THE ULTIMATE GUIDE TO BUYING AND FINANCING A HOME

THE ULTIMATE GUIDE TO BUYING AND FINANCING A HOME

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HOMEBUYING 101

Buying a home is a big decision that can open doors to friendships, community belonging, and a sense of ownership (not to mention financial benefits). Unfortunately, it's also something they probably didn't teach you in school. This guide will fill you in on the homebuying process from top to bottom, inside and out. So when you're ready to make your dream of homeownership real, you'll be prepared.

Let's get started.

3MORTGAGE BASICS 5HOMEBUYING TIPS 7THE PROCESS 9ALL ABOUT HOME LOANS 12THE RUN DOWN ON RATES 15DOCUMENTATION 18AFTER YOU CLOSE 20A LOOK AT REFINANCING 24APPENDIX

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MORTGAGE BASICS

Let's start with some homebuying ABCs. Here are several of the basic

terms you'll need to know as you go through this guide -- and as you inch closer to that new set of keys for your ring.

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THESE ARE JUST THE BASICS

Check out the appendix for some more advanced terms you might need to know.

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MORTGAGE m?rgij (n)

An agreement between you and a lender that lets you buy a home without paying the entire cost up front. The home itself is used

to secure the loan.

INTEREST RATE int()rst rt (n)

Written as a percentage, this is the rate at which you pay interest on the principal amount of your home loan. All other things being equal, a lower rate means a lower monthly payment.

DOWN PAYMENT dounpmnt (n)

The money you pay up front to purchase a home. A down payment covers part of a property's purchase price, with the rest typically being covered by a home loan. (P.S. You won't necessarily need 20% down.)

PREAPPROVAL pri ` `proovl (n)

A written statement from your lender that officially determines how much you can borrow (AKA, how much home you can

afford). It's based on things like your credit score, income, and employment history.

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CLOSING klzing (n)

The final step in completing your real estate transaction. The property is officially transferred from the seller to the buyer and

the buyer signs the loan documents.

EQUITY ekwd (n)

The difference between the value of your home and the outstanding principal

balance on your mortgage.

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HOMEBUYING TIPS

Some words of wisdom: There's no universal rulebook to this whole homebuying

thing. But there are a few tips, strategies, and nuggets of information that can help you make it from start to finish without any major headaches.

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SOME RULES OF THUMB

Buying and financing a home is complicated (and for good reason).

Here are some quick tips.

DO

Educate yourself on the homebuying process. Well,

you're here, so you're on the right track! You may not be able to prepare for every detail of the process, but reading up on the foundations matters. Things will go faster, the steps will go smoother, and you'll end up a happier homebuyer .

Get your finances in shape. A stronger credit score and

budgeting skills will help as you apply for a home loan. And after you do apply, keep at least 3 months worth of expenses saved in case of a rainy day.

Consider all of your loan options. The 30-year fixed rate

mortgage is the most popular, but it's not your only option. There are several types of home loans to choose from: some with small down payments, some with shorter terms, some with adjustable rates, and more.

Put your purchase in a long-term perspective. A home is

an investment -- both personally and financially. If you only plan to hold onto it for a few years, it might not be the right move. Consider the long term as you balance the personal and financial benefits of owning a home.

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DON'T

Assume you need a 20% down payment. Don't believe the old

mantra. There are actually several loan options that accept as little as 3% down or 0% for veterans. Some that even allow for less-thanperfect credit, too. Check out your home loan options before making any assumptions.

Choose a lender based solely on rates. Interest rates are just one

pixel in the big home loan picture. Pick a lender who offers you the help, tools, and resources you need throughout the application process and beyond. Also calculate fees and upfront costs into your decision, too.

Make any big purchases before closing. Wait to buy those new

appliances until after you close. Making big purchases can impact your credit score and cause you to get a higher interest rate, or threaten your eligibility for some loans.

Let emotion win over reason. Sometimes, you can't help but fall

in love with a house. But make sure you're comfortable living in it and paying for it over the life of the loan. Like many other people, a home may be the biggest purchase you ever make. You've got to be sure on this one.

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THE HOMEBUYING AND FINANCING PROCESS

Let's take this step by step. Even if you've been through this journey before, it makes sense to

brush up on the process. After all, it's an important one: Your dream home is at the end of it.

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YOUR TIMELINE FOR BECOMING A HOMEOWNER

This is your roadmap. It will give you a general overview of what to expect as you embark on the homebuying and financing process, steering you on the course to success.

6 MONTHS - 1 YEAR OUT

Researching and Soul Searching

The benefits of homeownership can be crazy good. But that doesn't mean buying a home makes sense for everyone. Start with asking yourself: What are my goals? How long do I plan to stay in this location? Are my finances as healthy as my appetite to buy?

3 MONTHS OUT

Preapproval

Preapproval is a must if you're financing your home. Based on hard documents and real numbers, it's an official stamp of approval confirming how much a lender will loan you for a home.

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45 - 60 DAYS OUT

Contract to Close

Once you find a home that: 1. You love, and 2. You and the seller have agreed on a purchase price, you will start the formal loan application process. Once everything is approved, you'll complete a few final steps, like the home inspection, and you'll then head to closing (which we'll touch on later). P.S. It might make sense to ask for a clue report now, which lists insurance claims on the property for the last seven years.

3 - 6 MONTHS OUT

Preliminary Home Search

Start perusing home listings online in your preferred area to get an idea of price. Now's also a good time to consider getting prequalified, which estimates how much home you can afford. Better to set your expectations now than to fall in love with a home out of your reach.

2 - 3 MONTHS OUT

The House Hunt

Based on the outcomes of steps one through three, you should be equipped to get out there and start house hunting! If you're working with a Realtor, keep him or her in the loop regarding your budget, goals, and timeline. And remember -- don't let emotion win over reason!

FINAL STEP

Hello, Homeownership

Home loan secured? Check. Papers signed? Check. Keys acquired? Check. Next steps confirmed? Well, that one's up to you! As a homeowner, you've got some basic obligations. But what you do with it is up to you. Throw a house warming, paint the front door red, become best friends with the neighbors -- your imagination is the limit.

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