When we left off in part one of our First-Time Homebuyer’s Checklist series, we walked buyers through the first six months of the buying process. With that out of the way, it’s time to take it home – figuratively and literally. Below you will find a step-by-step checklist that walks first-time homebuyers through the last six months of the buying process:
6 Months Out
Assemble The Proper Loan Documents
With roughly six months separating you from the purchase of a new home, the time for preparation is nearly at an end. Of course there will be impending nuances you need to address before the actual transaction occurs, but now is the time to take action. Remember, real estate does not favor the timid; it is on you to be proactive. Take everything you have done up to this point, and use what you have learned to bring the deal to the closing table.
Gather all the necessary documents you will need to receive loan approval, and get everything in order. While this step seems about as cut and dry as any other, I assure you that it is more difficult than it sounds. Subsequently, this step is dependent on the actions of whichever bank you are looking to borrow from. Banks are, at the very least, particular when it comes to mortgage loans. Everything must be in order for the transaction to progress. Any unexpected omissions or errors could set you back, or even prevent you from getting the loan altogether.
The sheer volume of paper work increases the odds of a mistake, and should – therefore – be addressed at least six months out. The more time you give yourself to go through your mortgage papers with a fine-toothed comb, the better. Carefully compile, and go through the following paperwork:
- Two to three years of W-2 forms, or business tax return forms for the self-employed.
- Two to three years of personal tax returns.
- The most recent paystubs you can get your hands on.
- Credit card and loan statements.
- Your bank statements.
- A list of addresses you have lived in for the last seven years.
- Brokerage account statements for the most recent two to four months.
- The most recent retirement account statements.
While it may feel a bit premature to gather these documents, I can assure you it is well worth your time. Taking care of this step now will alleviate a lot of stress when it comes time to close, and mitigate potential setbacks. Having said that, you will want to keep these documents close by throughout the entire process. It really helps later if you are able to update them with more accurate information regularly. With any luck, you might even come across something that will reduce your premiums or improve your terms.
Find A Lender & Realtor
While you are gathering the appropriate paperwork, it wouldn’t hurt to start looking for the lender you intend to give it to. In fact, now is the perfect time to do so. Armed with a better understanding of the loan programs that are available to first-time homebuyers, look for the lender that will accommodate your needs to the best of their ability. Keep in mind that they are competing for your business, so shopping around is an absolute must. Who you decide to borrow from will have a huge impact on the entire process; make sure that you are comfortable with whomever you choose.
If you are not comfortable with making the decision on your own, it may be in your best interest to hire a Realtor first. A properly trained buyer’s agent will help you find the right property, negotiate with the seller’s agent, and navigate you through the closing process. Sometimes it is incredibly beneficial just to have a second opinion; someone to let you know you are on the right track.
Even better, a good Realtor will be able to help you decide between potential lenders. Should there happen to be any discrepancies or inconsistences, their assistance should be able to alert you to potential complications. At the very least, they should give you more confidence in the lender you choose to represent your loan. To that end, look for a mortgage broker who will help you uncover a competitive loan rate, unlike a bank, which strictly offers its own services.
3 Months Out
Receive Loan Pre-Approval
In the event you have chosen to stick with our timeline, and are in fact on track, your credit score, paperwork, and down payment savings should be on schedule. Subsequently, you should now have an idea of who is going to represent you and which lending institution you will end up borrowing from. This is the time in the buying process where everything starts coming together.
First things first, you will need to receive a pre-approval letter from your bank. Schedule an appointment with the lender you have decided to borrow from, and be sure to have all of your paperwork in order. Provided everything goes well at the meeting, and I am sure it will if you have followed these steps, you are just a credit check away form receiving a pre-approval. At this time, you will learn how big of a loan your credentials have earned.
Of particular importance, however, is the leverage such a letter can give you during the buying process. Many first-time buyers are unaware that a pre-approval letter can actually place them ahead of the competition. Knowing that a buyer is capable of closing is a great relief to some sellers, especially those looking to close quickly. At the very least, a pre-approval letter will give all the parties involved in a deal their own peace-of mind.
Let The Shopping Begin
Having finally received approval, you will know exactly how much house you can afford. This will help you narrow down your actual home search, and prevent you from wasting time on homes out of your price range. Crosscheck what you can afford with the amenities you are looking for, and go from there. Now is the time to physically walk through properties and narrow your search results. Let your agent find homes that match your criteria and view them whenever you can.
For what it’s worth, have fun with this part of the home buying process. For as daunting as the whole thing can be, this is the time where you are actually able to visualize what it is you have been working so hard for.
2 Months Out
Make The Offer
Hopefully your search resulted in finding the home of your dreams, or at least a home you want to move into. If this is the case, it is time to make an offer. However, it is not enough to simply send them an offer you think is fair.
The offer process is complicated, and a bit temperamental. However, those with the know-how should have an advantage. For starters, you want your offer to stand out from anyone you may be competing with. There is one way to do this that I have found to be very useful: put the seller ahead of yourself. Transactions only work when both parties come out on top. Before you submit your offer, ask yourself why the seller would accept it. Sending over a low-ball offer just because the house needs work will probably not get the job done. Your offer needs to be fair, and justified.
It also wouldn’t hurt if you were the path of least resistance. Again, this is where the pre-approval letter comes in handy. If a seller knows you have already qualified for a loan, you already have an advantage over those that still need to.
Ultimately, it all comes down to one thing: getting the home at a price you feel is fair.
Request A Home Inspection
With your offer on the table, any acceptance should be contingent on whether or not the home passes inspection. One of the first things you’ll want to do after an offer is accepted is to hire a home inspector to look at the property. If everything checks out, it should be safe to move forward. However, the home inspection also offers an out for any property that is not up to your standards. For the sake of this publication, let’s say the home passed the inspection, and it is safe to move forward with the deal.
1 Month Out
Double Check Paperwork & Financial Documents
With the inspection out of the way, you are finally at the home stretch. Provided you have been updating your documents throughout the process, these last thirty days or so should be the easiest. First, have your agent go through your mortgage documents and check for any errors. It is absolutely critical that everything is correct, or you run the risk of delaying the close.
Get Home Insurance
Prior to closing, you will want to make sure the property is insured. At the closing, you will be required to present proof of insurance before the transaction can go through. Similar to that of choosing a lender, don’t hesitate to shop around. Get the best rate you can afford, while still having the protection you need.
Conduct A Final Walkthrough
This is where you will see the home for the last time before the closing. Walkthrough the entire property, and confirm that it is in the condition you and the seller agreed upon.
Have The Cash Ready At Closing
All that is left is to bring the agreed upon amount of cash to the closing. You will be given the exact number a few days before closing, which should be enough time to receive a cashier’s check or wire the funds. Remember, regular checks are not acceptable. At the closing, pay for the home and pat yourself on the back. Congratulations; you are now a homeowner.