Shopping for your new home can be exciting, but finding the right mortgage might seem intimidating. It doesn't have to be. Your Century 21 Home & Farm Realty, Inc. professional can connect you with a reputable, qualified mortgage professional to help you understand the entire process.
Here's an overview of how the entire home buying and mortgage process works.
Determine how much you can afford
This is an important first step on your road to home ownership. Three key costs to consider are:
Down payment — The part of the property purchase price paid in cash and not financed with a mortgage. One thing to consider is that the larger your down payment, the lower your monthly mortgage payments will be.
Closing costs — Cash due at closing for expenses you and the seller pay to complete the transfer of ownership. Closing costs are typically based on the home price and vary according to location. They might include an origination fee, attorney's fee, initial escrow payments, and charges for obtaining title insurance and a survey.
Monthly payments — When you are approved for a mortgage loan, you make a commitment to pay back the loan on a monthly basis. Your payment is based on both the principal — the amount of the loan — and interest — the amount you pay to borrow money, calculated as a percentage of the amount borrowed. It also includes money that may be held in escrow for taxes, homeowner's insurance and mortgage insurance.
Once you're pre-approved, you will receive a pre-approval letter with your loan amount, so you can start house hunting right away. In fact, most real estate agents will ask you to get pre-approval before they show you homes. You and the agent won't waste time looking at houses that are too expensive because you'll know for sure which houses are in your range. You'll place every bid with confidence because you'll have the letter—and the financing—to back it up. All of which helps you stay more focused on finding the dream home you can make a reality.
Make an offer
Once you find the home you want, your Century 21 Home & Farm Realty, Inc. agent can provide you with a list of comparable homes (known as "comps") recently sold in the area. Comps help you determine the right price to offer. There are other factors to consider, including the condition of the home, the cost of necessary repairs, and your or the seller's time restrictions. Any offer you make could become legally binding, so consult with your agent beforehand.
The Loan Commitment
The loan commitment takes place once the lender approves your loan and the property itself. That means a home appraisal ensuring that the home meets the lender's guidelines, and a title search ensuring there are no outstanding liens on the property are needed.
Your offer should contain provisions for a home inspection by an accredited home inspector and an outline of actions to be taken if problems arise. The inspection should cover interior and exterior structural elements as well as heating/cooling, and electrical and plumbing systems. It's a good idea to be present during the inspection so you can ask questions about the property.
At the closing, you and the seller transfer funds and sign all applicable paperwork to finalize the transaction. Real estate agents, closing agents, attorneys, and mortgage and title representatives may also be present.
Once the papers are signed, the fees are paid, and the deed is recorded you'll get the keys to your new home. Congratulations!