year in advance. Closing costs will generally include title insurance, title fees, recording fees, and loan origination fees. You’ll want to speak to a mortgage advisor early in your home buying to learn more about how much of a down payment you can afford.

2. Get Set

Once you’ve got a sense of your budget and borrowing power, get set to make your next moves.

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Get a Mortgage Preapproval

Reaching out to a lender is the first step in applying for a mortgage. Once you’ve got your budgeting done, you’ll want to get preapproved for a mortgage. If you wait until you’ve found the home of your dreams to begin the process of applying for a mortgage, you could very easily lose the chance to buy it. Loan contingency is an issue. Don’t let it be yours. A mortgage preapproval will give you an idea of how much house you can afford, your interest rate and the types of loan programs you qualify for. A lender will only offer you the amount that you can afford to pay monthly toward your mortgage. This not only helps you set your price range, but also speeds up the mortgage application process so you can make an offer quickly and with confidence. Take time before you begin this process to gather all your financial documents (like tax returns) and begin tracking mortgage rates so you’ll know a good deal when you see it and be able to get the very best possible loan.

Choose a Mortgage Lender 

The best place to complete the mortgage process may be online with Rocket Mortgage® by Quicken Loans®. At RocketMortgage.com, you’ll find an easy, step-by-step pathway to securing the mortgage that’s right for you, based on the type of home you want to buy, your timeframe and current credit score. Rocket Mortgage® offers both the tools and technology to make your mortgage process simple and convenient. Their friendly and knowledgeable experts are there to fully customize your mortgage solution and answer any questions you may have.

Find The Right House For You

Get online and check out the markets and homes that fit your budget and fulfill your dreams. Most real estate sites will connect with you the listing brokers who can schedule times to show you the homes you like. Bear in mind that these brokers may or may not be the partners you want to work with to find your dream home. As a first-time buyer, you’ll want to find a real estate agent you can trust to teach and guide you. The right agent will be your most important partner in the home buying process. They will know the neighborhoods and schools and will help negotiate a fair price for the house you want.

3. Go

Now’s the time to make it happen. Once you’ve found a house, it’s time to work closely with your broker to make an offer and close on your new home.  

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Make An Offer

Put in an offer to buy the home once you’ve found a property that checks all the boxes. It can be difficult to decide how much you should offer, so listen to the guidance of your agent. They will compare sales data and other local property values to help you make a reasonable offer. Your agent will also draw up an offer letter and submit it to the seller or the seller’s representative.

Keep in mind that you can ask for more than just a home sale in your offer letter. Depending on the condition of the property, you may want to request repairs or make your offer contingent upon a successful inspection. You may also request that the seller add upgrades to the home (like new carpeting or appliances) but keep in mind that this may drive the price up or cause the seller to reject your offer. 

With your offer, you are essentially making a promise that you’re serious about buying the property. You’ll include what’s called an earnest money deposit with your offer to prove it. An earnest money deposit is a small advance you make toward your down payment to the seller. Your earnest money deposit is usually equal to 1% – 3% of the purchase price of your home. Be 100% sure you want to purchase a home before you submit an offer because you could back out of the home purchase for a reason not specified, and lose your earnest money deposit.

If the seller rejects your offer, you and your broker may propose a counter offer and negotiate the details to reach a mutually agreeable purchase price. If not, you may need to move on to other properties. If your offer is accepted, congratulations! You’re moving on to closing on your new home.

Close on Your Home

At this point, a closing will be scheduled. Generally, the closing will be schedule within a month of your offer being accepted, though the date may be subject to further negotiations (which your real estate agent can handle for you). Before the closing, you’ll want to work closely with your real estate agent as well as your mortgage broker to be sure you have all upfront expenses and fees covered. Bear in mind that this includes not only your down payment but a number of closing costs that these trusted partners can explain and help you to meet. At the closing, you’ll be signing a number of documents you will want to be familiar with before you sign. Most are standard forms you can read over before the actual closing. On that day, you’ll no doubt be eager to move through the closing quickly, get your keys and move in. At this point, it’s time to go home!

Summary
Navigating the mortgage process can be complex. Rocket Mortgage® is a lender that can help make it simple. They created a better home buying experience centered around you – personalized, convenient and clear. So you can focus on making your house, home.

For more information and resources on home buying, check out these helpful articles. 

Quicken Loans Inc.; NMLS #3030; www.NMLSConsumerAccess.org. Equal Housing Lender. Licensed in 50 states. AL License No. MC 20979, Control No. 100152352. AR, TX: 1050 Woodward Ave., Detroit, MI 48226-1906, (888) 474-0404; AZ: 1 N. Central Ave., Ste. 2000, Phoenix, AZ 85004, Mortgage Banker License #BK-0902939; CA: Licensed by Dept. of Business Oversight, under the CA Residential Mortgage​ Lending Act and Finance Lenders Law; CO: Regulated by the Division of Real Estate; GA: Residential Mortgage Licensee #11704; IL: Residential Mortgage Licensee #4127 – Dept. of Financial and Professional Regulation; KS: Licensed Mortgage Company MC.0025309; MA: Mortgage Lender License #ML 3030; ME: Supervised Lender License; MN: Not an offer for a rate lock agreement; MS: Licensed by the MS Dept. of Banking and Consumer Finance; NH: Licensed by the NH Banking Dept., #6743MB; NV: License #626; NJ: New Jersey – Quicken Loans Inc., 1050 Woodward Ave., Detroit, MI 48226, (888) 474-0404, Licensed by the N.J. Department of Banking and Insurance.; NY: Licensed Mortgage Banker – NYS Banking Dept.; OH: MB 850076; OR: License #ML-1387; PA: Licensed by the Dept. of Banking –​ License #21430; RI: Licensed Lender; WA: Consumer Loan Company License CL-3030. ​Conditions may apply.