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Making a home purchase can be an exciting life event as you envision a future with your own space, free from landlords and the whims of the rental market.



Taking the First Steps to Buying a Home

February 5, 2019
By Comerica Bank

Making a home purchase can be an exciting life event as you envision a future with your own space, free from landlords and the whims of the rental market. However, the actual process of purchasing a home can be fairly intimidating, especially when considering the scale of the financial commitment. You can overcome these concerns, by preparing for your home purchase and considering what the process looks like.

With that in mind, here's a look at some of the first steps you may want to take when buying a home:

Know your financial situation

The first component of preparing for a home purchase is understanding your household financial situation and expectations. Understanding your fiscal circumstances can simplify the process and alleviate the strain that comes as you begin to shop. A Forbes® report highlighted a few of the key considerations you should keep in mind when you go into your home purchase. The first is understanding your credit rating. The rating will make a huge impact on the kind of interest rates you can expect from a mortgage lender. Also, looking into this early lets you to take action to improve your credit rating prior to applying for a mortgage.

With your credit foundation in place, it's time to delve into your budget and make sure you have a full understanding of the costs you can handle. First, evaluate your day-to-day budget to figure out what flexibility you have to fit in specific costs relating to a home purchase, and pin down any income that isn't properly accounted for. As you do this, figure out how much debt you have and calculate your debt-to-income ratio.

Of course, you also need to know what kind of cash you have ready up front. Forbes® emphasized that buyers' bank statements need to be in order so lenders can ensure you can actually provide the down payment you are aiming toward and that you'll still be able to handle any closing costs after the down payment has been used.

Initiating the purchasing process

One of the first things you should do once you have some idea of your fiscal situation is to start shopping around for a mortgage. Obtaining a pre-approval is helpful both in furthering your understanding of how much house you can afford, as well as providing an extra layer of assurance during the actual bidding process. A pre-approval isn't a definitive loan offer, however; it's a first step in accelerating and simplifying the actual home purchasing process.

Once you get through the negotiation phase, you still aren't finished. There's typically at least a 30-day period prior to closing. During this time, you will need to wait for a home appraisal - the process of getting the home valued by a neutral party so the bank can ensure the mortgage isn't worth more than the property - and finalizing your loan.

A Trulia® report noted that, in a typical purchasing cycle, consumers will spend between four and five months considering their financial options, just a few months shopping, and less than a week actually making an offer and completing final negotiations. Once you are pre-approved for a mortgage, that pivotal week can be much simpler because you know how much the bank is likely to offer. At the same time, pre-approval shows real estate agents and sellers that you are ready to move forward on a purchase and aren't just browsing.

After your offer has been accepted by the seller and your loan has been approved, you’ll be on the road toward closing on your home. As The BalanceTM explained, you should be careful to avoid making drastic changes to your financial situation during this time - such as taking on new debt - as doing so can cause your deal to fall through.

You may also need to pursue homeowners and mortgage insurance, with requirements and costs varying depending on your specific situation. Once this is all settled, you're ready to close, which will generally cost between 2 and 5 percent of the home's purchase price.

Are you ready to move forward in your home purchasing process?

There are a lot of steps in purchasing a home, and it can feel lonely if you're working with a bank that simply asks for a bunch of information and leaves you waiting to get the results. At Comerica Bank, we've built our lending services around a customer-focused model in which we work to compete on creating strong relationships with borrowers. We can help you understand the differences between various types of mortgages, evaluate your household financial portfolio and come to a consensus on what you can truly afford.

Finding the right loan isn't just about choosing the lowest interest rate. You need to understand the real estate market, consider the results of the home inspection, analyze your personal credit situation and find a mortgage package that fits your household's needs. We're here to help. Contact us today to learn more about buying a home.

 

 

This information is provided for general awareness purposes only and is not intended to be relied upon as legal or compliance advice.

This article is provided for informational purposes only. While the information contained within has been compiled from source[s] which are believed to be reliable and accurate, Comerica Bank does not guarantee its accuracy. Consequently, it should not be considered a comprehensive statement on any matter nor be relied upon as such.