Congratulations! You’re ready to buy your first home. Check out seven easy steps you can take to help you plan, avoid pitfalls, speed up the process and get to your end goal – moving day!
When you’re ready to apply for your mortgage, our specialists can also give you the latest rates and help you zero in on the loan option that is right for you. If you like what you hear, we’d love to work with you! Because home buying and refinancing are our specialties, we’ve designed a process that requires minimal paperwork, delivers maximum results, and gets you to closing day fast!
The Seven Easy Steps to Home Buying
Step 1: Renting? Make the decision whether or not to buy.
Step 2: See how much you can afford.
Step 3: Realize your purchase power!
Step 4: Find your dream house
Step 5: Make an offer
Step 6: Your Mortgage, Your Needs, Your Life
Step 7: The Big Day – Closing!
Step 1: Rent or Buy
Benefit of buying #1: EQUITY – Paying money to yourself.
One of the greatest things about buying a home is that it acts like an investment or savings account for you with each monthly payment. This means that with every monthly mortgage payment you are investing in your future and gaining more equity in your home.
Benefit of buying #2: TAX DEDUCTIONS – Get credit for owning.
The federal government generally allows you to deduct the interest you pay on your mortgage from your income taxes. Most states also allow this deduction from your state return. Current (2008) federal and many state provisions also allow deductions for property taxes.** Since interest will be the majority of your monthly payment for many years of your mortgage term, and most states collect property taxes, these deductions add up to thousands in tax savings every year. Thank you Uncle Sam!
**We encourage you to consult a tax advisor regarding tax deductibility of mortgage interest and property taxes.
Benefit of buying #3: DOUBLE UP YOUR DIVIDENDS – Extra equity can happen.
Another great benefit that has historically come with home ownership is increasing property value. This means that under normal conditions, the value of your home goes up with time. This will vary based on the economy. Rising property values add to the equity you’re building in your home over time – and all you have to do is enjoy taking care of your home!
Benefit of buying #4: You’re in charge of repairs.
Benefit? Are we kidding? True, it’s easy to call the landlord when something goes wrong! But most maintenance and upkeep is relatively low cost as long as you keep up with it (yard work, painting, minor fixes). Plus, when it’s yours, it can be a pretty satisfying feeling to keep things nice. And when a repair is needed, yes it’s your dime, but you control who will do it and exactly what should be done. Since your home will require an inspection before you buy it, and most regions now require that a seller let you know about any known problems with the house, you should be able to avoid major unplanned repairs at purchase time. It’s a good idea to budget a monthly amount for maintenance and repair and add it to your planned monthly mortgage expense. By setting aside even a small amount each month you’ll be ahead of the game.
Step 2: See How Much You Can Afford
You might be pleasantly surprised! National City Mortgage offers many different mortgage plans to fit your lifestyle. They’re affordable, flexible and can maximize your purchasing power while still keeping your financial future in balance. Try our easy-to-use home purchase calculators to get an idea of how much home you can afford. Then, feel free to give us a call to get more in-depth info and ask questions about what you learned. Our loan specialists are here to help you take the guesswork out of buying a home.
While a home purchase usually (but not always!) involves a down payment, you’ll want to be aware of other costs that must be paid when it’s time to close your loan. If you work with us, your National City loan specialist will help you put together the perfect mortgage at the lowest possible rate. Next, he or she will provide you with a Good Faith Estimate which shows you how much money will be required at closing.
Step 3: Realize Your Purchase Power! Get Pre-Approved!
The best way to make sure you have the "power" you need to purchase your dream house is by taking advantage of the National City Mortgage pre-approval option. You and a loan specialist work quickly through a simple data checklist, gathering credit, income, employment and asset information. We then prepare a written pre-approval document that gives you great negotiating power to bid quickly and get the house you want before someone else does. By proving to a seller (and real estate agent) that you have been approved for financing your offer will shine above any other potential offers!
Obtaining pre-approval also gives you the advantage of knowing an exact price range, so you don’t cut yourself short or get in over your head. Once you have an executed buy-sell agreement in-hand, it’s easy to wrap up the details and schedule your closing. You can be pre-approved even if you’re just looking. Pre-approval gives you peace of mind that you can be ready to put in your offer in an instant! Get in touch with us to talk about the pre-approval option. You’ll be glad you did! Go to pre-approval form
Step 4: Find Your Dream House
Start With a Good Team...
You and a good real estate agent teamed up with a loan expert from National City Mortgage will be unstoppable. Your real estate agent and your loan specialist can guide you from start to finish, making your home-buying experience efficient and easy. Your job is to zero in on what your dream house looks like. Your realtor’s job is to help you find it. Our job is to make the dream come true with the right financing package.
Tips On Choosing a Realtor...
It’s important to find a reputable real estate agent. Ask family and friends if they’ve got recommendations. Chances are they do! Their personal experience is usually a great indicator of what you can expect.
- If you can’t get any recommendations, call around.
- Ask questions and see how the agent responds.
- Leave a message and see how long before they call back.
- Ask for a few customer references. If they balk or delay, move on.
- If they aren’t listening to what YOU want, and your priorities, move on.
There are many, many real estate agents out there, just as there are many lending choices. National City Mortgage is genuinely committed to giving you the best mortgage and the best experience possible. Your real estate agent should feel the same.
Ask:
- How long they’ve been selling real estate in this area.
- Their total years of experience, and where they sold previously.
- How familiar they are with the neighborhood(s) you are most interested in.
- What will they do for you?
What Does Your Dream Home Look Like?
This is the fun part. Make two lists: MUST HAVES and NICE-TO-HAVES. Use the list of starter questions below to get going, then add ideas of your own. The answers to the questions are what will be on your lists.
When you go through a house, keep your MUST HAVE list handy. It’s easy to get swept away by a cool paint color or a beautiful fireplace when the house is really missing your top three must-haves!
Idea Starters for Home Must-haves and Nice-to-haves Lists
1. Do you need extra space because your family will be expanding soon?
2. Do you need a home office?
3. Do you need a fenced in yard for kids and/or pets?
4. Is there adequate storage in the house for your needs?
5. How many garage stalls are necessary?
6. Is a finished basement a must-have for extra storage or a play room?
7. Are the bedrooms suitably arranged to safely accommodate the whole family
8. What are your priorities in the kitchen, and does this house have them?
9. Do you entertain? Indoors or out?
10. If you have to choose between a newer roof or a newer furnace, which would you opt for?
11. Minimum number of bathrooms?
12. Is the basement finished? Is it dry space that would be good for storage?
Beyond the house – know the neighborhood...
Once you’ve got a good real estate agent, he or she will be able to tell you all about the lifestyle in the area – the neighborhood, the schools, safety, traffic volume, proximity to medical facilities and shopping, and so on. After all, the area has to meet the needs of you and your family.
Your realtor should also help you sort out the homes you’ll want to see. Show your realtor your MUST HAVE and NICE-TO-HAVE lists to avoid wasting your time. When you find your dream home, you’ll probably be ready to do anything to get it. By having a National City Mortgage pre-approval (Step 3), you’ll be ready to move quickly with an offer.
STEP 5: Making an Offer
Your real estate agent can help you with this important step, but remember YOU have the final decision. There are several questions you should ask in determining if, and what, your offer will be:
1. Is the asking price in line with prices of similar homes in the area?
2. Is the home in good condition or will you have to spend money making repairs? Make your offer subject to a favorable home inspection (paid for by you).* Ask your realtor if there is a Seller’s Disclosure requirement in your area, and if so, get the signed document from the seller.
3. How long has the home been on the market? If it has been for sale for awhile, the seller may be willing to accept a lower offer.
4. How much mortgage will be required? Is it within your pre-approved range? If not, call your National City Mortgage loan expert and see if there is any avenue you haven’t explored.
5. What if your offer is rejected? This may happen, but don’t panic – and don’t let it stop you! This is where negotiating comes in and an experienced real estate agent can really help. There are lots of ways your realtor can negotiate, such as:
- The seller may counter-offer, asking for more money or concessions.
- You can negotiate who will cover closing costs.
- You can negotiate that certain repairs will be made in order for you to up your offer.
Negotiations often go back and forth between the parties more than once. Stay focused on what you want to spend, and what you’re getting. Don’t get so hung up on negotiations that you end up over committing yourself. Even if you have to let this one go, you WILL find the house that’s right for you!
*You can find an inspector in your area on the American Society of Home Inspectors website at www.ashi.org.
STEP 6: Your Mortgage, Your Needs, Your Life.
National City Mortgage has a full range of mortgage products, so there is sure to be a loan that will meet your needs and goals. When you work with National City Mortgage, our job is to listen to you. When you share the hopes and goals you have for your home purchase, it will help us guide you to the loan types that can help you achieve those goals.
About Fixed Rates...
Most first time home buyers are more comfortable with a fixed rate mortgage. With a fixed rate, your interest rate will never change during the life of your loan, and your actual mortgage payment won’t change. This lets you budget easily. VA or FHA-backed loans can be an option when you’re looking for a low or no down payment option. By qualifying for a low or no down payment option, you free up cash to spend on furnishings or pay off credit card debt.
About Variable Rates (ARMs)...
Another kind of mortgage is the adjustable or variable rate mortgage. If you choose an ARM, your interest rate and monthly payments start lower than a fixed rate for a certain period of time. Once that initial period is over, the rate and payment can change at prescribed intervals throughout your loan. You will know when these changes can occur from your loan paperwork, and your mortgage consultant can explain it in detail, too.
The initial fixed-rate period can be set up for a range between one and ten years before the variable feature kicks in. Once the variable period has begun, rate adjustments will be made based on a well-known, established financial index such as the U.S. Treasury Securities. National City Mortgage adjustable rate loans also give you a rate cap. Rate caps set two limits on your loan:
1. A maximum amount of any periodic increase to your rate
2. A maximum rate that your rate will never exceed during life of the loan – this is to protect you!
The advantage of the adjustable rate mortgage is that you may be able to afford a more expensive home because your initial interest rate will be lower, but there are considerations you should keep in mind. The best way to know if this makes sense for your financial picture is to talk to one of our knowledgeable mortgage consultants. We’ll give you a professional opinion and tell you if this type of loan is the best option for you.
Step 7: The Big Day - Closing!
Before Closing...
You are almost a home owner! A day or two before closing it's a good idea to make a visit to the home to make sure any necessary repairs have been made, to confirm that there's no new damage, and anything meant to be sold with the property is still there. You can do this on your own or with your real estate agent.
What to expect at closing...
Your closing is an exciting event. It’s where you seal the deal, and legally take possession of your new home! Be sure to ask for copies of every document you sign. It is important that you understand each of the documents you are signing. Do not hesitate to ask the representative from the title company questions or to clarify a particular document.
What to bring...
At the closing, you will bring
- Your down payment
- Your share of closing cost funds
- Your License
Your money should be in the form of a certified check(s). You can get certified checks from any bank branch where you are withdrawing your funds.Ask your loan consultant to confirm the certified check amounts and the payees.
Closing costs are the fees charged for services that have to be performed to get your mortgage loan. The list of these costs was described to you in an earlier article, (Step 2), the Good Faith Estimate. You’ll receive this from your lender, and it lists each fee and its purpose on a signed document. All lenders are required by law to provide you with a Good Faith Estimate of closing costs when you apply. Make sure you understand this document and ask questions if you don’t.
What closing costs include...
The closing costs include:
- Appraisal fee
- Processing & Underwriting fee
- Credit report fees
- Title insurance
- Local government fees
- Recording fees
Typically, they range from $2,500 to $5,000 (or about 6% of your loan request) but it’s important to discuss your specific transaction with your mortgage professional to make sure you understand these fees and whether some of them could be the responsibility of the seller.
Useful Tips Section What will happen at closing...
During the closing, you will:
1. Review the HUD-1 Settlement Statement which itemizes the purchase price and all the closing costs and fees paid by all parties.
2. Sign a Promissory Note. This is your promise to pay back the loan transaction at the set monthly payments and interest rate noted on the document.
3. Sign the mortgage or deed of trust. This is the security instrument containing the legal description of the property. This executed document will be recorded by the county you live in to indicate that the property is now collateral for your loan.
While it may seem a bit overwhelming, you should absolutely ask questions during this process if there is something you don’t understand or that doesn’t sound like what you agreed to. Take your time! A certified check will be issued to the seller and their realtor by your lender for the money that is owed to them, excluding their share of mortgage closing costs and fees.
When the closing is complete, you’ll be given a complete set of the documents* and the house keys. Congratulations, you are a homeowner!
*Keep these with your other important documents such as birth certificates, social security cards and passports.