Buying your first home is a big investment. We’re here to make the process as easy as possible and keep you informed every step of the way. Whether you’re a first-time home buyer, are buying a luxury home, or are investing in properties to build your real estate portfolio, we can help guide you through the process toward getting that new set of keys!
Are you a first-time home buyer?
We at HomeTown Mortgage AZ want to help!
If you are ready to buy your first home, CONGRATULATIONS!
We know it can be overwhelming all the information you are presented with being a first-time home buyer, and we want to help you throughout this process. We’ve included a general overview of the steps involved in the home buyer process to give you a little insight on what to expect and the steps to take:
You might already know the monthly payment you financially can support, but the buying process will also include upfront costs, such as a down payment and closing costs, so having a savings is always a great start.
2. Down payment & Down payment options.
What are your savings like? Do you qualify for down payment assistance programs? Will you be able to get an FHA loan and pay 3.5 percent down? Will you be having a gift as part of your down payment? There are down payment programs and options to consider, so always best to think of these things and talk with your lender when you’re ready.
3. Check credit report.
It’s always good to know your credit score and to check your report to make sure all information on there is accurate, as well as report any errors to the credit reporting agencies. Lenders use it to evaluate your risk potential and to inform themselves on how responsible of a borrower you are. Credit reports and scores are used to figure your interest rate. The more stellar your report, the better your score and thus lower your rate.
4. Get prequalified.
It’s time to talk to a lender! A pre-qualification will give you an estimate of how much the bank would be willing to lend you and the home prices you can stay within, which is helpful for when you are ready to start looking and submitting offers.
5. Get preapproved.
This is the official letter from the lender that says they will be willing to lend you money. Your lender will work with you on the necessary documents needed to get preapproved. Keep in mind that what you might be preapproved for, may be different then what comfortably fits your monthly budget of other expenses.
6. Hire a licensed real estate agent.
An agent can help you navigate the entire process from searching, putting in offers, and overall general questions on the real estate front.
7. Start the search!
We are your trusted advisor and expert guide throughout the entire home buying process.
First Time Home Buyers FAQs
Pre-qualified or pre-approved — what’s the difference?
Pre-qualification is a determination of the loan amount you’re likely to receive. It is not a guarantee of approval. To obtain pre-qualification, you usually are interviewed by a licensed loan officer who determines the pre-qualification amount. You will be issued a letter with this information that you can present when making an offer on a home. It’s important to understand that pre-qualification does not imply any obligation from the lender that you will be approved.
Pre-approval is more thorough than pre-qualification. To be pre-approved, you must submit an application and verify your credit and financial history. After you receive your pre-approval certificate, you’re in a stronger position to close earlier and negotiate a better price. It’s highly recommended that you seek pre-approval if you are shopping for a home.
What will be considered in the loan process?
- Proof of Income – Find and make copies of your pay stubs.
- Tax Information – Gather your W-2s, 1099s, and tax returns for the last 2 years. If you’re self-employed or an independent contractor, you’ll be required to provide your 1099-MISC information.
- Credit Details – We’ll perform a credit check when you apply.
- Debt Documentation – You’ll be required to provide documentation on your outstanding financial commitments. Gather materials on your current mortgage, car loans, student loans and any other debts.
What are points?
Should I pay points?
It depends on your particular situation. Three major factors should be considered when deciding whether to pay points:
- How much you can afford to pay upfront?
- How long do you expect to make payments on your mortgage?
- What is the length of your loan, and how long do you plan to live in the home?
Many people looking for a long-term mortgage opt to pay points to ease their monthly payments. People looking at a mortgage with a shorter term or looking to stay in the home for a shorter period of time often opt to make a larger down payment instead of paying points.
What documentation will I need to provide in order to get my loan approved?
- Form 1003 — The residential loan application — including the attached Fair Lending notice, loan info sheet, and credit authorization. Note: Do not use whiteout on this paperwork. Mistakes should be crossed out and initialed.
- Copies of W-2s or tax returns for the previous 2 years.
- If you own rental units, provide the most recent rental agreement and tax returns for previous 2 years.
- Your last 3 bank statements along with the most recent statements for any mutual funds, IRA/401(k), or stock accounts.
- Settlement agreement and divorce decree (if applicable).
- Letter explaining how you plan to utilize refinance proceeds if you’re seeking a cash-out refinance.
- Non-U.S. citizens must present their Green Card or H-1 or L-1 visa.
- If you’ve filed for bankruptcy, present a schedule of creditors, discharge notice, and filing.
- If you’re applying for a second loan, include the first mortgage note.
These documents may not be all-inclusive, but by having these on hand, you will expedite the application.
What’s private mortgage insurance (PMI)?
Private mortgage insurance (PMI) protects the lender from the costs of foreclosure. You may be obligated to purchase PMI if you can’t make a sufficient down payment of at least 20%. By purchasing PMI, you will have access to a mortgage without having to make a large down payment, and the lender is insured in the event that you default on the loan.
The price of PMI is inversely proportional to the size of your down payment. The larger your down payment, the lower the cost of PMI will be.
What’s a zero-point/zero-fee loan?
Zero-point/zero-fee loans are particularly useful for people who will not be spending a long time in their home. If you’re looking to move within five years, there’s little downside to this type of loan. However, if you stay in the home for the long term, you’ll eventually end up losing money by paying at a higher rate over a longer period of time.
How important is the real estate location…really?
Location is key. Factors like crime rate, public school ratings, daily commute times to surrounding metropolitan areas, as well as the vicinity to local parks, libraries, swimming pools, sport arenas, churches, restaurants and shopping centers are essential in the price valuation of real estate. It’s best to consider the location as much as the condition of a home when you are looking to make a purchase.