From Renter to Owner: Buying Your First Home
Timeline for Buying Your First Home
The way many people tell the tale, buying a home is a soul-draining process that devours entire months of your life. True, the timeline for working through finding and financing a new home is not insignificant.
But good things take time. The transition from renter to owner doesn’t have to be intimidating if you know what to expect up front. Let’s look at the optimum times to initiate the process of buying your first home.
An Early Start
If you have strong credit, don’t let this timeline deter you from fast tracking your downpayment savings strategy and buying a home sooner!
5 years: Building a strong credit score is a long game. The sooner you know the right moves to make, the sooner your score will start heading in the right direction.
5 years: It wouldn’t be a bad idea to start saving for your down payment the moment you suspect there’s a new home in your future. You’ll get the best financing and rates with a standard 20 percent down payment, so set up a savings plan you can live with and let your money start to accumulate. Understanding the costs associated with a mortgage will help too.
2 years: Closing costs typically run about 2-5 percent of the purchase price of your home, over and above your down payment. Fold this into your savings strategy as well. It's a good time to consider what type of mortgage might be right for your situation as well.
1 year: How much home can you afford to buy? An affordability calculator lets you get a handle on roughly how large a loan your mortgage lender is likely to approve.
9 months: Start researching neighborhoods and get a feel for the area where you want to buy.
6 months: Decide what features and needs are priorities for your new home. Do you need a big back yard, a certain number of bedrooms or bathrooms, a move-in ready home or a fixer-upper?
From Renter to Owner
About six months before you hope to move, check the dates on your current lease. You’ll want to time your move to avoid overlapping your last rent payments with your first mortgage payments.
Your first mortgage payment is generally due about two months after closing. If you can close on your new home the month before your lease ends, you’ll have that last month of your lease for moving before you have to start making mortgage payments on the new place.
The Home Stretch
3 months: When your ideal moving date is 90 days away, it’s time to prequalify your loan with the lender you’ve chosen to finance with. Provide the basics on your income, debt, and credit history to receive an early, nonbinding estimate of how much you’re likely to be approved to spend.
3 months: Line up a real estate agent and start hunting for the home of your dreams. Internet home listing sites are fun to shop with, but they can’t keep up with the real thing. Getting an expert on your side costs buyers like you nothing.
2 months: Gather the documentation you’ll need for your mortgage application. You can formally apply now so that your pre-approval is based on validated documents rather than just stated information on your application. This is viewed by most sellers as a stronger bid factor which will enable the seller to have more confidence in your offer in case there are multiple bids.
1-2 months: t’s go time! Shop for a home. Make an offer. Your real estate agent will help you negotiate through this process.
1 month: Don’t risk your savings on a home that could be hiding potential problems. Now is the time to pay for a professional home inspection. Save for this expense as part of your closing cost savings.
1 month: Finalize the purchase agreement and submit your mortgage application.
1 month: Get a home appraisal from your mortgage lender. Save for this expense, too, as part of your expected closing costs.
1 month: Hurry up and wait. Plenty goes on behind the scenes. Your real estate agent will lead you through the maze of underwriting, home title research, termite inspection reports and more.
Closing day: Once you’ve cleared all the obstacles, it’s time for closing day. You’ll sign a massive sheaf of documents and receive the keys to your new home. Congratulations—you’ve bought a home!
Your New Home
As big a deal as closing on your first home is, it’s not time to put your wallet away just yet. Make sure you’ve saved enough to cover your first year of expenses.
How can you make sure you’re ready to go from renter to owner? PenFed makes it easy with helpful tools and great rates designed for first-time home buyers. Our classic fixed-rate mortgages give you great rates with predictable payments that stay the same over the life of the loan. Hop online and come see which PenFed home loan is right for you.