Purchase your dream home

Before you get too deep into the process of buying a house, you want to be certain you’re ready for homeownership. Given your financial circumstances, is now a good time to buy a house at this point in your life? If money’s tight or you don’t plan to stick around in one place for too long, it might make more sense to keep on renting.

Nothing’s more discouraging than finding the perfect home only to realize that the asking price is far more than you can afford. Set the right expectations for your house search by running the numbers in a home affordability calculator. Keep in mind, there can be a big difference between what you can afford and what you’re comfortable paying.

Give yourself a firm budget to stick to, with an absolute maximum amount you’re OK spending on a new house. Remember: In addition to the listing price, you should think about your budget in terms of the down payment and your ongoing mortgage payments. Those are the costs that are going to hit your bank account the hardest — both at the point of sale and on a monthly basis.

As a general rule of thumb, your total debt, including monthly housing payments, should not exceed 43% of your gross income. Use this guideline to adequately budget for your housing costs and avoid spending more than you’re comfortable each month.

You may feel ready at this point to go out and get pre-approved for a home loan, but it may be a good idea to take some time to improve your application credentials first. That’s especially true if you have a low credit score, high debt or low funds in your bank account. Those are some of the biggest factors lenders will weigh when assessing your mortgage worthiness. If you’re not in a huge hurry to buy a house, you may want to pay down some existing debt, boost your credit score and build up a fund for your down payment.*

Thanks to digital mortgages, homebuyers have more options than ever to consider with their mortgage lenders. Reach out to different lenders to see which one will give you the best mortgage rate possible. A common misconception is that running multiple credit checks during the pre-approval process will badly hurt your credit score. While this may be true for other financial services, like applying for several credit cards at once, credit bureaus are pretty good about recognizing rate shopping as long as those inquiries fall within a short period of time. That being said, you should expect any inquiry to impact your credit score to some degree.

A lot of homebuyers decide to go with the standard 30-year fixed rate mortgage, but there are plenty of other options to consider. For instance, you may want to cut the length of your home loan in half, and go with a 15-year fixed rate mortgage instead. You’ll be looking at a quicker timeline to pay back your home loan, but that also means you’ll own your home free and clear sooner.

Are you worried about putting down 20% for the down payment or having a low credit score affect your mortgage interest rate? Not a problem. Conventional financing offers many lower down payment options to consider. In addition, government-insured mortgages like FHA loans are designed to help people qualify even if they don’t meet the criteria that lenders typically look for in a low-risk borrower.

Every step up to this point has been focused on preparing you for the mortgage process, but now you’re ready to get in touch with a lender and see what kind of home loan you qualify for. Assuming your finances and credit history are in good shape, your lender of choice will issue you a pre-approval letter that shows they’re willing to extend you a mortgage. Unless you’re buying a house with cash, sellers will want to see that you’ve been pre-approved for a mortgage so they know you're serious about buying a house. Keep in mind, pre-approvals come with an expiration date, usually 60 to 90 days after being issued.

When you find a lender you like, see if you can lock your rate in case mortgage rates increase during the sale process. Not all lenders will lock a loan that’s still under a pre-approval, but it’s worth asking your loan officer. Like pre-approval letters, your mortgage rate is only good for a certain amount of time. You can expect that locked rate to stand for anywhere from 15 to 60 days. The clock’s ticking, so get a move on with your house search!

You could, in theory, go solo with your house search. But by doing so, you’re probably going to put yourself at a disadvantage. Professional real estate agents understand the ins and outs of the housing market, including how much homes are really worth and even catching wind of new houses before they go on sale. Given the stakes at play here, you want all the help and guidance you can get. Having an agent in your corner to manage the transaction is a smart way to avoid potential risks during the sale process.

What matters most to you when buying a house? Location? School district? The size of the yard? A fully furnished kitchen? You should go into your house search with a clear idea of what you absolutely need in a new house vs. what you would like to have. Lay out what your deal-breakers are so you and your real estate agent are on the same page and can make the most of your time when looking at houses.

You’ve got your budget, your pre-approval letter, your real estate agent and your list of must-haves — now you’re ready to start checking out houses. It’s always a good idea to drive around areas you’re interested in to get a feel for the neighborhood and see what’s on the market. Better yet, take a walk around the block to see if the area’s a good fit for you.

If you can’t find what you’re looking for in the ideal location, you have two choices: expand your search to other areas or compromise on the quality of the house itself. Remember: You can always renovate a kitchen or bathroom, but you can’t move your dream house to a better location.

Once you’ve found what you’re looking for in a house, don’t hesitate to put in your offer before someone else beats you to it. Work with your real estate agent to come up with a purchase price you think is fair. This is also the time to consider any additional contingencies you may want to tack onto your offer — but be aware that those contingencies may sour the deal for some sellers.

Just because the seller conditionally accepts your offer, that doesn’t make the sale a done deal. There could be any number of issues with the house that require your attention, from leaky pipes and broken laundry units to busted water heaters and out-of-code electrical wiring. The home inspection should bring any potential headaches to light, giving you a chance to negotiate the cost of repairs with the seller.

Meanwhile, your lender will schedule a home appraisal to ensure the property is sufficient collateral for the terms of your requested loan. If the appraisal comes back lower than the sale price, your lender may counter with new loan terms. That, in turn, may require the borrower to come up with a bigger down payment or renegotiate the price with the seller.

So, you have an agreement in principle with the seller and both the inspection and appraisal came through with flying colors. But you’re not done yet if you attached contingencies to your offer. This is the time to sort those out. For instance, some offers are contingent on the buyer selling their current home and using the proceeds from that sale as a down payment. Depending on the exact nature of the contingency, it could make or break the deal you have on the table.

You’ve locked in your mortgage rate and received a pre-approval letter, but your mortgage application still needs to go through the underwriting process and get full approval to move forward with your home loan. That could mean more back-and-forth with your lender and even responding to additional requests for documentation or reviews of your financial statements. Don’t get discouraged if it seems like there are some last-minute curveballs being thrown your way. You’re in the final stretch, that home is almost yours.

This is it; that moment you’ve been waiting for! Hopefully, every little wrinkle has been ironed out and things will go smoothly from here. That being said, you may find that you need to do some final negotiating with the seller before deeds are signed and titles are transferred.

Get all of your ducks in a row — collecting necessary paperwork, selecting homeowners insurance, producing any financial documents that may be requested — to avoid any delays and close on your new house as quickly as you can.

No matter what happens, your loan officer and real estate agent are there to answer any questions and help you make the best decision possible. Just a few final hurdles and you’ll be a new homeowner, congratulations!