But some people would rather a 2 minute version of the entire process so that thy can get a rough idea of what it entails. A bite-sized take home if you will.
Ok, in a nutshell:
Step 1: Improve your credit.
The higher your credit score, the lower your interest rate, which will save you thousands of dollars over the life of the loan. For the most part, you can improve your credit on your own.
Certain types of home loans also have minimum credit scores needed to qualify: FHA (580), VA (620) and Conventional (~650).
Step 2: Contact a Lender (3-7 days)
Once you’re in good financial standing (solid income and good credit), your next step is to contact a bank to apply for a home loan. This can be a mortgage broker, credit union, major bank, online lender etc…
The loan officer at the bank will make you fill out some paperwork, pull your credit, verify your income and your monthly debt. This process usually takes a few days.
They will then (hopefully) issue you a pre approval letter stating the amount that they will potentially loan you.
Step 3: Hire a Realtor (1-3 days)
This is (usually) the fun part, time to go home shopping! You might spend days, weeks or months finding a property that meets your requirements and is within your budget.
Whether you’re looking for more space, a certain school district or moving to a new city altogether, you and your agent will find the place that’s right for you.
Step 4: Make an Offer (1-2 days)
This is where having an experienced agent really counts. Negotiating the offer, adding the contingencies, working with lawyers to draw up the purchase agreement etc…
Please don’t try to do this alone without representation. 99 times out of 100, you’ll wish you worked with a real estate agent. The good thing is that hiring an agent is free for buyers!
Offer accepted? Great, put down you earnest money deposit, establish a closing date and move on to step 5.
Step 5: Inspection and Appraisal (3-7 days)
Congratulations, your offer was accepted!
Time to ensure you’re not buying a lemon. A home inspector will check every inch of the property on your behalf.
The lender will order an appraisal to determine the worth of the property. This protects the lender from loaning you more than the house is worth. Hopefully, the appraisal comes in at or above asking price.
Step 6: Underwriting (2-3 weeks)
Your application goes from the loan officer to the underwriter, ie the people on the hook for actually funding your escrow account with the money needed to purchase the property.
More paperwork with the lender. You may get frustrated but don’t be. It’s a necessary evil.
Step 7: Title & Insurance Company
Boring but important because they make sure you and only you can claim ownership of the property.
Step 8: Closing
The big day is finally here! Be prepared to pay 2-4% of the loan amount in fees…The lawyer, agent, insurance, lender, title company, HOA fees etc…So. many. fees.
Step 9: You’re Done
You’re a home owner. Whew! You’ll build equity and wealth with each monthly payment. You can then leverage this wealth
to build even more wealth via new properties, businesses or savings for the kids.