Steps to buying your first home

Becoming a new homeowner is an exciting milestone in anyone’s life. When you own your own home, you can make it truly yours — paint rooms, install new flooring, change light fixtures, even knock down walls! In addition to having a place to call home and make memories, you will also be building equity. As a homeowner, equity and the ability to build and take equity are some of the most powerful tools at your disposal.  

While homebuying is exhilarating, it can also be pretty overwhelming. Today, we’re going to make the process a lot more straightforward. Here’s everything you need to do, in order, when buying your first home.  

Make time  

Homebuying can be a long, multimonth process. Maybe longer if you’re looking for highly niche amenities or specific locations. This means that you’ll need to plan out time in your schedule dedicated to active mortgage shopping, going to the bank, and the little things in between. This is especially important if you’re planning other major life events like moving to a new city, having a child, or changing jobs or careers.  

Crunch the numbers  

For most of us, a house will be the most expensive thing we’ll ever buy. So, it makes sense that you’d need to take a deep dive into your finances both current and projected to decide what house is comfortably in your price range.  

Make a budget  

Once you’ve figured out a house in your price range, it’s time to make a budget. The budget is to determine how close you are to comfortably affording the house, mortgage payments, moving costs and other expenses related to house buying.  

Another key part of budgeting as it pertains to homebuying is to limit your use of credit before you start the homebuying process. Many mortgage lenders during the final stages of homebuying will demand that you not use credit cards, lines of credit, etc., as the final approvals are being completed. This is because loan amounts and interest rates are tied to your credit score. Using credit during the final closing stages may lower your credit score and make you ineligible for the home loan at the last minute.  

Finally, one of the best reasons to make a budget is to ensure that you’re not “house broke” —the phenomenon of owning a house but having no money because of house expenses. Newer houses may save you repair costs, but they’ll cost quite a bit more upfront than an older home. However, older homes, typically fixer uppers, may need early repairs that run into the thousands. Finding the balance between these two extremes is essential to your budget.  

Down payments  

The lion's share of homeowners will need a sizable down payment for a financial institution to approve them for a home loan. The larger the down payment, the less potential interest charges typically.  

Historically, it’s advised that a down payment be 5% down as a minimum and up to 20% as a maximum for the average buyer. Unless you have a windfall coming or a major, consistent increase in pay, error on the side of caution when it comes to your down payment. Here’s why. It all comes back to striving for the ideal condition of buying a house while still having enough money left over for daily expenses.  

Get prequalified  

The next step of the homebuying process is getting prequalified for a mortgage loan. You can prepare by checking your credit report, gathering one month’s pay stubs, W-2 forms from the past two years, bank statements from the past two months and your most recent tax return. From here, you can contact the OCCU mortgage team to start the official prequalification process. Prequalification gives you buying power and provides peace of mind to home sellers.  

Start your home search  

Here comes the fun part: looking for a home. Before you start your search, jot down a list of all your wants and needs. Then, search for a real estate agent you trust and tell them your needs and wants. You’ll work with them throughout the search, but if you have any questions at all, our mortgage loan officers will be happy to help.  

Make an offer on the home  

Once you’ve found a house that feels like home, it’s time to work with your real estate agent to make an offer. Your agent will arrange a home inspection to make sure the house is in good condition. After that, we’ll arrange a property appraisal and title search to find out the home’s value as well as any information about the home in public records. During this step, you can sit back and relax (for a moment at least).  

Close on the home  

If your offer is approved, it’ll finally be time to close on your new home. But before you close, you’ll need to schedule the closing day with your real estate agent and carefully review your closing disclosure (no skim-reading here). After that, it’ll be time to close, get your keys and enjoy life as a new homeowner.