CHAPTER 1: INTRODUCTION

Are you thinking about taking the plunge and buying a home? The decision to buy is a big one! It’s a bit intimidating to think about making such a large purchase.

But you can rest easy. I’m here to guide you all the way through this process and make sure you’re comfortable every step of the way. Think of it as a white glove delivery service—that’s how smooth I want it to be for you.

This comprehensive guide to buying a home shows you exactly what’s next, so let’s jump in.

CHAPTER 2: Get Your Finances on Track

Check Your Credit

The better your credit score, the better your interest rate will be (check out this cool calculator to see what a difference your credit score can make to your monthly payment).

If you’re not happy with your score, fixing your credit begins with knowing what’s wrong with it in the first place. Go to annualcreditreport.com and get a free credit report from each of the three major credit bureaus—Transunion, Experian, and Equifax.

If you see any mistakes on your report, get them fixed right away. When you fix a problem, the lender must report the correction to all three credit agencies, so you shouldn’t have to fix the same problem three times. Look for:

- Payments incorrectly posted as late
- Bills marked unpaid that you actually paid
- Loans or credit cards you didn’t sign up for

Get Financial Documents Ready

Your lender will need financial documents from you when you apply for a mortgage. Here’s a short list of things you’ll need.

- Pay stubs - Personal tax returns (2 years)
- W-2s or 1099s (2 years)
- Bank statements (2 months)
- If you own a business, business tax returns (2 years)
- Proof of alimony or child support payments
You may need more documents as the loan process continues, but this is a good place to start.

Pay Down Debt

The lender will use a ratio called the debt-to-income ratio (DTI) that compares your monthly debt payments to your monthly income.

Basically, DTI is your monthly debt obligations (car payment, student loans, monthly minimum credit card payments) divided by your monthly gross income.

So if you have $1,500 in monthly debt payments and $5,000 in monthly income, your DTI is 30%.

This number is important because it helps the lender determine how much money to lend you. They don’t want your monthly debt obligations to be too high.

If you have debt that you don’t want to count in your DTI, pay it off right now, before you apply for a loan.

Stop Other Borrowing

If you’re applying for a mortgage soon, it’s a smart move to stop other kinds of borrowing. In other words, now is not the time to get your dream car and a house full of furniture. There will be plenty of time for those things after you’ve closed on your new home.

In fact, don’t even apply for any new types of credit during the loan process.

Decide on a Down Payment

You’ll need to put money down to buy a home. You may have heard that you need 20% of the home’s price, but that’s actually not true. You can buy a home with as little as 3% down. Just remember that the more you put down, the lower your monthly payment will be.

Now is a good time to sit down with your finances and decide what you feel comfortable putting down on your new home and how long it might take you to get there. It will be much easier (and quicker!) to get pre-approved for your new home if your finances are straightened out. After that work’s done, it’s time to move on to pre-approval!

Determine How Much You Can Afford

The lender will tell you how much you can afford during pre-approval (more on that in the next section), but this doesn’t necessarily mean you can actually afford a home that costs that much.

Take a hard look at your budget and make sure that you know exactly how much of a monthly payment you can really afford. You may need to look at homes that cost less than the number the bank pre-approves you for.

CHAPTER 3: GETTING PRE-APPROVED

You’d never go shopping without a wallet, and shopping for a home without getting pre-approved first is about the same. During a pre-approval, the lender will verify your finances, so they can decide how much to lend you.

Pre-Qualification vs. Pre-Approval

You’ve probably heard of both a pre-qualification and a pre-approval, but one is a lot better than the other. If you’re serious about buying a home, skip straight to the pre-approval. It requires a credit check and financial documentation. Because the lender actually verifies your financial information, it’s a lot more robust than a pre-qualification.

Here are some of the advantages of getting a pre-approval before you shop for a home:

- When you get a pre-approval, the lender tells you how much money you’re likely to be approved for (keep in mind that a pre-approval is never a commitment to lend). This way, you won’t shop for homes that are over your budget.
- Because the lender has already gone through your financial documentation and pulled your credit, a pre-approval makes it more likely that they’ll be able to approve your loan once you do find the home you’re looking for.
- A pre-approval shows all parties that you’re not just window shopping. You’re serious about buying a home, and that strengthens your offer.

Now that you’ve been pre-approved, it’s time to start shopping for your dream home.

CHAPTER 4: Find a Realtor®

So, why do you need a hard-working local Realtor®? A Realtor® makes your home search easier. That’s because a Realtor®:

- Has expertise about local market conditions
- Knows about homes you may not know about
- Is a negotiator who wants to get you the best deal
- Has many local connections that make everything home-related easier

I’m here to make your entire transaction, whether you’re a first-time buyer or an experienced buyer, go smoothly. I can foresee potential problems and prevent them before they derail the home you’ve worked so hard for.

Plus, you won’t ever pay me a cent. I’ll get paid from the proceeds of the sale of the home. So, there’s no reason not to take advantage of all the ways I can help you!

CHAPTER 5: Find a Home

Now is the fun part—the part you’ve been waiting for. It’s time to shop for a home!

Make a List of Needs and Wants

First, make a list of things you must have in a home and things that you would like to have in a home. This ensures that you look only at homes that actually fit your criteria. Otherwise, you risk falling in love with something that isn’t what you need, which is a recipe for unhappiness and regret. Trust me on that one.

Take Notes and Pictures

Make sure to take notes and pictures (or even videos) of homes as you’re walking through them. You’d be surprised how all of the homes start to blur together after you’ve seen a few.

Evaluate the Neighborhood

You should also evaluate each neighborhood as you look at homes. Go during the day as well as after dark. If you can, talk to some of the neighbors. Drive to work from the home and see if the daily commute will work for you.

CHAPTER 6: Negotiate and Secure Home

Once you’ve found the right home, it’s time for us to work on submitting an offer to the seller. I’ll help write a fair offer based on the market and the homes in the surrounding area. This is where my negotiation skills go to work for you. I’m here to act in your best interest.

Once we’ve come to an agreement with the seller, you’ll pay earnest money (this is money that shows that you’re serious about buying the home, and it goes toward your down payment).

CHAPTER 7: Lock in Rate/Full Loan Application

Now, it’s time to lock in your mortgage rate with the lender (you can also wait if you want to).

Mortgage rates change daily, even hourly. A rate lock protects you from rate fluctuations. It’s a written guarantee from the lender that you’ll get a specific interest rate on your loan, despite what the market does (as long as your loan closes when it’s expected to).

At this point, the lender will also work on putting your full application and file together to begin the underwriting process. They’ll likely be asking for additional financial documents (sometimes they just need to update the documents you already gave them, especially if it’s been a while since you were pre-approved).

CHAPTER 8: Do Your Due Diligence

Due diligence is what you do to make sure you’re buying the house you think you’re buying. If you skip any of these steps, you could end up with many more problems than you bargained for.

Inspection

Nobody actually requires you to get a home inspection, but I strongly advise that you do. A home inspector looks at all the parts of your home and tells you exactly what you’re getting. Without a home inspection, you won’t know the true condition of your home.

Seller Disclosures

Disclosure statements reveal known defects (both present and past) to potential buyers. This is a chance to learn more about the house you’re buying. Disclosures also protect sellers from potential legal action.

Disclosures can include things like work that was done without a permit or that wasn’t done to code, termite problems, water damage, or malfunctions with major systems.

You’ll usually receive seller disclosures after the sellers have accepted your offer. Most contracts allow you to back out if you discover something negative in the disclosure statement. You’ll also have to sign off on all disclosures and reports.

Appraisal

An appraisal is something the lender will order for you. An appraiser gives an unbiased view of the home’s worth. He or she will assess if the amount you offered to pay is supported in the market based on both the home’s condition and comparable homes in the area. This is to protect the lender and to protect you. It’s good for everyone to make sure the home is worth the price you’re paying for it.

CHAPTER 9: Get Ready to Close

It’s just about time to close, and you’re probably feeling a little antsy. That’s normal! I’m busy working behind the scenes with your lender to make sure everything goes off without a hitch. There are a few things you can do to help us out.

Home Insurance

You’ll need to provide proof of home insurance before you can close on your new home. I recommend calling around to make sure you’re getting the best rate and coverage level possible.

Submit Final Documents

You’ll likely need to provide a few final financial documents before the lender can close on your loan (depending on how long it’s been since your initial application).

Final Closing Disclosure

At least three days before you close on your loan, you’ll receive your final closing disclosure documents to sign. These documents lay out the final terms of your loan, including down payment, interest rate, total cost of the loan, and more.

Arrange Moving

It’s also time to arrange how you’re going to move out of your old home and into your new one. It can get a little hectic, so the more you plan, the better off you’ll be.

CHAPTER 10: It’s Closing Day!

You made it! It’s closing day. It’s time to get ready to sign a whole bunch of papers, and then it’s all over. You can move into your brand-new home!