Steps to Getting a Mortgage and Buying a Home
Preparing to Buy Your First Home
- Start saving for your down payment and closing costs. Make sure to check your credit score and your debt-to-income ratio, too.
- Decide what type of house (condo, duplex, single-family) is right for you and which features are a NEED vs. a WANT (neighborhood, location, etc.)
- Determine your budget by analyzing your expenses and working with a mortgage lender. Check out our mortgage calculators, too!
- Take into consideration the monthly costs for a home – loan principal, loan interest, private mortgage insurance, property tax, and homeowners’ insurance.
- Gather necessary paperwork for the loan-application process, including tax returns, pay stubs, bank statements, and investment information.
The Mortgage Application
Submit necessary financial records for a pre-approval application before placing an offer on a house to show you are a serious buyer. The bank will run a credit check, review your financial documents, and determine mortgage loan options such as the right type of mortgage, rates, and terms for First-Time Homebuyers.
Now that you have initiated a home loan application, you will want to be careful about financial events that could impact our ability to approve your loan. Specifically, you should contact your lender concerning any of the following: changes to your income, acquiring additional debt, or shifting funds around. You will then receive, in writing, a conditional commitment for a specific loan amount, which you can use to show you can afford the house on which you are making an offer.
Finding Your Home
For the home inspection, make sure to follow up with your realtor on any unacceptable findings.
It's Time to Close on Your First Home
To close on your home, work with your lender to update your application as needed, and to provide any additional documentation required for your loan. Your lender will then schedule a home appraisal to determine the property's fair market value. Together, you both will confirm a closing date and finalize loan details, including private mortgage insurance, if applicable. Be prepared to pay fees associated with closing, such as attorney fees and lender fees. Once the closing is completed, your new loan request will be funded and it's time to enjoy your new home!
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In addition to the upfront costs, you will have a monthly payment for your mortgage that can be broken out into four parts:
- Principal: The principal is the actual money you borrowed and need to pay back.
- Interest: Interest is part of your monthly payment and is one of the costs of borrowing money.
- Mortgage Insurance: Mortgage insurance is only required for individuals who pay less than 20% for their down payment. This part of your monthly payment is also part of the cost of borrowing money.
- Property Taxes & Homeowners' Insurance: These monthly costs are not a result of borrowing money, but of being a homeowner. You will typically have these grouped with your monthly payment which is managed by your mortgage lender through an escrow account. Additional monthly payments you may need to pay for include condo or homeowner's association fees. These, however, are separate from your mortgage monthly payment and vary depending on your type of residence.