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The Loan Process for First-Time Homebuyers

Face About First-Time HomebuyersMedian Age is 32 years old1,187 sq feet is the average size of a first home10% average downpaymentMedian listing for a starter home
You’ve done your neighborhood research, found the perfect realtor, visited countless houses and have narrowed down your search to the house you want to become your home. For a first-time homebuyer the next step, apply for a mortgage1 and the loan process, can seem overwhelming and long. With this guide, we break down how the loan process works so you can be prepared, know what questions to ask and be one step closer to your new home.

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  1. Get organized

Going into the loan process, it’s good to know what mortgage officers, mortgage underwriters and your realtor will be asking of you. Items including residence history, employment history, past pay stubs or other income information and bank statements are all parts of the process. Take time to gather past W-2 forms, contact information of past landlords and the sales contract, if you have it, to keep the process moving.

Find a full checklist of items you’ll need during the application process here.

  1. Get Prequalified

You can go through the prequalified step in one of two ways. If you have decided on a house, you can get prequalified for the amount of that house. If you haven’t found a place, but want to know how much your budget should be, then you can get prequalified without having a house in mind.

When you reach out to a bank to get prequalified, you will be asked about your income, credit, down payment amount and more.

Getting a prequalified letter is a great bargaining tool when you’re putting in an offer on a house. It shows the sellers you are a serious buyer and can afford the home you are trying to buy.

  1. Apply for a Loan

During this step, you will be submitting information about the property you wish to purchase and your personal finances. This step is when you will be happy you got organized and have your documents in one place. After your application has been reviewed, you will receive a Loan Estimate detailing your note rate and corresponding annual percentage rate, or APR.

This is a good time to formalize your down payment amount. Depending on the deal you made with the owners, you might have to factor in closing costs, inspections and more into the amount you’ve saved for a down payment. In 2016, 6% was the average down payment for a first-time homebuyer. Work with your lender to come up with a plan that works for you and your finances.

  1. Get a Property Appraisal

Once you have submitted your application and agreed on your loan amount, down payment and annual percentage rate, your lender will coordinate to have your property evaluated. Once the property has been appraised, your lender will contact the closing attorney to prepare the title search and arrange a title insurance binder. You will receive a copy of the appraisal for your records.

  1. Underwriting Process

During this time, a team of underwriting professionals will review your paperwork and documentation to make sure everything is in order. If they have questions or are missing something, they will reach out to you. If all documents meet the underwriting standard, you will be issued a final loan approval.

  1. Determine a Closing Date

The closing date will be determined between your lender, realtor, closing attorney and potentially the sellers and their realtor. All documentation will be finalized and a loan package will be provided to the closing attorney.

  1. Close on Your Home

You will walk in a renter and leave a first-time homeowner! For your closing, you will sit with your attorney and sign all required paperwork to complete the loan and officially own your own home.

  1. Move in and Enjoy Your New Home!

Congratulations! After all your hard work, it’s time to move in and get settled into your new home.

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