The Basics

Step-By-Step Guide to Buying a Home

Published: December 14, 2023

Step-By-Step Guide to Buying a Home

Buying a home can seem a lot more daunting than it is from the outside looking in. It’s one of the biggest financial commitments you can make, but with proper preparation and an understanding of the process, you can make sure your homebuying journey is a breeze.

Below, we’ve broken down the homebuying process into 11 steps. Some steps are more fun than others, but all will contribute to a life-changing purchase.

Step 1: Assess Your Readiness

Becoming a homeowner is a life-changing commitment that has benefits that will last a lifetime. But before you decide to start the homebuying process, you must assess your readiness.

Financial preparation is important, but being mentally and emotionally ready is almost just as important. When you buy a home, you should expect to live there for at least three years to make the purchase worthwhile.

When you decide to start the process, consider a few of your goals for the next couple of years. Do you plan on staying in the same job? Are you buying with a partner? Do you think you might want to start a family in the near future? Identifying these big-picture goals can help you realize if you’re ready to buy a home.

Step 2: Get a Snapshot of Your Financial Situation

Buying a home is likely the biggest financial decision you can make. Before you start the process, you’ll want to make sure that you have your finances in order and a plan in place.

You’ll want to check your credit score. Healthy credit is one of the cornerstones to getting a favorable rate when you apply for your mortgage. If you need to improve your credit score, check out our blog on the steps to take to repair your credit.

If you want to a good idea of what you can afford, use our affordability calculator! This uses your credit score, annual income, monthly debts, down payment, and an estimate of your interest rate based on location, credit, down payment, and loan term to provide you with an approximate maximum home price and monthly payment.

Step 3: Budget For a Down Payment & the Other Homebuying Fees

Your down payment and closing costs are perhaps the largest lump sum that you’ll spend when you buy a home. The down payment is your one-time payment towards the purchase of your home. Many individuals believe that a 20% down payment is required, but in some cases, you can get a conventional loan with as little as 3% down!

There are caveats to a lower down payment, though. Although you are paying less money upfront, you’ll most likely have to pay mortgage insurance which can increase your monthly payment.

For many first-time homebuyers, there are down payment assistance programs that can offer financial health through the form of a forgivable grant. DPA programs vary from state to state and even city to city, so speak with an expert to learn what’s available in your area!

If you have friends or family members who can afford to help, you can also use gift money to increase your down payment. Rules regarding gift money vary by loan program.

You’ll also need to save some money to cover closing costs, which are the fees you pay to get your loan. Typically, closing costs are around 3-6% of the home’s value. Your loan type, lender, and location will determine how much your closing costs will be.

Step 4: Create a List of Wants and Non-Negotiables

Do you want a fixer-upper or something that’s move-in ready? Would you rather live in a walkable area or something that’s got more land? And if you’re considering starting a family or already have one, which areas have better school districts?

These are the questions you’ll want to have nailed-down answers to before you hit the market. Knowing your wants and needs from the jump will be hugely beneficial when it becomes time to start searching for homes.

Step 5: Connect With an LO and Get Pre-Approved

You wouldn’t go shopping without your wallet. Well, shopping for a home without a pre-approval letter is the same thing. Once you’ve assessed your readiness, budgeted, and analyzed what you want in your home, connecting with a loan originator to get a pre-approval is the first official step of the homebuying process.

A pre-approval letter will give you a solid estimate of your homebuying budget. Getting pre-approved is quick and can be done over the phone. A loan originator will pull your credit score and ask you basic questions regarding your income and other debts to provide you with a number that you can use as a point of reference when narrowing down your home search by list price.

Not only does a pre-approval give you a solid budget to work off, but it also shows sellers and real estate agents that you’re a serious buyer and can access financing. It also will make the actual loan application process go by quickly since you already have most of these financial documents handy, easing stress down the line.

Step 6: Find a Real Estate Agent & Start Shopping

It’s not necessary to hire a real estate agent, but it’s hugely beneficial and highly recommended. An experienced real estate agent will know the ins and outs of your local market, help you find homes on the market and ones hitting the market in the future, write your offer letter, and assist in negotiations.

There are a few different ways that you can find a good real estate agent. Most people will ask friends or family members if they recommend the agent they’ve worked with, and if you’re already working with a loan originator, they likely have some partners that they work with and trust as well.

With a pre-approval letter in hand and a trustworthy real estate agent by your side, the fun begins; it’s time to hit the housing market! Your real estate agent will help send you listings and even some homes that haven’t hit the market yet.

When you’re looking at homes in person and online, this is when your list of wants & non-negotiables comes in handy. Try to keep note of the things you like and dislike about each home so you can reevaluate when comparing your options.

Step 7: Make an Offer

Now that you’ve found the home that ticks all the boxes and is within your budget, it’s time to make an offer! This is where your real estate agent will really come in handy. They’ll be able to pull comparable sales information and insight from the selling agent to gauge how much competition you might face for the home and whether the seller is motivated to sell quickly. From here, they’ll help you write the offer and provide their insight to make sure you get a good deal.

If your offer is rejected, you can work with your agent to make a counteroffer, or you can continue your home search. Negotiations can take some time, and this is where you should lean on your agent’s expertise.

Once you have an offer accepted, there are just a few steps to go!

Step 8: Apply For Your Mortgage

Now that you’ve had your offer accepted, you know how much you’ll need to lend in order to buy your home. Working with your loan originator, you’ll go through your options to pick the mortgage that works best for you.

When you work with experienced loan originators like myself, we can shop rates for you from a portfolio of different lenders to find the rate and term that works best for the buyer’s individual circumstances.

The process for getting your mortgage involves quite a few financial documents that you’ll have to gather. Here’s what you should prepare when you’re ready to apply:

Tax documents for the last two years
Bank statements for the last couple of months
Pay stubs for the last two months
Proof of any other income or funds (like gift money)
Driver’s license and social security number

There’s plenty that goes on behind the scenes when you take your loan from application to clear-to-close, but when you’re buying with UMortgage, you can rest easy knowing that your loan is being handled by our best-in-class Operations team. Once you’re approved, your loan will go into underwriting. Here, your lender makes the final decision and approves your loan once everything is reviewed.

Step 9: Get a Homeowners Insurance Policy & Schedule an Appraisal

Before you close on your home, you’re required by lenders to secure a homeowners insurance policy and have your home appraised. These are two conditions that lenders require you to meet before closing on your home.

You’ll want your homeowners insurance policy to have enough coverage to fully replace the home’s value and to become effective on your closing date.

Your appraisal is required to make sure the lender isn’t lending you more money than the home is worth. Typically, the lender will order the appraisal for you and will bill you directly for the cost.

Step 10: Have the Home Inspected

Although this is an optional step, it’s highly recommended to ensure that the home you’re about to commit to is in good condition. When you’re paying upwards of tens of thousands of dollars for your down payment and closing costs, the last thing you want is to find out that you’ve got a faulty water heater or HVAC unit to burn a hole in your pocket once you’ve moved in.

Home inspections typically cost anywhere from $200 to $700. If your inspection finds any major issues, you typically have a contingency that allows you to back out of the agreement before you close. If any relatively minor issues are discovered, you can negotiate with the seller to have the repairs made or have them pay you to fix them after you’ve moved in.

Although it’s optional and could seem like a good place to cut costs before you start signing checks on the closing table, getting a thorough home inspection is a relatively small cost to ensure you’re not saddled with any large and unexpected repair costs once you’re settled in your new home.

Step 11: Close On Your Home & Move In!

The 11th and final step of your homebuying process is the most exciting. All the hard work put in to budget, save, house hunt, and provide all the necessary documentation to get your mortgage culminates in you putting pen to paper and making the home yours.

At least three business days before your closing date, your lender will provide you with your closing disclosure. This document clearly outlines all the costs that go into finalizing your mortgage and the costs that are due from you at closing.

On or before your closing date, you’ll do a final walkthrough of the home with your real estate agent. During your walkthrough, you should check to make sure that any potential repairs negotiated after your inspection have been made and that all agreed items, such as appliances, are accounted for in the home.

It might seem like a long and arduous process, but buying a home is one of the most rewarding investments you can make. Working with experienced professionals will go a long way towards making it as stress-free and smooth as possible. If you’re ready to get started, contact your UMortgage loan originator for an initial conversation!

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The BasicsDecember 18, 2024

How to Read Your Loan Estimate

Getting your loan estimate is an essential step in the homebuying or refinancing process. What’s even more essential, though, is knowing how to read your loan estimate. We’ve seen plenty of clients work with other lenders and get hit with extra fees that were hidden in plain sight on their loan estimates. Reading your loan estimate doesn’t have to feel overwhelming. This guide will break it down step-by-step so you can understand every detail and feel confident about your mortgage. What is a Loan Estimate? A loan estimate is a detailed document provided by your mortgage lender that outlines all the different details and fees that will go into your mortgage once approved. It details things like your rate, the type of loan you have, what your monthly payment will be, an estimate of your closing costs, and much more. Remember, these figures are estimates. They can change if your mortgage rate, home price, or down payment changes. It’s important to work alongside your loan originator to understand all of the costs that go into your mortgage to make sure you know what you’re paying for and get the best deal possible. The Different Sections of Your Loan Estimate When you receive your loan estimate, you’ll notice that it’s broken down into a few different sections. It’s important to know what these sections cover and what they mean to avoid hidden fees and make sure your mortgage is structured the way you want it to be structured.Below are some of the sections you should review in detail and the different sections you’ll see on each page. Page 1 - Loan Terms Page 1 of your loan estimate summarizes the basic details of your loan. This includes your loan amount, interest rate, monthly principal & interest, prepayment penalty, and balloon payment. At the very top of the page, you can see whether you locked your rate, the length of your loan, and the type of your loan. As you review this section, keep in mind the things you agreed upon with your loan originator. Things like whether you locked your rate, what type of mortgage you got, and whether or not your rate can or cannot increase after closing. Page 2 - Closing Costs Page 2 of your loan estimate will cover all of the fees that make up your closing costs. The only thing on this page that’s controlled by your loan originator is section A: origination charges. This section includes charges like application fees, underwriting fees, or points to ‘buy down’ your rate. These are the only fees your loan originator controls, so review them carefully to ensure they align with what you discussed. The other sections are the services that you can and cannot shop for, taxes and government fees, prepaid interest, taxes, and insurance, initial escrow payment due at closing, and other costs. At the bottom of this page, you can see your estimated cash to close. This is the amount of money you’ll need to pay to close your loan and get the keys to your new home. It combines the fees outlined on that page with your down payment and accounts for paid fees like a deposit, seller credits, lender credits, and other things that help lower your total closing costs. Page 3 – Additional Information Finally, on page 3, you can see a few pieces of information specific to your loan. At the top of your page, you can find information about your lender and loan originator. Beneath that are figures that you can use to compare this loan estimate with any others you receive. Finally, at the bottom of the page are details about your appraisal, loan assumption if you sell or transfer the property to someone else, late payment details, refinance qualification, and servicing. Servicing lets you know whether your lender will transfer servicing of your loan to someone else. This is important to know—if your lender intends to service the loan, you will pay that lender each month. If they plan to transfer service, you will need to pay a different lender. You can confirm all of those payment details with the lender at the time of your closing. How to Use Your Loan Estimate to Your Advantage Understanding every section of your loan estimate will help empower you to shop around for the most affordable mortgage available with terms that fit your short- and long-term financial goals. It will also protect you from different hidden fees that some lenders utilize to make a loan look more affordable than it actually is. The most common is discount points that allow a lender to give you a lower mortgage rate than the market allows. If you think your quoted rate is too good to be true, make sure to check section A on page 2. Discount points aren’t always bad, but it’s important to know whether you’re paying them and if it makes sense to pay discount points before you sign the dotted line. When you work with a UMortgage Loan Originator, you’ll unlock expert guidance to walk you through the entire mortgage process, including your initial loan estimate and your more detailed closing disclosure. You can also trust that you won’t get hit with any deceptive fees—just a mortgage that allows you to unlock the life-changing benefits of homeownership. Want to get started? Follow this link and fill out the form to get connected with a Loan Originator in your area today!

The BasicsOctober 11, 2024

Spruce Up Your Fall Open Houses With This Checklist

Autumn is the perfect time to create a warm, welcoming atmosphere that invites buyers to envision themselves living in the home they're visiting. As the weather cools and the leaves start to turn, real estate agents have a unique opportunity to set the mood for open houses by adding a touch of seasonal charm. With just a few simple touches, you can help potential buyers feel at home while also reminding them of important fall maintenance tasks. Here’s a checklist to give your open houses that cozy, autumnal vibe while also emphasizing the importance of seasonal upkeep. 1. Set the Mood with Fall-Scented Candles or a Simmer Pot When potential buyers walk into a home, the first thing they’ll notice is the atmosphere. Scents are incredibly powerful, so setting the right mood with fall-scented candles or a simmer pot with seasonal spices is a must. Opt for warm, inviting aromas like cinnamon, pumpkin spice, allspice, or cedarwood. These scents create an immediate sense of comfort and coziness. Tip: Choose subtle, natural fragrances to avoid overwhelming guests. You want the scent to be pleasant, not overpowering. For a fall-scented simmer pot, slice an apple, an orange, and a lemon and add to a saucepot. Sprinkle them with a tablespoon of nutmeg and ground ginger and add up to 5 cinnamon sticks. Cover with water, bring to a boil, and lower the heat to simmer for as long as desired. 2. Incorporate Seasonal Decor Fall is all about beautiful colors and textures, so why not bring those elements into your open house? You don’t have to go overboard—just a few tasteful touches will do the trick. Think decorative pumpkins, a simple wreath on the door, cozy throw blankets, and vases filled with autumnal foliage or wheat stalks. Tip: Neutral tones and natural materials, like wood and cotton, blend well with most interiors and help potential buyers focus on the home itself, not just the decor. 3. Create Cozy, Inviting Spaces Fall is the season of warmth and relaxation, so highlight areas of the home that encourage comfort. Stage the living room with plush pillows and soft throws or set up a reading nook with a comfy chair and a stack of books. If the home has a fireplace, make sure it’s clean and staged, and consider lighting it for the event (if it’s a gas fireplace) to showcase how the space could feel on a chilly evening. Tip: Dim lighting and warm, ambient lamps create a relaxed atmosphere that makes the space feel more intimate and inviting. 4. Highlight Outdoor Spaces with Seasonal Touches Don’t forget about the exterior! Add seasonal touches to the front porch or backyard to make outdoor spaces shine. A simple pumpkin arrangement or a few pots of mums can make a big difference. Clean up leaves and debris to ensure the yard looks well-maintained. Tip: Don’t forget to highlight the potential for cozy outdoor living. Adding a fire pit, some string lights, or a patio heater can inspire buyers to imagine gathering outside even in cooler weather. Seasonal Maintenance Tips to Share with Buyers In addition to creating a cozy atmosphere, fall is an important time for homeowners to tackle seasonal maintenance tasks. By offering these tips during an open house, you can help buyers think ahead and show that you’re a knowledgeable resource. 1. Turn Off Outdoor Spigots and Drain Hoses One of the most important fall tasks is to turn off outdoor spigots and drain hoses before freezing temperatures arrive. Remind buyers that failing to do so can lead to burst pipes, which can cause costly damage. Tip: Suggest purchasing insulated faucet covers to protect outdoor water sources during the winter months. 2. Clean Gutters and Downspouts Fallen leaves and debris can easily clog gutters and downspouts, leading to water damage when the rain starts. Make sure buyers are aware of this essential task to prevent overflow or ice damming during winter. Tip: A gutter guard can help reduce the amount of debris that accumulates, saving time and effort in the long run. 3. Trim Dead Limbs and Clean Up Spent Plants Fall is the perfect time to trim dead or damaged tree limbs to prevent them from breaking under the weight of snow or ice. It’s also a good idea to clean up spent plants and flowers from garden beds to give the yard a tidy appearance and prepare for next spring. Tip: Encourage buyers to save time in the spring by planting bulbs in the fall that will bloom early next year, like tulips or daffodils. 4. Inspect and Seal Drafty Windows and Doors With cooler weather coming, now is the time for homeowners to check windows and doors for drafts. Encourage buyers to inspect the home’s seals and weatherstripping to prevent heat loss and save on energy bills. Tip: Window insulation kits and door draft stoppers are affordable and effective ways to block cold air from seeping in. Adding fall vibes to your open houses is more than just setting the mood—it’s about helping potential buyers feel comfortable, welcome, and excited to imagine themselves living in the space. By combining seasonal decor and cozy touches with important homeownership tips, you’ll not only create a memorable experience but also position yourself as a trusted resource for your prospective buyers.

PurchaseJune 11, 2024

How To Budget to Buy a Home: The Essential Homebuyer’s Guide

Buying a home is a significant financial milestone, but it also requires a significant financial outlay. If you’re dreaming of buying a home, you first need to make sure you have a solid budget in place to pay for the one-time fees like your down payment and closing costs as well as the new recurring expenses that come with homeownership. In this blog, we’ll share some tips to help you budget for your home purchase and ensure a smooth transition into homeownership. Below, you can find more details about how to set your budget, which expenses you should keep in mind, and how to track your budget throughout the buying process and into homeownership. Setting Your Budget Before you start to set money aside, you first need to determine your budget. There are three main things that you need to consider: your buying power, how much you plan to put toward your down payment, and what your closing costs might look like. Determine Your Affordability with a Pre-Approval The first step in budgeting for a home is to assess your financial situation and determine how much you can comfortably afford. Lenders typically recommend that you follow the 28/36 rule. Based on this rule, your monthly housing expenses, including mortgage payments, property taxes, and insurance, should not exceed 28% of your gross monthly income. Total monthly debt payments—which include housing expenses and other existing debts such as student loans or a car payment—should not exceed 36% of your gross monthly income. A great way to get started with a snapshot of your homebuying budget is to work with a UMortgage Loan Originator to get pre-approved. Your pre-approval will use your income, credit, and existing debts to provide you with an estimate of your buying power. If you want an immediate estimate of what you can afford, feel free to use my free affordability calculator. Calculate Your Down Payment Unless you’re buying your home with a VA loan, you’ll have to pay a down payment when you close on your home. Saving for a larger down payment can help you secure a lower interest rate and avoid private mortgage insurance (PMI), which can add significant costs to your monthly payments. However, with a conventional loan, you can buy with as little as 3% down. For more information on down payment minimums, reach out to your UMortgage Loan Originator. Factor in Closing Costs Closing costs are the additional fees and expenses associated with the home-buying process, such as lender fees, title insurance, and property taxes. These costs can range from 2% to 5% of the home's purchase price, so it's crucial to factor them into your budget. As you start working through the beginning stages of your homebuying journey, you can work with your UMortgage Loan Originator for an estimate of your expected closing costs. Accounting for New Expenses While homeownership is exciting, it also comes with a handful of new one-time and ongoing expenses. As you’re budgeting for your home purchase, it’s important to consider the expenses below so you’re prepared when that first new bill hits your mailbox. Homeowners Insurance Homeowners insurance is a mandatory expense that protects your investment against potential damages or losses. Homeowners insurance costs vary depending on factors such as the home's location, age, and construction type. Once you hit the market, you can connect with your UMortgage Loan Originator or real estate agent for a cost estimate. Property taxes are an ongoing expense that homeowners must pay annually or semi-annually. These taxes are based on the assessed value of your home and can vary significantly depending on your location. Typically, your property taxes and homeowners insurance are rolled into your escrow, which adds these expenses incrementally through your monthly mortgage payment. Utilities As a homeowner, you’ll be responsible for paying utilities such as electricity, gas, water, and internet/cable services. These expenses can vary based on the size of your home, energy efficiency, and usage habits. Maintenance and Repairs When you own your home, you won’t be able to rely on your landlord or property management company to maintain your home. As a homeowner, you’ll be responsible for repairing various components, such as the roof, appliances, and HVAC systems. It’s essential to budget for these expenses, as they can be costly and unexpected. When you initially buy your home, your inspection will give you a good gauge of the health of these costly components like HVAC systems, plumbing, and roofs. Tracking Your Budget Setting your budget is a big step in your journey toward homeownership, but the actual act of following that budget is what will enable you to buy your home. As you inch closer to being able to afford to buy your home, follow these steps to ensure you stow away the necessary funds to turn your dreams of homeownership into reality. Create a Detailed Budget Develop a comprehensive budget that includes all your monthly expenses, such as mortgage payments, utilities, insurance, and other recurring costs. This will help you identify areas where you can cut back or allocate funds more effectively. Use Budgeting Tools and Apps There are plenty of great budgeting tools and apps out there that streamline the process of tracking your expenses and monitoring your progress. Many apps offer features like categorizing expenses, setting spending limits, and generating reports. There are also plenty of spreadsheet templates that you can use for a more manual budget-tracking experience. Review and Adjust Regularly Regularly review your budget and adjust as needed. Your financial situation may change over time, and it's essential to adapt your budget accordingly to ensure you stay on track. As you work along your journey towards homeownership, take some time to connect periodically with your UMortgage Loan Originator to share updates on your budget and discover any new products that might make your home purchase more affordable! By following these steps, you'll be well-equipped to budget effectively for your home-buying journey. Remember, proper budgeting not only helps you achieve your homeownership goals but also ensures long-term financial stability. Once you’ve closed on your home, you can continue to follow these steps to protect yourself from unforeseen repairs or save for your next big purchase!