Buying a home can be overwhelming, especially for first-timers. Once you find the house of your dreams, how do you navigate the process from start to finish?
“Assuming you have fallen in love with a home and it’s the right one for you, it’s important to be organized and disciplined,” says John Pataky, executive vice president for consumer and commercial banking at TIAA Bank. “Put in the time and the effort on the front end of the process before you even make that initial offer. Put yourself in the best position to see the transaction get completed.”
Get your financial house in order
Pataky says there are a number of things you should work on before viewing your first home. Research how the home buying process works. Understand your budget and what you can afford. Work with a lender to get preapproved for a mortgage. Get your credit and finances in good standing. Set money aside for a down payment as well as closing costs. He says being organized can help you act quickly once you find the perfect house.
Submitting an offer
When presenting an offer, it needs to be in writing and accepted by all parties. Pataky says you can soften what is normally an impersonal experience by attaching a written letter with the offer. In the letter, explain to the seller why you are the right person to buy their home.
Be ready for some stiff competition. Depending on where you live, there could be as many as six offers for the same property at the same time. In some markets, you may also be competing against cash offers. Don’t be discouraged if your first offer is not accepted. He says some consumers search for a while before finally purchasing a house.
Applying for financing
If you are a first time home buyer, most likely you will need financing. Pataky says this is where being organized is important. When applying for a mortgage, all of your personal information should be at your fingertips, including your social security number, employment records, bank statements, retirement plan, and investments. Be prepared to package and deliver all of the documents/information at the same time. He says the entire process from submitting an offer to closing can be shortened if you deliver all of the required paperwork at once, instead of separately.
Typically, within 10 days or so of applying for financing, you will receive various documents from your lender, including a loan estimate. The document will detail the estimated closing costs, as well as the amount of money needed to close the loan.
If you are using funds that are being gifted to you to buy your home, Pataky says it’s important to have a discussion about this early on with your lender. Make sure you share any relevant documentation to prevent unnecessary delays in the process.
Getting from processing to underwriting
After financing is approved, the loan will go through processing and underwriting. During this part, the lender may reach out to you for clarifying information. As the borrower, make sure you have provided them with good contact information. The same applies to the co-borrower if there is one.
When you are going through this process, Pataky advises consumers to avoid any large fluctuations in cash balances. If it can be avoided, don’t move funds or make any large purchases. He says it's important to show a stable financial picture throughout the application process.
Assuming the loan has been approved and all of the conditions are met, you will receive closing instructions. The information will include the date and time of the closing, the final amount of funds needed to close and instructions on how to deliver the funds to the closing agent. Generally, the preferred method is wire transfer. Cash or personal checks are typically not accepted. After each party reviews and signs the documents, the ownership of the home transfers to you. Congratulations, you are now a homeowner!
“It can be an overwhelming process if people aren’t first and foremost organized, somewhat disciplined and prepared for the process,” says Pataky. “There are easy ways to do that to take the pressure off what can be a less than thrilling experience for some consumers.”
Linda Bell joined FOX Business Network (FBN) in September 2014 as an assignment editor. She is an award-winning writer of business and financial content. You can follow her on Twitter @lindanbell.