Buying your first home is one of the most exciting financial decisions you will make. Our goal as the top mortgage lender in our area is to make your dream of homeownership a reality as quickly and trouble-free as possible. So we're providing all the information you need to be an educated buyer and borrower.
Step 1 of 7 – What is my price range?
Before you start house hunting, you'll need to understand what price range you can afford. A commonly used guideline is 2.5 times your yearly gross income (income before taxes) plus the amount of your down payment.
Step 2 of 7 – How much can I afford to borrow?
Your monthly gross income (income before taxes) and your debt load are used to determine how much you can borrow. Your loan payment plus your monthly debt (not including your household expenses such as heat and electric) should not exceed 30% of your monthly gross income.
Step 3 of 7 – Finding the Right Mortgage Product
A wide variety of home loans and financing options are available. Some choices are yours to make; others are based on specific circumstances such as:
- The amount of money you have for a down payment
- Availability of closing costs
- Your credit score
- Length of the loan term
- A desire for a fixed or variable rate
- Choice of monthly or bi-weekly payments
FHA Loans have many unique benefits that may make home-buying a reality for you:
- The ability to buy your home with a minimal down payment (as low as 3.5%)
- The option to pay for down payment and closing costs with a gift or grant
- Flexible income, debt and credit requirements
- First Citizens Community Bank Mortgage Products
Step 4 of 7 – Obtain Pre-Qualification
The Pre-Approval step allows you to validate your ability to borrow and provides an estimate of your maximum loan amount. During the pre-approval process, a credit check will be performed. A letter can be printed by you and provided to the Realtor to assure them that your bank has tentatively approved you for this loan amount. Many Realtors require this pre-approval letter so they can be sure the homes they show are in your price.
Step 5 of 7 – Buying your Home
Buying your first home is an exciting time. To get started and make it easier, start by thinking about those features that are must-haves – the number of bedrooms, number of bathrooms, garage, etc. Then list what you absolutely do not want. Finally, list the things that would be nice to have but something you would be willing to give up for the right house or the right price. Now you're ready to go shopping!
For your convenience, we've gathered the names, contact information and websites of realtors in our local area. You can simply click on their website to learn more about them and view the homes they have listed.
Step 6 of 7 – Applying for your Mortgage Loan
So, you've found your house and you're ready for the next step – getting your Mortgage. You can apply for your mortgage loan by contacting a lender or you can apply online. A lender will contact you if you apply online. You will be asked to provide a list of information to your lender, so they can proceed with your loan review and approval:
- Paystubs for all applicants for the prior month
- W-2's for all applicants for the most recent tax year
- Tax Returns for all applicants for the prior two years
- Bank statements for prior two months for all deposit accounts and the last quarterly statement covering any investments listed on the application including retirement accounts
- Copy of signed purchase agreement
- Copy of driver's license for all applicants
- Copy of social security card for all applicants
- Divorce Decree (if applicable)
- Alimony/child support documentation (if applicable)
- Death Certificate (if applicable)
- If a refinance, a copy of the most recent year's tax bills (spring and fall)
- A copy of the homeowner's insurance policy if refinancing or prior to the closing if purchasing a new home (if applicable)
Locking in the Rate
You may be provided with the opportunity to "lock in" a rate, which ensures you receive the rate that is quoted to you at the time of commitment (which is when you are informed of the approval of your loan). This is often a good option if you feel rates may go up.
Within 3 days of application, you will be provided with several documents:
- Truth In Lending Disclosure – provides information about the proposed loan such as the annual percentage rate, total finance charges, and total payments.
- Good Faith Estimate – Lists your closing cost. This is provided to give you some idea of the approximate costs you will need to pay at closing. Such costs could include interest adjustments, title insurance, recording fees, points, credit report fees, appraisal fees and settlement fees which are paid to the lawyer or firm who manage settlement.
- US Department of Housing and Urban Development (HUD) booklet to assist you in understanding closing costs and the Truth in Lending Disclosure.
Appraisal and Inspection
Once you have a signed sales agreement, the appraisal will be ordered by the bank. The appraisal is an evaluation of the property's value and is completed prior to the final loan approval to ensure the loan amount is consistent with the value of the property. The appraiser visits the house and evaluates the site, structure and physical condition of the property. The final appraisal amount also includes an evaluation of recent selling prices of similar homes in the area (often referred to as "comparables"). The process can take up to two weeks.
An inspection may be required as a result of something found during the appraisal process. It may also be requested by you, the buyer, to uncover hidden problems or to identify items that you may want the seller to repair before the final contract is signed.
The title search is a step to uncover any possible problems with the legal ownership of the property such as a lien, an unknown heir or faulty land survey. Arrangements for the title search are made by the bank. A one-time fee is paid at closing.
Approval and Commitment
Upon receipt of a satisfactory appraisal and title search, your lender will contact you with the final approval. A commitment letter will be issued at this time.
Step 7 of 7 – The Closing
At the closing, papers are signed, keys change hands, and the home officially becomes yours!
The lender will establish the closing date. Before closing you should review all loan documents and your purchase agreement and do a final 'walk through" inspection to ensure nothing has changed or been removed from the house.
You must pay for the rest of your closing costs and down payment at the closing.
Download Your Home Loan Toolkit - A Step by Step Guide