Buying your first home is a huge step that’s full of unknowns. One of the most important parts of the process is arranging a mortgage, and applying for the first time can be scary – especially in a pandemic. Yikes!
But you can relax a bit. It’s probably simpler than you think, even if it can take a while to complete. Here are the basic seven steps to follow to make the financial side of buying your first home go as smoothly as possible.
1) Find a Lender
Finding the right mortgage deal is the first step toward home-buying success. You could take the simple route and seek a mortgage from your bank, but in many cases you’ll get a better deal elsewhere. Check the ads on finance websites, comparison services, and so on to find a deal which suits your financial circumstances, credit rating, and intended budget.
2) Seek a Pre-Approval
Before you go any further, arrange for a mortgage pre-approval. This means the lender will check your details to make sure you’re eligible for the loan you’re looking at, and that you’re likely to manage the repayments.
If it all stacks up, they’ll issue a mortgage offer in principle. You’re not committed at this stage, but it gives you a clearer picture of the price range of homes you should be looking at, and removes one obstacle from your home-buying path. Obtaining a pre-approval should only take a few days.
3) Find a Home
Now the exciting part begins. Start your house-hunting quest by scouring local real estate agent websites, brochures, and newspaper advertisements to find a home you’d consider buying, and then go through the viewing process to make your decision.
4) Finalize Your Application
Once you’ve found a home you love, submit a formal mortgage application containing all the relevant details and the supporting documents the form asks for. With luck, this will turn your pre-approval into a solid mortgage offer.
5) Processing and Underwriting
Once your final application is submitted, the lender will begin to process it. This involves checking your documents, and confirming that you meet all the guidelines for the loan you’ve applied for.
They’ll also check that the home you’re planning to buy meets their criteria and has no urgent issues of concern. Depending on how smoothly things go, this stage can take anywhere from a couple of weeks to a couple of months.
If your mortgage is approved, your home-buying journey will enter the pre-closing stage. This is largely carried out between the lender, the real estate agents involved, and the legal representatives of both buyer and seller. It wraps up the final details, arranges for the down payment to be issued, and checks that all legal requirements have been met.
If everything goes to plan, all the loose ends will now be tied up and all the paperwork finalized. All that remains is for the mortgage lender to issue the loan, and once the buyer’s bank confirms receipt, closing will be completed and you’ll be the legal owner of your new home.
Taking out a mortgage loan for the first time is probably the biggest financial commitment you’ve ever made so far, and it’s vital to get it right. If you follow these seven steps carefully, you could be moving into your new home sooner than you think.