Buyer's Guide

REVIEW YOUR CREDIT REPORT AND KNOW YOUR CREDIT SCORE

Start with your credit report. Do not skip this step. You should know exactly where you stand as most lenders and loan programs have minimum requirements that must be met. You may also see errors on your credit report that need to be addressed and/or disputed which may take time to correct. This will ensure that when it comes time to apply for your mortgage loan, you will not have any surprises pertaining to your credit.

CREATE A REALISTIC BUDGET

Next, create a budget - a financial plan that helps track and control your spending and allows you to save money. A budget shows you exactly how much money you make and how you spend your money. If you manage your budget, this will allow for you to adequetly save for your home purchase.

SAVE FOR DOWN PAYMENT AND CLOSING COSTS

For down payment, most loan programs allow a minimum of 3-5% down and some require none, such as government-backed programs offered by the VA and USDA. However, there are benefits to putting a larger down payment so you may want to consider putting down more towards your home.

For closing costs, expect to pay as little as 3-5% of the purchase price. These costs are incurred to facilitate the purchase transaction and include lender fees, title fees, recording fees, etc.

A pre-approval is not a commitment to lend; it is simply how much your lender is willing to lend to you - pending forthcoming details, such as the value of the home and the specifics of your loan. It allows you to look for a home with greater confidence and demonstrates to the seller that you are a serious buyer.

Pre-approval letters have an expiration date so be sure to ask your lender how long your letter will remain valid.

To get pre-approved, you'll complete your lender's loan application, providing them with important information about your credit, debts, work history, residential history, and down payment. This information helps your lender evaluate your "4 Cs" to determine how much you may be qualified to borrow.

The "4 Cs" refers to the four lending criteria lenders use to evaluate the strength of a loan:

• Capacity - Your current and future ability to make your payments. (Income)
• Capital - The money, savings and investments you have that can be sold quickly for cash. (Down payment and closing costs)
• Collateral - The home that you would like purchase and use as security for the loan
• Credit - Your history of paying bills and other debts on time

If your lender determines you qualify for a loan, you'll receive a pre-approval in writing that outlines the maximum amount you can borrow. Remember, it's a maximum, and not necessarily the amount you should borrow. You'll want to stay within your budget and comfort level.

As you set out to find the right home for you, be sure to select an experienced, trusted professional who will help you make informed decisions and avoid any pitfalls.

Your real estate agent will be your "wingman," helping you navigate each step of the homebuying process while being readily available to answer your questions. Your agent's job is to help you find a home that meets your needs and budget requirement. Your agent can also provide information on neighborhoods, schools, property tax rates and more and will handle negotiations with the seller when you're ready to put an offer on a home.

Before you begin looking for a home, talk with your real estate agent about what you want in a home, why you want to buy and where you'd like to live.

House Hunting Tips and Tricks

• Bring your house hunting checklist with you and ask questions.
• Know where you want to live, scope out the neighborhood and evaluate the school district.
• Bring a camera and take pictures.
• Keep an open mind.
• Concentrate on unchangeable aspects like home size and bedroom count, not on changeable elements like paint color.

Where do you want to live?

URBAN OR SUBURBAN: Do you want the convenience and walkability of city life? Or do you want a larger home with a yard, away from the hustle and bustle of urban living?

PROXIMITY TO YOUR JOB: Are you willing to make an hour-long drive to work or do you want a short commute? Consider your current job and future opportunities.

ACCESS TO PUBLIC TRANSPORTATION: Do you need access to public transportation to get to and from work, school, or your primary health care provider?

Your Home Wish List

Determine your "must-haves" and your deal breakers. Think about your household now and how your needs may change in the future. It is easy to get overwhelmed with so many possibilities so consider creating a homebuying wish list to narrow down your choices.

Through this phase, you'll work closely with your real estate agent. They'll help determine a fair offer price while making sure you stay within range of what you can afford. They'll also handle all contract negotiations with the seller's agent.

DETERMINE THE PRICE

You've found the perfect home, have your pre-approval letter in hand and are ready to make an offer. Now what? Your real estate agent will be by your side, helping you determine a fair offer price based on their experience and the following home, market, and budget considerations:

• Recent sales prices of similar homes in the same neighborhood
• The condition of the home
• The competition (seller’s vs. buyer’s market)
• What you are willing to pay and can comfortably afford

DECIDE ON CONTINGENCIES

Contingencies are clauses in the sales contract that would allow buyers to walk away with their earnest money if certain specific conditions are not met. Common contingencies include financing, title, home inspection, appraisal and sale of prior home contingency.

SUBMIT THE OFFER

Next, your agent will draw up the purchase agreement to submit to the seller's agent. The offer will include the purchase price and terms and conditions of the purchase, including:

• Target closing date
• Provisions for certain fees
• A deadline for the sellers to accept or counter your offer
• Any contingencies (e.g. appraisal contingency)

NEGOTIATE THE OFFER

Oftentimes, the seller will counter the offer, typically asking for a higher purchase price or to adjust the closing date. In these cases, the seller's agent will submit a counteroffer to your agent, detailing the desired changes.

Following the counter offer, you have the option to accept, reject, or counter again. Your agent will play a large role during this part of the process, communicating all changes with the seller's agent.

FINALIZE THE CONTRACT

The contract is considered final when both parties sign the written offer.

Buyer Tip

In your written offer, it is highly recommended that you make the home purchase contingent on the appraisal and inspection.

Once your offer is accepted, the next step is to get the home inspected. The inspection is not a requirement but is highly advised as it protects you from underlying issues with the home that you can't detect.

Home inspections give you the opportunity to have the home thoroughly examined by a professional before you spend your hard-earned money buying it. It can be well worth it for both peace of mind and the potential cost of trouble avoided. You can choose your own inspector and your real estate agent should be able to recommend several well-qualified home inspectors if you need assistance.

WHAT CAN YOU EXPECT FROM THE INSPECTION?

Your home inspector will climb atop the roof and crawl deep into the attic. Their job is to protect your investment and find any issues with the home, including:

• The roof
• Plumbing
• Electrical components
• Appliances
• Heating and air conditioning systems
• Ventilation
• Windows
• The fireplace and chimney
• The foundation

After inspection, your home inspector will provide you with a detailed report on the overall condition of the house, including outlining any issues and necessary or recommended repairs.

Having a home inspection contingency in your purchase contract is important because if any major issues are noted in the inspection report, you can renegotiate the sales price, require the seller to make repairs, or back out of the offer altogether.

Even if you’ve been pre-approved, you still need to take a few additional steps to officially submit the mortgage application. If you decide to apply for your loan with the same lender that did your pre- approval, they already have some of the documents you’ll need for your application. Likely, you’ll need to provide updated financial statements. If you decide to move forward with another lender, they will tell you the list of documents needed to complete your application.

Once you've selected your lender, an appraisal report will be ordered. Your lender will hire the appraiser, so there’s not much for you to do here. (Your real estate agent should work with the seller’s agent and the appraiser to schedule the appraisal).

Appraised Value?

• If the appraisal matches your offer price: Your lender should approve the full loan amount.
• If the appraisal comes in above your offer price: Even better! This means you're purchasing the home for a price below market value, giving you instant equity.
• If the appraisal comes in low: Your lender won't approve the full loan amount, as in their eyes, you're overpaying for the property. You'll need to either make up the difference between the appraised value and the offer price in cash or try to re-negotiate the offer price with the seller. If you believe the appraisal was incorrect, you can try to request a new appraisal from your lender.

You should do a final walkthrough in your new home before you close, even if you’re 100% committed to the property. This time allows you to ensure that the seller has made any agreed upon repairs and has cleared out the property. You should also double-check the home's systems one last time to ensure they are in working order. If everything looks good, it’s time for you to confidently move toward closing.

Three days before closing, your lender is required to give you the Closing Disclosure (CD), which tells you what you need to pay at closing and summarizes your loan details. Once you’ve reviewed the CD, it’s time to attend your closing. Bring a valid ID and any documentation that has been requested from your closing agent. You’ll sign a settlement statement, which lists all costs related to the home sale, the mortgage note, and the mortgage deed of trust to secure the mortgage note. This is when you will also pay your down payment and closing costs.

Congratulations

After the closing finishes, you’re officially a homeowner.