Article Contributor:
Aaron Kovac
Loan Officer, NMLS# 1015725
CMG Financial
c. 512-766-7379
e. kovacmortgagegroup@cmgfi.com
With over 7+ years of experience in the industry, my journey in the mortgage industry began working for a large, nationwide bank where I learned the industry from the ground up. I became specialized in helping First Time Homebuyers, Jumbo loans, and government programs such as FHA, VA, and USDA. Working with people to help them accomplish their dream of homeownership is one of the most fulfilling professional experiences I could ever imagine.
“So you want to buy your very first home? Where do you start though? I need 20% down payment? Does my credit score need to be 740+? What’s the difference between Conventional, FHA, VA, USDA- SO MANY ACRONYMS!!!???”
Buying your first home can be super confusing to most people. The internet is a tremendous resource for information, but often it can lead to more confusion than clarity when trying to educate yourself and prepare for your first home purchase. So where should you start and what should you do to better prepare yourself?
Here are a few tips and facts to consider as you begin your journey towards buying your first home.
What NOT To Do
Do NOT take out any new debt (car loans, personal loans, student loans, new credit cards, etc).
Do NOT make large deposits to your bank accounts that cannot be explained or sourced… If you have cash sitting under the mattress at home, get it in your bank account and wait two months. Do not do this if you are within 2 months from closing on a home though, as cash cannot be sourced or used to buy a home.
Do NOT change jobs UNLESS it’s a similar role, in a similar industry, with a similar pay amount and structure.
Do NOT miss payments on existing credit lines (credit cards, loans, etc)
Do NOT get caught up on what you think the right or best program is for your purchase. Let the lender determine your options and provide that information.
What TO Do
DO get Pre-Approved by a local lender who knows the market and is very responsive
DO check your credit report to know what’s on it, so when the lender checks, there are no surprises (www.annualcreditreport.com)
DO continue paying credit cards and other debts on time
DO expect to have your credit checked/pulled/inquiry when you are ready to get pre-approved. Any lender who says they don’t need to check your credit to pre-approve you, is not doing their job and the pre-approval is worth no more than the paper it’s printed on.
DO have all your income and bank account documents in order, ready to go for your lender
DO know where your money is coming from- did you move money from one account to another, did you receive a gift. Be prepared to show proof that you can document where your money came from
DO know what you are approved for and whether you are ok with the monthly payment
DO have an idea of WHAT, WHEN & WHERE you want to buy
DO be flexible on your location/area
In this ultra-fast-paced real estate market here in Austin, you can see a house one afternoon on a Saturday, call a lender at Noon to get Pre-Approved, and by 2 PM, it’s already too late and the house is under contract. I know because this happened to one of our clients a few weeks ago. You need to get Pre-Approved BEFORE you even start looking at homes because houses go so fast in this market. If you wait until you find THE ONE, it could be too late, even if your lender is Johnny on the spot. You also need to have a realistic idea and expectation of what you want your first home to be.
First time home buyers often daydream of their perfect, dream home. One that checks every possible box they can think of. Usually, your first home will be your starter home and the average American today moves or buys/sells a house every 3-5 years. Make a list of the MUST HAVE and NICE TO HAVE things you are looking at when considering making an offer on a home. This way you have a clear, concise idea of what you are looking for in a home and can in turn decide faster whether to offer or pass. Being able to quick decision to offer on a home can be the difference between going under contract and continuing your search for a few more weeks or months.
No one is saying you must “settle” or “compromise” but being realistic with what you want and need out of a home can improve your chances of finding a home sooner rather than later. Also, educate yourself about what is going on in your local housing market… “Is it a sellers’ market, a buyers’ market? How fast are homes going under contract and are they going for above-asking price, or can you potentially offer less?”
Do your research online and if you need help understanding what’s going on in your market, reach out to your REALTOR® or lender to get their input on what they are seeing. As a lender, the reason I see some buyers continuing their search for months and months at a time is that they either 1.) don’t understand that they can’t low ball their offers on a home in a sellers’ market or 2.) want the absolute PERFECT home that may or may not exist in the area or price range they are looking for.
Knowing what is necessary to get a home under contract and knowing exactly what you want or need in a home, can greatly improve the chances of you getting a house under contract. Even in the crazy sellers’ market we currently have here in Austin, TX.
Once you have successfully gone under contract on a home, that is when your actual loan process begins. Let’s look at what that process entails from a high-level overview. Keep in mind, the Do’s and Don’ts still apply throughout the loan process as well.
The Home Loan Process Made Easy
Potential homebuyer obtains Pre-Approval from Lender
Offer made/Contract is Accepted & Executed
Loan Disclosures go out to Buyer for signatures & Rate is Locked
An Appraisal is ordered & scheduled
Initial Loan Approval after underwriting review
Any remaining underwriting conditions are collected from borrower, loan is resubmitted to underwriting
Clear To Close is given by Underwrite
Closing documents are delivered to title & signed by Buyer
Buyer receives Keys and moves into New Home!!!
Buying your first home can seem intimidating when you first get started. By educating yourself and finding a great real estate agent and lender, you can greatly improve the chances of your offer getting accepted faster than a buyer who has not prepared. Follow these steps as you begin looking for your first home, and you will be in your first home before you know it!
