Buying your first home

Before you begin your home-buying journey, it is important to do some prep work so that you are aware of your options and then you can begin to seriously start shopping.  Keep these points on the top of your checklist:

• How much you can afford. The rule of thumb is three times your annual income. A loan officer can help you narrow it down to a more precise amount and even provide a pre-qualification letter.
• Your credit score. The higher your credit score, the better interest rate you may be able to get. You can get a free credit report every year (annualcreditreport.com). Examine it and follow the directions to correct errors and make modifications.
• Total cost of ownership (TCO).  In addition to your monthly payments, consider local taxes, insurance, maintenance, utilities, renovations and association fees (if any).
• Where you want to live. Look at school systems, neighborhoods, property taxes, commutes, amenities, and resale value.
• What type of residence. Condo, single-family, multi-family, or townhouse?  Existing home or new construction? Suburb, rural or city? 
• Shop mortgage lenders, real estate agents and attorneys.  There are lots options for exploring including online and social media sites plus asking trusted family and friends for recommendations is always good. Your local Webster Mortgage Banking Officer can also be an invaluable resource.
• The difference between pre-qualification, pre-approval and a commitment letter.  
  • A pre-qualification letter is based on preliminary information you provide your loan officer and is an estimate on what you might be able to borrow – this is not verified nor formally underwritten;
  • A pre-approval letter means your financial information has been formally reviewed and verified by your lender and a credit check is done;
  • A commitment letter is issued after the pre-approval letter, provided you meet established guidelines. It is also subject to a property inspection.

You’ve done all the prep work and now you’re ready to make your move.

• When you find a property you like. Make your offer and don’t be surprised if you have to go over the listing price. The housing market is incredibly competitive right now and bidding wars on properties are not unusual. With that said, remember what your budget is and the work you did figuring out your total cost of ownership (TCO) – the last thing you want is to find yourself overextended. Your dream home can quickly become a bad dream if you’re struggling to make payments.
• Go through the process.
  • You’ll make an offer. The seller will accept or counter. There may be some negotiating before you land on a sale price;
  • Next is a property inspection. Make sure you review the report, work with the seller if you have any concerns and provide your lender with all the paperwork; 
  • Your lender will then schedule a property appraisal to determine the market value of your property;
  • Once the lender has all this information, they can proceed with a firm commitment, let you know if you are clear to close and schedule the closing. Stay in close communication with your attorney throughout this process, making sure they review all paperwork prior to the closing so there are no surprises;  
  • Sign the papers, collect your keys and congratulations!