HOME BUYING 101 – A BEGINNER’S GUIDE

Tired of handing money over every month for a rental property? You have a steady income, some money put away, and you’d like to put down roots and be stable. It sounds like conditions are right to consider buying a home of your own.

It’s not as daunting as you may have anticipated, and Federal Home Loan Centers will make the process as smooth as possible. The process of how to get a home loan is straightforward if taken step by step, from loan pre-qualification and approval, shopping for a home with your agent, through escrow, and accepting the keys to your new home.

Unlike traditional lenders, Federal Home Loan Centers does not charge any origination fees and will also help you pay your closing costs.

Real estate is a great investment, and it’s also a great time to consider a purchase. For first-time home buyers, a USDA, FHA or VA home loan offers lower interest rates and better terms than a conventional loan. For example, the VA Loan and USDA mortgage are both zero down home loans. The FHA mortgage requirements only require a 3.5% down payment and part of this can be paid by a grant or even gifted from a family member.

Do you know what you are looking for in a home? List your needs first, such as the number of bedrooms, yard size (to accommodate children, garden, etc., or perhaps a yard isn’t desired and would be a headache you don’t need), one-story or two, garage, area amenities and schools are considerations.

You know what you need and want; now how much money do you qualify for? This is called loan pre-qualification, and is the first step in the loan process. It’s generally a quick conversation with a loan officer, or loan originator, who will ask about income, marital status, credit score, etc., in order to determine if and for how much you qualify. Before you talk with a loan officer, find out your credit score from one of any of the three major credit rating companies: Experian, TransUnion and Equifax.

Once you qualify, documentation will be needed to verify the information provided and aid in the loan approval process. This will include items such as tax returns, work history, other income, child support or divorce decree, and current rental or mortgage information.

When your loan amount is approved, you can begin home shopping with confidence. Real estate agents are professionals who know what properties would be a great fit, given your property preferences, sometimes even before the listings go “on market,” giving you an edge over people without loan pre-approval and an agent at their side.

Enjoy the process of home shopping. Your agent may send you listings from the MLS (Multiple Listing Service – a database of available homes), that you can peruse at your computer, but nothing beats seeing the real thing. Go look at homes. Get a feel for the location and neighborhood. Walk around inside the house. Could this be your new home? If you think so, put in an offer. Your agent will help you create an offer letter. If accepted by the seller, escrow opens and the next phase begins.

Escrow is a neutral third-party company that holds funds and regulates payment transactions for both the buyer and seller. The initial escrow account deposit will be “earnest money,” or a good faith deposit, that you, as a buyer, will pledge, thus creating a contract. This earnest money can be used towards the purchase price, towards the closing costs or if you are getting a zero down home loan, then it can be refunded to you at closing. The amount and terms will be written into your contract.

While escrow is open, it’s time to check on the details of your prospective property. Ordering a home inspection will help uncover problems that you may need taken care of before closing the sale, or may help in negotiating a lower price, or even negate the deal altogether. Meanwhile, the lender on your loan will order a property appraisal to ensure that they are not loaning you more money than the home is worth.

The closing of escrow means the contract has been finalized, property title transfers to your name, and closing costs are paid, generally 3 to 5% of the total loan amount. Your escrow company will help you establish the initial payment your property taxes, insurance payments, etc.

Don’t forget, your agent is there to assist you in all aspects of the home-buying process, from home search to paperwork to closing escrow and keys in hand. Call Federal Home Loan Centers to speak with a loan officer at 877-432-5626.

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