Few things in life are as exciting as buying your first home. At First Internet Bank, we want to help make the entire home buying process as simple and – believe it or not – stress-free as possible. The following steps can help get you from dreaming to closing as easily as possible.
Decision time: buy now or later?
Becoming a homeowner is a big responsibility. How do you determine if now is the time to take the plunge? A good place to start is our blog, How You Know You’re Ready to Buy a Home. It may help answer some key questions you have, so you can make this critical decision more confidently.
If you take a closer look at the benefits of homeownership, it may become even clearer. A few advantages of owning your own home could include:
- Potentially lower monthly costs: Did you know that the monthly cost of owning a home (excluding the initial down payment and closing costs) can often be less than renting? Thankfully, we have a Rent vs Buy Calculator that can help you determine if that’s true for you.
- Fixed payments: It never fails to happen. Just when you thought you had your budgeting down pat, the rent increases. Instead of having to constantly alter your spending, a ﬁxed-rate mortgage will ensure consistent payments for the duration of your loan. No surprises or shock to the budget, just a set monthly amount you can count on until the loan is paid off.
- Your home as an investment: Depending on where you live, your home and property are likely to appreciate over time. Think of it like a “super savings account” with even higher potential than investing in the stock market.
- Added tax deductions: When you own a home, some of the expenses you have like property taxes and interest are tax deductible. All in all, it can add up to a nice break come tax time.
- Take it from “house” to “home”: It’s yours, so make your home exactly what you want it to be! From small upgrades like painting to a full-blown renovation, you can decide on the look and feel you like best – something you can’t do renting. So what we’re really saying is, you can have your designated Zen room and improve the value of your home at the same time. It is a win-win!
Sound good so far? Ready to take the next steps in the home buying process? Great! Let’s move on.
Preparing for the mortgage loan process
Review your credit score and history. If your score isn’t as high as you – or potential lenders – would like, it’s never too late to start improving! Credit bureaus like Experian®, TransUnion® and Equifax® not only allow you to check your score without negatively affecting it, but also offer ways to increase your credit score quickly and easily. Even a few extra points on your credit report can make a big difference! For more tips, our article Want Better Credit? Know the Score. is a good source of additional information.
So, with a green light for your credit, you’ll need to begin compiling the important documents that are required in the mortgage loan process. These include:
- Your previous month’s pay stubs
- Two years of tax returns and W-2s
- Year-to-date financial statements (if you’re self-employed)
- Explanations for bank deposits or withdrawals above $1,000
- Information about other property or businesses you own
Having these docs in advance will keep things moving efficiently throughout the home buying process.
Develop a realistic budget
Before you immediately jump into the search for the home of your dreams, you need to take a realistic look at just how much house you can afford. This is where it pays to take the long view: Not only do you need to determine how much you can afford in a down payment, you also need to know how that new monthly payment will fit in with the other financial responsibilities you already have, like utilities, taxes, car payments, groceries and the other things you regularly purchase. Don’t forget to budget for the unexpected, as well.
Here’s an easy way to make sure you build an accurate, workable budget: Budgeting, Adulting and All That Good Stuff offers tips, lists and more.
Know the available loan options – and what works best for you
FHA, VA, Conventional…fixed or adjustable rate…the range of choices may seem pretty mind-boggling at first. But the good news is that somewhere in all those mortgage loan options, the loan that’s right for you is waiting to be discovered. Take time to learn about the different types of mortgages and how each might impact you as a borrower. No one loan is ideal for everyone, and the more you know (or rely on knowledgeable professionals like our Mortgage Loan Officers), the easier it is to make your own best choice.
The easiest way to increase your odds of a successful home search is to get pre-qualified or pre-approved. Be aware that there is a significant difference between pre-qualification and pre-approval. While both processes help you find the spending limits (what lenders are willing to provide) for your new home, pre-approval carries the extra value of having gone through underwriting.
- Pre-qualification: Pre-qualification is a preliminary estimate that tells you the amount you will be able to afford to borrow based on the information you give them. Being pre-qualified takes the stress out of the home search process by allowing you to focus only on those homes that are within your price range. It is not, however, an assurance that a loan will be approved.
- Pre-approval: To get pre-approved, you’ll be asked to provide the supporting documentation required on a loan application. Once your documents have been processed and verified by underwriting, the answer is virtually immediate. No more waiting around for someone to decide whether or not you qualify for a loan. You will receive a pre-approval letter, which can be used to assure real estate agents and sellers that you are a qualified borrower.
Ready to get started on buying your first home? Pre-approval is just a few clicks away!
Work with a real estate expert…and find the home you want
There’s no substitute for experience when you are looking to buy a home…especially when it comes to your real estate agent. Hiring the right realtor can make the entire process simpler and less intimidating. From start to close, you can count on a real estate professional to help find the perfect house and to negotiate the best terms on your behalf.
Now we come to the fun part in the home buying process! While showings and open houses are a critical part of the process, it’s also a good idea to drive and walk the neighborhoods, so you can be confident the area is a good match as well. If you found a home you really could see yourself living in, it’s probably a good time to do one more thing – talk to folks who could be your future neighbors. See what they like or dislike about the community. Finally, it’s always a good idea to keep specific notes on each home in which you have interest to help you when it comes time to make a final decision.
Above all, during this period, you need to maintain as much schedule flexibility as possible; when a home hits the market, your quick response may make the critical difference when, or if, others are bidding against you.
Make your offer
Once again, here’s where real estate agents earn their keep! Working with your agent not only makes your offer official, it makes sure that it is (thanks to their experience) well-tailored and attractive to the borrower. Once your offer has been accepted, you can begin your path to closing, and the keys to your new home!
Go with a trusted team
If you’ve gotten this far, it’s apparent that a lot goes into your home buying process. But, when you’ve found that dream home, and it’s time to make it yours, you can count on your First Internet Bank Mortgage Loan Officer to be with you every step of the way from application to closing.
Speaking of applications, First Internet Bank has made this once time-consuming process significantly less difficult to navigate. Potential buyers can apply for a loan using their phone, tablet, laptop or other device. In minutes, a submission-ready application can be created. Instead of making copies of tax returns or other financial information, documents can simply be uploaded to the lender’s website. That can speed up the loan process and reduce aggravation.
Simple prompts guide borrowers through the entire online application process. The app can import financial data from their bank, wherever they are. No more searching for paper statements; just input the required information and the app does the searching. Best of all, when the process is done, the answer is virtually immediate. No more waiting around for someone to decide whether or not the borrower qualifies for a loan.
Ready to get started on buying your first home? Pre-approval is just a few clicks away!