Homebuying Advice: Guide to buying a home

There is a lot of advice for homebuyers on the internet and researching market trends, finding a lender, learning mortgage types, and the steps to buying a house can feel overwhelming. And you’re not alone — purchasing a home is an emotional experience that requires studying, planning, and confidence.

The homebuying process has many different steps. In this article, we’ll be breaking them down with advice that will help ensure you’re ready for whatever comes your way on the journey to homeownership.

Mortgage process guide

It’s important to remember that buying a home takes patience. On average, it may take three to six months to find a home, put in an offer that’s accepted, and close on your mortgage loan. While this is an estimate (since everyone’s home purchase process is unique), it’s good to start off with realistic expectations.

In total, you can break the homebuying process down into seven steps:

1. Financing: Arguably the most important step is the first one — finding a lender to finance your mortgage loan. Shopping around for a mortgage lender will help you secure the best deal available; it’s not as simple as finding the best interest rate. A good lender will be able to help you find the best home loan for your needs and be with you through every step from pre-approval to closing. While there is no guarantee of final loan approval at this point in the process, obtaining pre-approval status will provide you with a preliminary mortgage offer so you know how much home you can afford when you start house hunting.
2. Timing and market conditions: Technically, there’s no “perfect time” to buy a home. It all depends on your individual circumstances/readiness. However, understanding market conditions can help you decide whether now is the right time for you or if it’s better to hold off until trends become more favorable. For instance, in a seller’s market there is an increased demand for homes and a lack of properties for sale. Bidding wars between buyers are more prevalent, so it may be more difficult to get your offer accepted. It’s also important to pay attention to interest rate fluctuations. Waiting for them to go down may mean saving more money in the long run.
3. Finding a real estate agent: An experienced real estate agent will be your biggest asset in your search for a home. They can help reduce your workload (and stress), give you local market insight, provide actionable advice on home buying, and put your best interests first during the negotiation phase of submitting an offer.
4. Understanding contingencies: Purchase contract contingencies are commonly built into your home purchase contract for the purpose of protecting a buyer and/or seller. As a buyer, there are five crucial contingencies you want to see in your contract before signing on the dotted line: inspection, appraisal, title, home sale, and financing. It’s standard for all five to be included in real estate contracts, but they can be tailored to your unique situation. Your real estate agent will be able to help you determine the specifics.
5. Negotiating fees: Your home purchase will include common closing costs and fees, though every lender and locale will charge varying amounts. Typical costs and fees are between 2% to 6% of your total loan amount. However, depending on the motivation of the seller, you may be able to negotiate with them to cover some of the costs. You may also have the option to roll your closing costs into the loan amount on some mortgages.
6. Final loan approval: The key to loan application success is having your documents organized. A lot of paperwork exchanges hands throughout the homebuying journey, so it’s vital that you keep careful track of your information to ensure you’re able to provide what is asked of you. Keep your paperwork in a single folder on your computer with clear labels for each document.
7. Closing day: A successful closing day experience is all about preparation. As a borrower, you should be proactive in ensuring you have everything you need. Contact your closing agent for a list of the documents you’ll need to bring with you and confirm the date and location of the meeting. If you need to bring money for final payments, find out what form of payment is acceptable. Typically, closing will take between one to two hours. After which, you’ll finally have the keys to your new home in hand!

What are the different types of mortgage loans?

Borrowers have a lot of mortgage options to choose from, each with their own down payment and eligibility requirements. Most home loans fall under two categories: conventional mortgages and government-backed loans.

Conventional loans will either be considered conforming or non-conforming (also referred to as jumbo loans). The primary difference between the two is the amount you are able to borrow, but there are often other differences such as minimum down payments, minimum credit scores, interest rates, etc.

Government-backed loans are insured/guaranteed by certain government entities. Their goal is to provide lower down payment options for eligible borrowers and make homeownership a reality for more people. However, only approved lenders are able to offer these loans, so it’s important to ensure the lender you choose to work with has the option you’re interested in available. Two common government-backed loans you may have heard of are:

• FHA loans: insured by the Federal Housing Administration. Minimum down payment requirement is as low as 3.5%, making them an attractive option for first-time buyers and families with low to moderate incomes.
• VA loans: guaranteed by the Department of Veterans Affairs. Only available for veterans and current military servicemembers who meet the VA’s qualifications. There is no down payment required, just a one-time VA funding fee.

Be sure to take your time researching your home loan options. Your lender will also be able to determine which option is right for your homebuying needs.

Homebuying costs

Every mortgage transaction has associated costs and fees for the various services needed to close the loan. The goal of these costs is to ensure that the transition of property ownership goes smoothly. A mortgage calculator can help you in the beginning stages of homebuying with calculating your potential costs. It can even show you how different down payment amounts will affect your monthly mortgage payments, since the more money you’re able to put down, the more you will save long term.

However, the best way to determine how much home you are able to afford will be getting pre-approved from your lender. 

Finding your dream home

Once you’ve started your mortgage process, the fun part is searching for your dream home. Hiring a real estate agent you trust to help with buying a house can make a huge difference in getting you into the home you want, but it’s important to do your own research and a list of your needs, like:

• Location
• School districts
• Commute time
• Home type (single-family, townhome, condo, etc.)

If you’re willing to check out many types of properties, you may be surprised to find options you hadn’t previously considered. Don’t be afraid to branch out and expand your search.

What do you need to get a mortgage loan?

Even though every buyer’s transition to homeownership looks different, the documents you’ll need along the way will look similar regardless of the type of mortgage you choose. Here’s what you want to have on hand throughout the process:

• Government-issued ID
• Down payment
• Bank statements from the last two months
• Pay stubs from the last 30 days
• Tax returns – business and personal – from the last two years
• W-2s or 1099s for the past two years
• Retirement statements from the last two to three months (if applicable)
• Social security award letter (if applicable)
• Property appraisal
• House contract
• Inspection documentation
• Title insurance evidence

If you’ve selected a trustworthy lender and homebuying team, they’ll be by your side through every step of the mortgage process. The key is staying organized.

Review all of your options with a lending partner to ensure you’re getting favorable terms and the best rate available.