Approximately 44% of US households had a mortgage as of 2020. This indicates that homeownership is still a big part of the American dream.
While homeownership has its perks, it can also be overwhelming and confusing. If you’ve never bought a home before, it’s important to familiarize yourself with the home loan process steps.
The home purchase journey begins by choosing your new property, which will need to meet certain home loan prerequisites. Next, you’ll need to get your credit score together and apply for a home loan with one of the best lenders in your area.
The following list of home loan process steps will show novice homebuyers how to get a home loan.
Get Preapproved for a Home Loans
The home loan process starts by getting preapproved. This means you’ll need to complete home loan paperwork and submit it with proof of income, payment history, credit scores, etc.
Your lender will use this information to determine the amount they can lend you based on your financial qualifications.
Learn how to choose a mortgage lender here.
Determine Your Budget
Once you get a home loan preapproval, it’s time to figure out how much you can actually afford. You’ll need this number when deciding on a home and negotiating with the seller.
You might be wondering, “How do I determine my budget?” If so, we’ve got some steps for that:
First, write down your monthly necessary expenses (i.e., housing costs like rent or mortgage payment, food, transportation, and utilities).
Next, add any one-time expenses (like taxes and insurance premiums) and divide by 12.
Finally, subtract your total from your income per month. Whatever is left over is what you have available to spend on home buying.
Choose a Home to Buy
This home loan process step is pretty straightforward. Decide on a home that works with your budget, needs, and preferences. Make sure you take note of all home loan prerequisites while searching for properties. For example, if the home requires renovations or an update to pass inspection, it might not be worth spending money.
Once you’ve found the right property, make an offer. Negotiating can be tricky, so here are some tips:
- Don’t lowball the home seller: You can always negotiate, but they might say no if your initial offer is too low.
- Offer to pay closing costs: This will help increase your home buying power and make it easier for the seller to accept the offer.
After making an acceptable offer, home loan process steps will include home inspections, appraisal, and legal documents.
Finalize the Loan Process
Once the home inspection and appraisal are complete, you’ll have a better picture of the home’s value. If everything checks out, it will be time to finalize the home loan process.
You’ll need to meet your home lender to go over the paperwork and draw up a final contract, including your home loan interest rate.
Next, you will sign all necessary legal documents (i.e., the home purchase agreement) so that everything is official before closing day.
On closing day, it’s time to celebrate!
Home Loan Process Steps
Home buying can be very overwhelming at first. Make homebuying easier by knowing the home loan process steps before starting your journey to homeownership.
We hope these steps will help you get a first-time home loan. For more tips, check out our other articles.