8 Tips to Simplify the Process of Buying a Home
Mortgage Banker
Richard Blair
Published on November 5, 2021

8 Tips to Simplify the Process of Buying a Home

Buying a home can be an exciting time in your life, but it can also be incredibly stressful. From learning how to qualify locking in a great mortgage payment, there are lots of factors to consider. Fortunately, there are several things you can do to simplify the process of buying a home. It’s important to take your time and understand each step of the process before you jump in.

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Whether you’re planning to buy your first home or are just looking to cut back on the hassles that come with selling your current house, here are eight tips to simplify the process of buying a home.

By following these 8 tips, you’ll be able to get into your new house faster, which means less time spent searching and more time enjoying your new home!

  • Choosing the Right Mortgage Lender

There is an important question you need to ask yourself when starting your home buying journey.

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Who should I contact to help me through the mortgage process?

First step is to choose the right mortgage lender to fit your personal financial goals and communication style. Buying a home is one of the most important financial decisions in your lifetime, so check local social review sites, like Google Business, and read what other home buyers say about their experience. Schedule a personal call with the loan originator and find out how they will educate you about the home buying process and help you choose the best financial option. You will want to ask the mortgage loan officer to provide you with a customized home loan analysis so you can review lending options. Focusing on finding only the lowest advertised interest rate can be very misleading and cost you $1,000’s of dollars in the long game if you do not get the best advice.

  • Understand Credit and Get prequalified

Before you start searching for your dream home, it’s important to know exactly how much house you can afford. This process, known as getting prequalified or preapproved for a mortgage, is when your mortgage banker or mortgage broker will accurately calculate your income, review your credit profile, including your credit score, and determine what mortgage amount you qualify for based on several factors.

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Getting prequalified with the right loan originator and lender can make finding and purchasing a home quicker and easier than if you decide to skip this step. It also allows you to compare homes in your area without worrying about their affordability or putting pressure on you to buy something before seeing other options.

The prequalification process will vary by lender. Ask your mortgage lender to discuss their process and timeline. When going through prequalification, a mortgage broker or banker will pull reports from all three bureaus (Experian, Equifax, and TransUnion). If you previously placed a credit freeze with any bureaus make sure to unfreeze the account before starting your prequalification.

 Getting prequalified can be an intense process that requires your lender to review pay stubs, bank accounts, W2s and tax returns. The mortgage lender will also need to verify your employment history for the past two years. Before starting your home buying journey make sure to get all your financial records organized and this will eliminate the stress associated with prequalification.

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  •  Get your Down Payment Ready

Did you know that the biggest obstacle cited by home renters was saving for a down payment? Nearly 70% of home renters surveyed said saving for a down payment was the biggest reason for not buying a home today.

If you’re ready to buy a home, you’ll likely need some cash for your down payment and closing costs. Some loan programs, like VA and USDA, do not require a down payment. However, in most instances you will need money for down payment and closing costs. Remember that you will also need funds for a home inspection (likely range of $450 to $700) and maybe a termite report (about $100).

What options should you consider for down payment and closing costs?

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One option is using your savings. Your mortgage lender verifies bank accounts at the time of pre-qualification. This can also include a brokerage account, like Robin Hood, where you trade stocks. If you have brokerage account check with your advisor regarding a Margin Loan.

You also may be eligible to tap into your 401(k) Plan for some extra cash without paying penalties or taxes. This is typically done through a loan against your 401K Plan. An Individual Retirement Account (IRA) is a source of possible down payment funds. Before making any decision always consult with your financial advisor for advice regarding the pros and cons of borrowing from retirement accounts.

Many first- time home buyers are unaware that gift funds are a legitimate avenue for down payment. Simply stated a gift means that you have no obligation to repay the person that gave you the gift money. A gift is not a loan.

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Who can give you a gift to use as a down payment? You will need to check with your mortgage loan originator because each loan programs have their own rules, or guidelines, regarding gift money. The most important factor in determining who can give you gift money is the relationship of the gift donor to you. For example, some loan programs require the gift donor to be a family member or blood relative.

If you are considering using gift money, then check out my Blog article “Using Gift Money for A Home Purchase” for additional information. https://richardblairmortgageteam.com/using-gift-money-home-purchase/

Looking for another way to save for down payment? Start planning your monthly budget now. Planning and sticking to a family budget are difficult, but the process is made simpler with the right tools. A little financial pain today is better than continuing to pay skyrocketing rent increases each year. You can either pay your landlord’s mortgage each month or own your home and pay your mortgage. One resource for budgeting is Kiplinger. This link offers an easy on-line budget planner to get you started: https://www.kiplinger.com/kiplinger-tools/spending/t007-s001-budgeting-worksheet-a-household-budget-for-today-a/index.php

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  • Know your Mortgage Financing Options

Before you start looking for your next home, take some time to figure out what type of financing works best for you. The right mortgage program can be an effective debt planning tool to help achieve your future financial goals.

The question you need to ask is -What loan program will best fit my financial goals?

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There are many types of financing available; we’ll cover two popular methods below: Conventional and FHA Loans.

 Conventional loans require a down payment and can be financed through a mortgage broker or mortgage bank. You have probably heard reference to Fannie Mae and Freddie Mac in the news. Essentially both these companies buy and guarantee conventional mortgages in the marketplace. Which is why the conventional loan is often referred to as an Agency loan. It is a myth that conventional loans require a 20% down payment. Conventional loan programs start as low as 3% down payment.

With an FHA loan, or a Federal Housing Administration loan, the down payment can be as little as 3.5% of the purchase price. These loans may also have lower interest rates than conventional loans.

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Here are four reasons why FHA helps certain home buyers get approved for a mortgage:

  • It is more lenient on borrowers with a lower credit score or a shorter credit history.
  • Requires only 4 years after a foreclosure vs. 7 years for conventional.
  • Requires only 2 years after a bankruptcy vs. 4 years for conventional.
  • Allows for higher debt-to-income ratios than conventional.

For a comprehensive review of FHA and Conventional loans read my Blog article “FHA vs. Conventional-Which Is A Better Choice.  https://richardblairmortgageteam.com/fha-vs-conventional-loan-better-choice/

The bottom line is get educated, ask the right questions, review all options to empower yourself to make a wise decision when choosing a loan program.

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  •  Closing Costs, Home Inspection and Appraisal 

Costs are constantly changing, but you can expect closing costs on average for single-family homes to be in the range of $3,500 and $5,000. Typical closing costs include the fee charged by your lender, an appraisal, Title and Escrow fees, recording fees, tax stamps and a Notary cost. If you are purchasing a condominium the HOA typically charges additional fees to provide required documentation.

A home inspection is not required by a mortgage lender. The home inspection is done for you protection and peace of mind. Inspections vary in cost by size and age of home. Expect to pay between $450.00 to $750.00 for a professional home inspector.

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The Appraisal is ordered by the mortgage lender and determines the value of the property for the lender. Expect an appraisal fee between $550.00 to $750.00. The fee can vary based on the size of the home, location, and uniqueness of the home.

Pre-Paid Expenses is another category of costs that are due at closing. Included in pre-paid expenses are such things as your home insurance premium for the first year, tax and insurance escrows, and interest on your loan from the date you close until the end of the month.

Before starting your home buying journey make sure to carefully budget not just for your down payment, but also for closing costs, pre-paid expenses, and a home inspection.

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  •  How to Shop for Mortgage Rates

Getting your mortgage rate locked, or guaranteed, is one of the most important parts of buying a home, but it can also be one of most confusing. Before you applied for a mortgage you were probably shopping interest rates. This process of searching the internet for the “lowest rate” is intimidating, confusing. You can easily be misled by advertised rates and fine print. Choosing the wrong interest rate or loan program could cost you $1,000s of dollars. You can avoid this costly mistake by understanding more about the loan process.

After searching on the internet for hours you may click on an ad for an unbelievably low advertised interest rate. The advertised rate is typically subject to many restrictions or has a very expensive discount fee attached to it. Often the ad is really an internet lead site that sells your contact information to other lenders. Get ready to be bombarded with phone calls, both day and night. This is a very poor tactic to use when making such an important financial decision.

Buying a home is stressful enough, make the wisest financial decision for you, or your family, by asking a local, trusted lender for a customized loan plan. A Loan Plan helps you select the best lending option with an affordable interest rate. Your mortgage loan officer should be able to provide you range of options with different interest rates to choose from. Choosing the best loan program with the right financial strategy together with a competitive interest rate will save you money over the life of your loan and make the home buying experience less stressful.

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Remember that interest rates change daily, sometimes many times each day, and your rate cannot be locked, or guaranteed, until you have a signed purchase agreement.

  • Making an offer in Today’s Market

When it comes time to make an offer on a house, your real estate agent will walk you through many different scenarios and factors that can affect your decision. Make sure you ask questions and try not to get stuck in a situation where you feel rushed or pressured into making an offer before you’re ready. Surround yourself with a professional team – Realtor and Mortgage loan officer- that will educate you about the home buying journey. This is one of the largest investments of your life—be sure you make it right.

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Arizona, like many other cities, is in a “Seller’s Market.”  This means that there are more pre-qualified, or pre-approved, home buyers looking for homes than there are homes available to sell.

Here are four strategies every homebuyer should use in a Sellers’ market:

  • Make a “Clean” Offer- The term clean offer means that your offer has no, or very few, contingencies and is meant to create a more appealing offer for the seller.
  • Effectively Use an “Escalation” Clause in your Offer- The use of an escalation clause is a new strategy that became more popular in a Seller’s market. An escalation clause means that you agree upfront to outbid other offers received by the seller up to a certain maximum price. The escalation price will be higher than the listing price for the home.
  • Be Flexible in Your Offer and Consider the Seller’s Needs and Concerns- Understanding what is important to a seller, in addition to price, can make your offer standout. Does the seller need more time in the home after closing? Is there certain personal property that the seller wants to keep?
  • Seller Wants No uncertainty in The Transaction- Presenting the seller a credit pre-approval completed by a reputable local mortgage lender with great on-line reviews will make the Seller feel much more at ease with accepting your offer.

​ If you want to better understand the best strategies for home buyers in a seller’s market read my previous blog article. https://richardblairmortgageteam.com/every-buyer-sellers-market-absolutely-amazed-know/

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  •  Six Things Not to Do After Mortgage Preapproval

When you hear you’ve been approved for a mortgage, it’s easy to assume your home-buying process is moving along and it will be smooth sailing. But there are still plenty of things that can go wrong between preapproval and signing on the dotted line at closing. If you want a great home buying experience and avoid last minute surprises, here are common mistakes you should avoid making.

  • Don’t change your employment or the way you are compensated
  • Don’t apply for new credit cards, car loans or other credit
  • Don’t co-sign a loan for a friend or family member
  • Don’t close any active credit cards -the length of your credit history is very important to your credit score.
  • Don’t transfer large amounts of money or change your bank accounts  
  • Don’t make any large purchases before closing- if you buy an appliance before your loan closes this can affect your credit score and your ability to qualify. This is true even if the credit card is no payments for one year-it is still a new debt.

The mortgage lender will be monitoring your credit all the way from application to funding your mortgage loan. Any time you apply for credit the mortgage lender is notified by the credit bureau.

Keep in touch with your mortgage loan officer throughout the process to make sure you will not be taking any action which will impact your home purchase.

About the author: Richard Blair (NMLS# 213176) is a mortgage loan originator with 24 years of lending experience that combines the personal touch with cutting edge technology for an amazing experience. Richard is part of the dwell Mortgage Team at Victorian Financial

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