It’s natural to doubt whether or not you can do this. But you can do this, because you’ve got us! It’s our personal belief that everyone deserves to be a homeowner.

We created this comprehensive guide just for newbies like you. It will walk you through each step of the home buying journey, defining key terms along the way.

After Reading Our First-Time Home Buyer Guide:

• You will know what “interest rates” and “escrow” are
• You will understand how buying a home works
• You will finally feel confident enough to purchase your first home

Just how comprehensive is this guide? Very. That’s why we suggest reading a few sections each day. You can also download and print a PDF version to read at your own pace.

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Are You Ready to Buy a House?

Key Takeaways

• Determine if you are ready for the financial responsibility of owning a home
• Think honestly about if the home you can afford meets your needs

Before you dive headfirst into a 30-year mortgage, weigh the pros and cons of owning.

Will The House That I Can Afford Meet My Needs?

A mortgage isn’t something you should rush into. You need to consider all factors like,

• Can you afford to buy a home in your desired neighborhood?
• Are you able to purchase a home that’s big enough to accommodate your family?
• Will this move shorten your commute to work?
• Will your kids continue attending their desired school?

If you keep answering “no,” this might not be the time to buy. Renting may be the best decision for your lifestyle, at least for now. If you answer “yes,” however, now might be the time for you to make a move.

Can I Afford New Homeownership Costs?

Homeownership can have very different costs than renting. Instead of just cutting a check to your landlord each month, you’ll need to think about:

• Making repairs
• Paying for upkeep
• Paying taxes
• Covering insurance costs
• Covering all of the utility costs

However, there are financial advantages to having homeownership costs.

• Rent isn’t a controlled cost and can go up at any time. A fixed-rate mortgage, however, remains constant over the lifetime of the loan.
• Rent payments don’t bring you equity. A mortgage payment, however, brings you closer to owning a home giving you equity that you can borrow from in the future.

Am I Financially Stable Enough to Buy?

To set yourself up for success, you want to make sure you can financially handle the responsibilities of homeownership.

• Do you have a secure job?
• Will your income stay the same or increase over the coming months and years?
• Does your co-borrower, if you have one, have a secure job too?
• Will you still be able to cover large upcoming expenses after purchasing a home?

You can always wait and spend the next few years squirreling away money.

Will The Value of The Home Increase or Decrease Over Time?

In some cases, the value of the home you hope to buy may be projected to decrease.

There are lots of factors that can impact the value of your home – some of which are in your control:

• Location and neighborhood
• The current state of the housing market
• The state of the economy and current interest rates
• Prices of comparable homes (aka neighborhood comps)
• The size of your home
• The age and condition of your home
• What upgrades or updates you’ve made to the home

Together, these factors can impact your home value and ability to sell the home later.

As you can see in the chart below, provided by DQYDJ, the median home price in the U.S. has stayed relatively positive.

While there is no fail-proof method to predicting whether your dream home will appreciate in value, there are some things you can look for.

• Does the property have value by itself? Real estate value has a large impact on home value. Land appreciates in value more consistently than the buildings on it. That’s why waterfront properties, for example, tend to appreciate in value.
• Is the local housing market doing well? Even when home values are down at a national scale, some cities still offer home value gains, especially cities experiencing new growth and revitalization.
• Can you complete mild upgrades to the home? New construction homes tend to have all the bells and whistles, leaving very little to upgrade. This makes it difficult to find upgrades that will improve the home’s value.

Calculating What You Can Afford & Homeownership Expenses

Key Takeaways

• Home-related costs shouldn’t exceed 28% of your income
• Be aware of the expenses you’ll incur before, during, and after buying a house

Before you start falling in love with homes on the market, you need to determine just how much house you can afford.

Here’s how to calculate what you can afford:

1. Determine what your household income is
2. Calculate all of your current monthly payments (e.g. credit cards, loans, food costs) and subtract the total from your income
3. Determine how much you will need to save each month for other needs and subtract that too

However much you have left over is a ballpark of what you can afford to pay each month on a mortgage.

You may also want to consider using the 28% rule. This common-sense adage states that home-related costs should never exceed 28% of your gross (pre-tax) income.

Homeownership Expenses

We won’t sugar-coat it: Buying a house can be costly. There are expenses every step of the way and they vary based on your location and the vendors you hire.

The key is to be aware of the costs before, during, and after you sign on the dotted line.

Expenses Before You Buy

Down Payment

These are the funds you’ll pay toward the purchase price of your home (unless you opt for a zero-down loan option). Depending on the lender, your down payment will range from 3 to 20% of the purchase price of the home.

Credit Report

You’ll pay a one-time fee for the lender to pull a copy of your credit report. This helps them make a decision about whether or not to lend to you. This may be a part of your closing cost fees. It ranges from $10 to $100.

Home Appraisal

A home appraisal is a requirement for nearly all loans. During a home appraisal, a professional provides a full inspection to determine the value of the home based on features, size, location, and the value of recently sold homes in the area. It costs between $450 and $750.

Home Inspection

You pay for the home inspection, and it’s your way of ensuring that the home is safe and secure. The home inspection can also tell you about potential upgrades and repairs you’ll need to make in the coming months and years. It costs between $200 and $1,000.

Pest Inspection

Your lender needs to ensure the home is safe from pests, especially termites. Having a professional pest inspector look at the home provides peace of mind. It costs around $100.

Survey

A survey helps you understand where the property boundaries are. This one-time fee is paid at the time of purchase and costs around $400.

Expenses During the Home Buying Process

Origination Fees

This is a one-time fee paid to cover the costs of processing the loan and any associated administrative costs. It generally costs 0.5 to 2% of the loan amount.

Title Insurance

Title insurance is sometimes included in closing costs. Otherwise, it costs around $500.

Closing Costs

Closing costs are generally between 2 and 6% of the home’s purchase price. Closing costs is a more general term that encompasses all of the fees you have to cover at closing, including:

• Appraisal fees
• Survey fees
• Title insurance
• Attorney fees
• Settlement fees

Expenses After You Buy

Moving Costs

Moving costs will depend on the size of your home as well as the distance you’re moving.

Escrow Fees

Escrow fees may be a part of your closing costs. This is an administrative fee for opening and managing an account to hold escrow in.

Repair Fees

The only way to know the cost of repair fees is to hire a professional to complete an inspection.

Property Taxes

Your local taxing authority may charge property tax. Check with your county or city office to learn how much to expect.

Private Mortgage Insurance

This is a monthly payment associated with your loan if you purchased a home with less than 20% down. It helps provide a level of security to the lender, should you default. PMI is normally 0.58 to 1.86% of the original loan amount.

Homeowners Insurance

This is an ongoing monthly payment that covers property and liability insurance. It is often required by your lender. The average homeowner insurance cost is $1,383 per year.

HOA Dues

If you buy property in an area with a homeowners association, you may be expected to pay regular dues. Most are monthly costs, and they vary considerably from one location to the next.

Utilities

These are monthly costs you’ll pay each month for expenses like electricity, gas, water, and sewer. Expect to pay between $100 and $500 a month.

Maintenance and Repairs

These are ongoing costs associated with the routine upkeep of your home. Experts suggest you set aside 1% of the total purchase price of your home for yearly maintenance. So, a $250,000 home would require that you save $2,500 annually.

Lawn Care

You may need to pay ongoing costs to maintain your lawn and exterior of the home. Estimate $100 or more per month.

Understanding Credit Scores

Key Takeaways

• A higher credit score can help you secure a larger loan and lower interest
• You don’t need a perfect credit score to buy a house
• You can (and should) work on improving your credit score
• You can get a free copy of your credit report online

It’s time to pay attention because credit scores are VERY important in the home buying process.

A credit score is a numerical representation of your creditworthiness. This figure is generated by credit bureaus who manage your payment history and debt usage.

Your mortgage lender evaluates your credit score to understand the risk associated with lending you money.

A higher credit score means you are more likely to secure a loan. It may also help you qualify for a lower interest rate.

What Credit Score Is Needed To Buy a Home?

The short answer? It depends.

While 786 is the median credit score for borrowers taking out home loans, you can get qualified for a mortgage with less-than-perfect credit.

Though specific credit requirements will depend on the lender you choose, here are some general guidelines:

Recommended Reading

How to Buy a Home With Bad Credit

How to Get a Copy of Your Credit Score

Start with a free copy of your credit report. That’s right, free. You have the legal right to one free copy each year from each of the three main credit bureaus, TransUnion, Equifax, and Experian.

You can request and review your free credit report by visiting AnnualCreditReport.com.

What Impacts a Credit Score?

Credit bureaus gather information on your credit usage and how you manage credit to develop this score. Some of the factors that impact it include:

• Making payments on time
• How much debt you have
• How close you are to maxing out your credit
• The types of debts you have (such as secured loans and unsecured loans)
• How long you’ve had a credit history
• How many loans you’ve applied for

How to Improve Your Credit Score

Improving your credit score is totally doable. However, it does take some time and effort.

If you want to work on your credit score, you must:

• Make payments on time every month. Auto payments can help.
• Keep the amount of debt you have as low as possible. Aim for under 30% of your available credit.
• Settle any judgments made against you.
• Use credit, but try to pay off balances in full.
• Avoid racking up multiple credit cards or loans at one time.

How Much Can You Borrow for a Home Loan: Pre-Qualification & Pre-Approval

Key Takeaways

• Pre-qualification isn’t a guarantee of the loan; it’s an estimate of what you will likely qualify for
• You need a pre-approval letter before putting in offers; this letter proves you have access to a loan to make an offer

You’ve calculated how much you can afford for a monthly mortgage. Now, how much can you borrow from a mortgage lender, bank, or credit union?

To answer this question, you’ll need to get pre-qualified.

What Is Pre-Qualification?

Though it sounds stressful, pre-qualification is quick and easy – in most cases, it takes less than a day.

During the pre-qualification process, you’ll provide your lender with some basic information like your income, monthly expenses, and credit score. They’ll use this information to offer a general idea of how much money you’re eligible to borrow.

Pre-qualification isn’t a guarantee of the loan. It simply gives you an idea of the loan amount you’ll likely qualify for.

You can use this information to narrow your home search to houses in your price range.

What Is Pre-Approval?

Step two is pre-approval.

During the pre-approval process, your lender will provide a more detailed evaluation of the mortgage for which you’ve qualified, including an estimate of the interest rate you’ll be charged. This process is more involved and time-consuming – often taking five to 10 days.

During the pre-approval process, your lender will review:

• The last two years of tax returns
• Paycheck stubs or proof of income
• Bank statements showing available savings
• Your personal identification
• Secondary identification, such as a utility bill or credit card
• Investment account statements to show proof of savings for down payments
• Credit card statements
• Loan statements for other accounts you own

All of this information allows the lender to know just how likely you are to make payments on time and how easily you can afford the loan.

Once you’re approved, your lender will draft a pre-approval letter. You definitely need a pre-approval letter before you start putting in offers on listings. This document shows sellers that you’re serious about buying the home and have sufficient moolah to back up your offer.

RECOMMENDED READING

What’s the Difference Between Pre-Qualified and Pre-Approved?

Financing Your First Home: Your Mortgage, Interest & Down Payment

Key Takeaways

• A mortgage is a loan used to buy a home; homeowners pay off their mortgage each month over the span of 10, 15, or 30 years
• Interest is the cost you pay your lender to borrow money
• While you don’t have to put down a large down payment, there are advantages

Getting approved for a mortgage can feel nerve-wracking. But there’s no need to worry.

When you partner with Dash Homes Loans, our Mortgage Coaches will walk you through each and every step of the financing process.

To give you a head start, we’ve included a little crash course on home financing below. You can also dive into our Guide to Home Financing.

What Is a Mortgage?

Let’s start with the basics.

A mortgage is a loan used to buy a home or another piece of real estate. As a borrower, you agree to pay back the principal plus interest over time.

Typically, homeowners make monthly mortgage payments for 10, 15, or 30 years. The longer the loan term is, the lower your monthly payment is. However, that also means you’ll be paying more in interest.

What Is Interest?

Interest is the cost of borrowing money and is expressed as an annual percentage rate (APR).

The interest rate associated with your loan will depend on many different factors like current market conditions, loan amount, and creditworthiness.

An interest rate that’s even slightly higher can mean paying thousands of extra dollars over the course of your loan. That’s why it’s so important to lock in a low rate.

Fixed vs. Adjustable Rates

Mortgages can either come with fixed or adjustable interest rates.

With a fixed-rate mortgage, the APR is static for the lifetime of the loan. That ensures monthly payments are always consistent.

Adjustable-rate loans may have a lower initial rate, but those rates can rise over time. Though unpredictable, adjustable-rate mortgages are perfect for homeowners who plan on paying off their loan early.

What Is a Down Payment?

A down payment is your initial payment toward the purchase price of the home.

How much money you put down on a home depends on your lender, loan type, and creditworthiness.

While USDA and VA loans can be secured with no money down, FHA loans typically require 3.5% down.

For borrowers with credit scores less than 580, a down payment of 10% is expected.

Comparatively, conventional loans require as little as 3% down. However, if you put less than 20% down, you’ll be expected to pay PMI.

(Forgot what PMI is already? We got you. PMI stands for private mortgage insurance that you pay if you purchase a home with less than 20% down.)

Why Put More Money Down?

Though no-money-down lending options may seem attractive, a larger down payment can be advantageous.

Benefits of putting more money down include:

• A lower monthly mortgage payment
• It can help you stand out in a seller’s market
• You may be able to bypass PMI
• You may be offered a lower interest rate

Down Payment Assistance Programs

But what if you don’t have the cash reserves for a down payment? No problem.

Many states offer down payment assistance programs. These programs make homeownership a reality for low-income buyers.

Down payment assistance comes in many forms, from grants to zero-interest loans.

At Dash, our Mortgage Coaches will make sure to explore any and all down payment assistance programs that you might qualify for.

Mortgage Lenders: How to Choose & Compare Offers

Key Takeaways

• When comparing mortgage lenders, narrow your list down to three and compare offers
• Take your time evaluating each lender; you want to work with someone you can trust

Mortgage lenders are banks, credit unions, and other financial institutions or organizations that provide access to loans.

Dash Home Loans is an example of a mortgage lender.

The lender you pick can mean the difference between getting stuck with unfavorable loan terms (think: high-interest rates) and finding a home loan that works for your budget.

Before You Settle on A Lender, Ask These Questions

How long do you expect the financing process to take?

The mortgage process itself – from application to closing – normally takes between 30 and 60 days. At Dash Home Loans, we have simplified our home lending process to minimize stress and wait times.

Who will be my primary contact during this process? How will we keep in touch?

Loan officers are notorious for offering subpar customer service. But at Dash Home Loans, we match every customer up with a Mortgage Coach who can offer five-star support.

Do you offer a closing guarantee?

If you don’t close as expected, you could be out thousands of dollars in inspections, due diligence money, and appraisals. To minimize this risk, some lenders (think: Dash Home Loans) offer a closing guarantee.

Comparing Mortgage Loan Offers

After learning more about different mortgage lenders and their home financing processes, narrow your list down to three. Then, compare offers made by each lender.

Here’s what you’ll want to evaluate:

• Interest Rate: Since a lower interest rate means a lower monthly payment, you’ll want to lock in the best APR possible.
• Fees: Ask about all the fees associated with mortgage financing – from application fees to underwriting costs.
• Down Payment: What are the down payment expectations? Do you have the cash reserves to meet these expectations?
• Mortgage Insurance: If you put less than 20% down, will you be expected to pay PMI?

Home Loans Available to First-Time Home Buyers

Key Takeaways

• First-time home buyers have access to grants or programs that can help reduce interest rates
• There are many loan options to choose from; a Dash Mortgage Coach can help you find the best one

First-time home buyers are, obviously, individuals who have never purchased a home before. However, you may also qualify as a first-time home buyer if you haven’t owned or co-owned a home in the past three years.

While being a first-time home buyer can be nerve-wracking, being new to the real estate game has two advantages:

1. You may be eligible for first-time home buyer grants. Specialized lenders offer these programs based on the state you’re located in. They can help reduce interest rates and help you borrow money for your down payment.
2. Lenders may offer more relaxed qualification requirements, like a lower down payment or credit score standard.

Types of Home Loans for First-Time Home Buyers

First-time home buyer loans are widely available in several forms. Here are a few types of mortgages to consider:

Conventional Loans

These loans have moderate interest rates and are most common for borrowers. Lenders typically require a credit score of 620 or higher and a down payment of at least 3%. However, PMI is needed for less than 20% down.

FHA Loans

Since these are backed by the federal government, they have lower credit score and down payment requirements. A first-time home buyer with a credit score of 580 can put down as little as 3.5%.

VA Loans

These zero-down loans are available to eligible individuals who have served in the U.S. Armed Forces. Since VA mortgages are backed by the federal government, they have lower credit score requirements and low- to mid-range interest rates.

USDA Loans

USDA loans are a no-money-down option for low-income borrowers looking to buy in rural areas. They have lower interest rates.

Reasons to Hire a Real Estate Agent for Your First Home Purchase

When you’re ready to start looking at properties, it’s time to hire a real estate agent. These are licensed, experienced professionals who have the sole goal of helping you find your dream home.

A real estate agent that works with home buyers is called a buyer’s agent. Your buyer’s agent works for you and only you, acting in your best interest. (Side note: Homeowners selling their homes also work with a realtor known as a listing agent.)

The best thing about working with a buyer’s agent? The home seller pays the real estate agent’s commission.

Other advantages of working with a real estate agent include:

• Your agent can help you with all aspects of paperwork, from understanding and completing documents to ensuring your legal rights are protected.
• Your agent negotiates for you. Once you find a home, they work with the seller’s agent to negotiate the best terms possible.
• Your agent knows what to look for in a home and can identify concerns before you make an offer.

What To Expect From a Buyer’s Agent

A buyer’s agent makes the house hunting process easier by:

• Finding Listings: Your agent will talk to you about your needs and budget, gathering insight into your desired features, space, and location. Then they get to work, finding and recommending listings.
• Showing Properties: Your agent schedules showings of available properties. They will also research available properties to uncover any problems or issues, giving you all the facts needed to make a decision.
• Making an Offer: Once you find your dream home, your agent will advise you on how to make a legally binding offer.
• Negotiating the Offer: Once the offer is in the hands of the seller, your agent works with the seller’s agent to negotiate the offer. The goal here is to protect your rights and secure a fair price.
• Provide Resources: Real estate agents can also connect you with other professionals like movers, attorneys, appraisers, and home inspectors.

What To Look For in a Real Estate Agent

Before committing to a real estate agent, ask friends and family to recommend prospective realtors. Then, look up their websites and online profiles, reading about their experience and expertise.

It’s a good idea to meet with at least three real estate agents before you decide who to work with.

Consider interviewing each agent, asking questions like:

• How long have you been an agent?
• How many homes do you help buyers purchase each year?
• How well do you know this area?
• Have you helped buyers find homes in my price range?
• How many clients do you have right now?
• How does your commission work?

Remember: Your real estate will be negotiating on your behalf, so you want to find someone you can trust.

Types of Home Sales

Key Takeaways

• There are different ways to sell a home, each offering a different buying experience

As you start looking at homes on the market, also consider how they are being sold. There are various strategies for home sellers to list their property.

However, how they are being sold can play a role in the type of experience you have.

Standard Home Sales

A standard sale is the most common option. A person lists their home on the real estate market and aims to get the highest price possible.

The homeowner handles the entire process, including negotiating the sale, often with the help of their real estate agent.

Sometimes, the home is sold on contingency. That means the home is being sold based on a certain outcome, such as the seller closing on the sale of their own home.

Bank Owned Sales

It is not uncommon for banks to list homes for sale. These are often foreclosed properties.

The bank owns the home and is selling it, sometimes at a fraction of the overall market price.

However, not all bank-owned homes are a good deal – you have to know the market to determine if the value is right.

Keep in mind that most bank-owned homes are sold “as is,” which means that the bank isn’t willing to do any renovation work.

Also, you may not be able to access the full history of the home, including any repairs that have been done.

Short Sale Sales

Short sales occur when a seller is hoping to get out from under a mortgage quickly. They ask the bank to accept an offer on the home for less than what they owe on the loan.

The bank may agree to this if they believe the property cannot be sold at a higher rate or that the homeowner may default on the loan. This could create a good deal for some home buyers. However, the process can be time-consuming.

What to Consider When Searching for Your First Home

Key Takeaways

• Carefully evaluate homes that have been on the market for a long time
• Don’t get hung up on wallpaper and carpets, those can be updated. Look at the bones and structure of the house

When searching for your first home, it helps to keep these three factors in the back of your mind.

1: Price

Once you are pre-approved for a loan, you know what you can afford to buy. But you don’t have to spend the full amount that you’ve been approved for. Some home buyers find lower-priced homes, using their remaining budget for renovations.

2: Size

Think about your current square footage needs, but also how those needs will change.

• Do you want to have children?
• Do you need space for an aging parent?
• Do you want to build a home gym or office?

3: Location

It’s not just about the city, but also the neighborhood. Work with your real estate agent to get a feel for the community as a whole to make sure you’d enjoy living there.

Learn about local restaurants, grocery stores, schools, parks, and greenways. You may even want to get out of your car to experience the area on foot. Your location can have a big impact on your quality of life.

What To Look for When Viewing a Property

Your agent has found the perfect home for you and you’re excited to see it.

Is it too good to be true?

The only way to know is to look at the bones of the house:

• Floors: Type, condition, and whether they need to be cleaned or replaced.
• Cracks: Look at the walls, ceiling, and foundation of the home, both inside and out.
• Leaks: Look for stains on the ceiling or floor. You may also look for evidence of moisture in the basement.
• Windows: The condition, style, and cleanliness are factors here. Make sure they close fully and aren’t drafty.
• Roof: Step away from the home to see all angles of the roof. Look for discoloration, missing shingles, and mold. Eventually, you’ll want to hire a professional to conduct an inspection.
• Trees: Are the trees and shrubs in good condition? Are they causing cracks in the foundation, sidewalks, or driveway?
• Electrical and Plumbing: Though you’ll have a formal inspection later, make sure the lights and faucets turn on. You may even flush the toilet.

Remember: Dated floral wallpaper or carpet in the bathrooms can be updated! Don’t let the home’s decor sway your final decision.

Your real estate agent should also check the home’s ownership history. If the property has been on and off the market numerous times, it may have some problems that aren’t fully understood or disclosed.

Putting in an Offer: Closing Costs, Home Inspection, Earnest & Insurance

Key Takeaways

• A low offer can work for homes that have been on the market for a while, but it likely won’t work for homes in a desirable market
• You may be able to negotiate closing costs, requesting that the seller cover them, but this is less likely in a competitive market
• Home inspections are very important; if the home inspector notices something wrong with the home, the buyer can negotiate and ask the seller to cover the repair costs. Or the buyer can walk away from the deal
• Earnest money is a “good faith” deposit that shows the buyer you’re all in; to avoid losing your earnest deposit, scan your contract for specific contingencies

You’ve found your dream home! (Go ahead, jump for joy. We won’t judge.) Now, you need to put an offer in.

The next question is this: Do you offer more or less than the asking price?

While you want to offer a competitive bid, you also don’t want to overpay for the home.

Lots of factors play into your offer amount. Luckily, your real estate agent can help you determine an appropriate offer amount.

A low offer might be right if:

• You’re operating in a buyer’s market where sellers are more likely to accept your offer.
• The home has been sitting on the market for a while.
• The listing price has already been reduced.

Offering the asking price might be right if:

• The listing price is fair and is similar to other comparable homes.
• The listing is in a desirable market and was recently put on the market.

A high offer might be right if:

• You’re operating in a seller’s market and competition is hot for homes in the area.
• There’s a lot of interest in the home.
• You must have the house because it’s perfect for you in every way.

In addition to price, there are other factors to consider as well. These include:

• Setting a timeline for a response from the seller
• Listing any contingencies you have
• Putting in stipulations for a home inspection

Work with your agent carefully on this, and be sure you are aware of all terms. Terms include when you’ll move out, what type of property (if any) is being left behind, and any details about closing costs.

Negotiating Closing Costs

When purchasing a home, you may be able to negotiate closing costs.

Closing costs are fees charged by the lender and other vendors. These fees typically range from 2 to 5% of the home’s sales price and include expenses like:

• Origination fees
• Fees for appraisals and surveys
• Title and homeowners insurance
• Attorney fees
• Property tax (typically six months of advance tax is paid at closing)

Who Pays Closing Costs?

You may be able to ask the seller to contribute to the closing costs. You could do this if you know your offer is solid or if the seller needs to sell lickety-split.

Another option is to ask the seller to lower the asking price so that you can pay the closing costs.

However, if you are in a competitive market, think again. The seller may disregard this request and move on to another buyer who’s willing to pay all closing costs. Work with your agent to determine if negotiating closing costs is appropriate.

Home Inspection

After you put in an offer, you’ll need to schedule a home inspection. This is a critical step.

During a home inspection, a licensed inspector will review the home, looking for obvious signs of damage or repairs.

If a major repair is detected, the home buyers can renegotiate their offer to cover the cost of the repair. Or, the home buyers can ask that the sellers fix the damage.

A home inspector will review the:

• Heating system
• Central air conditioning system
• Interior plumbing and electrical systems
• Roof and rain gutters
• Attic, including visible insulation
• Walls
• Ceilings
• Floors
• Windows and doors
• Foundation
• Basement
• Structural components

What If The Inspection Uncovers Something Wrong With the Home?

If the home inspector notices something wrong with a specific part of the home, they may recommend you call in a specialist. For example, you may need to hire a plumber to look at faulty pipes and evaluate repair costs.

What if an unexpected issue – a termite infestation, for example – is found during the inspection?

You, as the buyer, have the right to walk away from the deal.

Home Inspections and VA/FHA Loans

If you’re purchasing a home with a VA or FHA loan, you may face very stringent inspection standards.

These lenders want to ensure the home is in good condition, worth the price, and safe. If serious issues are found during the inspection, the seller will need to make repairs before closing.

Earnest Money

Earnest money, also known as a good faith deposit, is a down deposit that home buyers make to show intent to purchase.

When the buyer and seller enter a contract together, the home gets taken off the market. If the deal doesn’t go through, the seller must relist the property. This wastes valuable time.

Earnest money provides the seller with compensation, should a buyer back out of the deal through no fault of the seller.

If the deal closes as planned, the earnest money is applied to the down payment. If the buyer backs out of the deal, they may lose the money.

Earnest Money Contingencies

Within the purchase agreement, you’ll find contingencies that must be met to finalize the sale of the home.

Contingencies protect both the buyer and seller, so read them carefully to understand whether you lose your earnest money in various situations.

• Home Inspection Contingency: This allows the buyer to back out of a deal without losing earnest money if a home inspection reveals serious damage.
• Appraisal Contingency: If the home appraises for less than the listing price, the buyer can walk away from the deal without losing earnest money.
• Financing Contingency: If a buyer doesn’t get approved by a lender, a financing contingency can help them get their earnest money back.

Homeowners Insurance

Before you can sign the contract with your lender, you must have a homeowners policy. This policy must meet coverage requirements set by the lender.

It may be a good idea for your home insurance agent to visit the home to provide an inspection and make policy recommendations.

Fortunately, you can always increase your policy coverage at a later date.

Finalize Your Home Loan & Close on a House

Key Takeaways

• Your lender may re-pull your credit so DO NOT buy any big purchases while closing on a home; this can negatively impact your credit and stall your approval
• Once the closing documents are signed, the home is yours!

With the help of your mortgage lender, you can begin to finalize your home loan. During this step, loan underwriters will conduct another review of your information, ensuring all details are in order before they agree to the loan fully.

At this point, the lender may re-pull your credit, check that you’re still employed, or ask for additional documents. However, this is less common if you’ve already gone through the full pre-approval process.

Very important: This is NOT the time to make big purchases. Buying a new car or taking out a personal loan can affect your credit score, impacting whether or not your loan is finalized. Failing to make payments could also affect mortgage approval.

Closing on Your House

Once the underwriters agree to move your loan forward, the final step is to close on your home.

During closing, you’ll meet with legal representatives to sign documents making the home purchase official.

It’s a good idea to allow the closing agent to read through the entire mortgage document so that you fully understand the loan terms.

If you have any questions, ask for an explanation. It’s their goal to ensure you fully understand the terms you’re agreeing to.

You’ll see a breakdown of all costs during this process. This will include details about when your first payment is due. You’ll also be authorizing payment to the seller for the home at this time.

The closing process completes the home sale. That means you’re officially a homeowner. Congratulations!

First-Time Home Buyer FAQs

The average time from offer to close is 50 days, and a lot can happen in that month and a half. There are several reasons why a pending home sale might be canceled, including:

1. The buyer’s mortgage financing falls through
2. The home inspection turns up major damage
3. The appraisal is lower than the sale price
4. The buyer can’t sell their old home
5. There are issues with the title
6. The home isn’t insurable
7. The buyer is inexperienced
8. There are details missing on the paperwork
9. The buyer or seller gets cold feet

Some of these are preventable, but others are up to fate. While you can’t control all these factors, you can make sure you’re fully prepared to address your own responsibilities as a buyer or seller to prevent any mishaps. 

What Is a Pending Sale? 

The sale of a home is “pending” after an offer has been accepted and before the sale has closed. You might also hear terms like “under contract” (meaning the house sale’s contract is in process) or “closing period” (referring to the weeks between an offer and the finished sale). 

This period allows for paperwork and for both the buyer and seller to get their ducks in a row. Most contracts include contingencies—items that must be completed for the contract to remain valid and the sale to follow through.

Contingencies are meant to protect both the buyer and the seller. For example, a buyer could include a home inspection contingency, which allows them to exit the contract if an inspection finds major damage to the home. On the other hand, a seller might include a kick-out clause, which allows them to find a better buyer if the original one is waiting to sell their own home. While these contingencies are designed to help both parties, they can also cause a pending sale to fall through. 

Common Reasons Pending Sales Don’t Cross the Finish Line

1. The buyer’s mortgage financing falls through
   Before you think too seriously about buying a house, you should contact a lender and get pre-qualified or pre-approved for a mortgage. This will help you understand just how much house you can afford. Pre-approval requires a bit more information and effort, but it also carries more weight. In either case, your lender will provide you with a letter indicating they’re prepared to loan you the money.
   
   However, neither pre-qualification or pre-approval is a guarantee of a loan. If you’re a buyer and your financial situation changes—like if you lose your job, acquire more debt, or your credit score changes—you may not be approved for your loan. Even if interest rates change, your loan qualifications may change, too. If there’s a financing contingency in your contract, both buyer and seller will be able to walk away without repercussions.
   
   If you think your loan fell through because of discrimination based on your race, religion, sex, marital status, use of public assistance, national origin, disability, or age, that’s illegal. You should file a report with the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development.
   
2. The home inspection turns up major damage.
   Your dream home may look perfect, but you’d be surprised how many nasty surprises might be lurking under its exterior. That’s why most contracts have a home inspection contingency which protects the buyer if the inspection turns up extensive damage. If there’s major damage to address, like foundation issues or if the house needs a new roof, the buyer can ask the homeowner to make those repairs. As an alternative, the seller could offer the buyer the money to make the fix as a credit at the closing. If the homeowner refuses or if the damage is just too much for the buyer to bear, it can cause the pending sale to fall through.
   
   A specific kind of damage to keep in mind is that caused by termites or carpenter ants. These pesky pests can cause serious damage to a home by eating its wooden elements, which is why most lenders actually require a termite inspection before they’ll approve the loan. If they find termite damage, that in itself could cause them to cancel the loan.
   
3. The appraisal is lower than the sale price.
   The lender will appraise the home before approving the loan, which means they’ll evaluate the value of the property. This is determined by inspecting the home, as well as comparing it to similar houses. Your lender wants to make sure the house is worth at least what you’re paying for it so that if they have to repossess the house, they’ll be able to recoup their losses.
   
   Sometimes—especially in a seller’s market, when home prices are driven up by competition and even bidding wars—the appraisal will come in below the price being offered for the home. When this happens, the bank or lender can decline the loan, or they may require the buyer to pay the difference. If the buyer can’t do so, the pending sale will fail. In this case, the buyer can use a financing contingency to walk away without losing their earnest money.
   
4. The buyer can’t sell their old home.
   Another common contingency—but one that’s a little risky for sellers—is the home sale contingency. Typically, buyers who are already homeowners need to sell their existing home in order to get financing for their new home. Sometimes they find a home they love before they’ve sold their old place. In these cases, they may ask for a home sale contingency in the contract, which gives them 30–60 days to sell their existing home.
   
   While this is great for buyers, it’s a risk for sellers because there’s basically no guarantee these buyers will purchase your home. If their existing home fails to sell in the allotted time, they can walk away from your house scot-free. If you’re a seller considering a contract with a home sale contingency, it might be helpful to research the average Days on Market in the area to estimate how quickly their home will sell.
   
5. There are issues with the title.
   Before your lender will approve your loan, they’ll want to make sure the home’s title is squeaky clean. The lender will require that a title company research the property to ensure it’s in good shape and there are no outstanding liens (meaning the seller owes someone money, and the house is being held against that debt) or judgments (a similar situation in which a judge has ordered a debt be paid and the property is held until the debt is satisfied). A lien or judgment may show up on a house title if the owner hasn’t paid property taxes, for example, or if a contractor they used to work on the house is still owed money.
   
   In doing research on the title, your lender also wants to make sure no one else has a right to the property. For example, if an heir or spouse is on the title, they’d need to sign off on the transfer, too. Even the Internal Revenue Service (IRS) or state could have a claim to the house if the owner hasn’t paid their taxes or owes the state for some other reason.
   
   If a title search turns up any of these issues, sorting them out can be time-consuming. There has to be a clear title in order for the sale to proceed, and sometimes that just isn’t possible. Even if it is possible, often buyers will walk away from the sale rather than sort through title transfers or liens.
   
6. The home isn’t insurable.
   In order to secure a home loan, you have to insure the home. So if the house is uninsurable, no loan. A home is uninsurable if it is uninhabitable, which usually means it’s got some serious damage or needs extensive repairs. If the prior owner made a major insurance claim on the house—because of flooding or black mold, for example—insurance companies will see that history, and they may decide insuring it is too risky.
   
   Whatever the reason, if the house you’re looking at is uninsurable, your lender won’t approve your loan. The only way to buy a house like this is to pay cash. And to be honest, if it’s uninsurable, you probably don’t want to buy it, anyway.
   
7. The buyer is inexperienced.
   Buying a house is complicated, and there’s a huge learning curve for a first-time buyer. That also means there’s a lot more room for error. First-time home buyers may have trouble securing a mortgage or may not understand their budgets. (Hey, buyers, that’s why it’s so important to get pre-qualified or pre-approved for a loan before starting the shopping process!) First-time homebuyers’ mortgage contracts also just get scrutinized more than others because the bank wants to make sure they’re making a good investment.
   
   If you’re a first-time buyer, be sure to do all your homework before putting in an offer on a home to make sure you’re fully prepared. If you’re a seller, be sure to review the contract closely to see what the financing contingency looks like. If the buyer is a new owner and they will be able to drop out of the pending sale easily, you might want to consider other offers instead.
   
8. There are details missing on the paperwork.
   There are a lot of moving pieces in every home sale, and it takes a lot of effort by many parties for everything to come together. If anyone makes even a tiny mistake, it could delay the whole process. For example, the real estate attorney could miss the deadline or fail to deliver the proper documents. If the fault can be attributed to the buyer, they may have to pay the seller a fee for each day the closing is delayed. In some cases, the seller might not agree to the delays, and the sale will not continue.
   
9. The buyer or seller gets cold feet.
   Buying or selling a home is a big decision, and sometimes it turns out to be the wrong one. Depending on the contingencies and timeframe, backing out of a sale after an offer has been accepted could be bad for either the buyer or the seller. During the contingency period, either party can walk away from the contract if there’s a valid reason outlined in the contract—like if their financing falls through or the inspection turns up major damage.
   
   However, if it’s past that period of time, or if there’s no reason for canceling the sale that can be connected to a contingency, that’s problematic. If a buyer walks away from the sale, they’ll lose their earnest money. That money is meant to credit the seller for the time lost when they could have been negotiating with another buyer. If a seller backs out, the buyer is legally afforded the right to collect damages. 

Ensuring Your Home Sale Crosses the Finish Line

One thing we know: Buying and selling a home is complicated. As the buyer or seller, you should do everything possible to make sure the process goes smoothly, like getting pre-approved for your loan if you’re a buyer, or addressing any major repairs if you’re a seller.

We know that the mortgage and buying process sucks, which is why we at Dash Home Loans work to make it easier. We’ll be with you every step of the way to ensure you’ve got everything lined up and the buying process goes smoothly. 

Opinions expressed are solely my own and do not express the views of my employer.

*Pre-approvals are given to clients who have met qualifying approval criteria, and specific loan requirements, at the time of applications. Results may vary.

You might be able to buy your dream house without the stress of traditional real estate transactions through an off-market or “pocket” listing. In these scenarios, houses are sold before they’re even listed. 

While finding these real estate opportunities is somewhat akin to finding needles in haystacks, a determined buyer willing to put in a little detective work just might get lucky. Here, we offer a few ways you can find homes before they hit the market. 

Why Homes Are Sold Off-Market 

There are a number of reasons sellers might choose to skip listing their home and entertain offers from savvy buyers, including: 

They want to prioritize their privacy. This is common with celebrities who want to keep their identities and addresses confidential, so they’ll steer clear of public marketing or showings. 

They aren’t ready or willing to put in the work to get their home MLS-ready. Selling your home through traditional channels can require a lot of fixing up—from little tasks like decluttering to big home maintenance projects—and sometimes sellers would rather entertain offers without the hassle of clean-up.  

They aren’t trying to move, but they’re open to it. Some homeowners don’t necessarily need to sell, but if someone makes an offer they can’t refuse, they might be tempted to do so.  

They want to test the waters before selling. A quiet pocket listing can serve as a test for curious sellers, allowing them to see how the market reacts to their listing and price before listing it on MLS. 

They think they’ll get the best price and serious offers. There’s a mentality among some sellers that the exclusiveness of an off-market home might lead more serious buyers to up their offer. (Others, of course, argue that the competitiveness of a listed home drives up the price.) 

Benefits to the Buyer & Seller of Off-Market Listings  

As we mentioned above, the greatest benefit to the seller of a pocket listing is that they won’t have to prep their home for the market, which can save them a lot of time and money. Off-market listings might also help both buyers and sellers be more relaxed at the negotiating table. 

As for buyers, the greatest benefit of snagging an off-market house is that they’ll avoid much of the stress of a traditional real estate transaction. It’s a seller’s market out there, and dozens of offers can come in on a freshly listed house, driving buyers to hike up their offers to try to beat out the competition. If you put in an offer on an off-market house, there’s a greater chance your offer will be accepted. 

Six Tips for Finding an Off-Market Listing 

If you’ve watched a few true crime docs or tracked down your best friend from fifth-grade summer camp on social media—or even if you haven’t—you’ll probably be able to find a pocket listing you love. It just requires a little sleuthing. 

1. Find a Well-Connected & Hardworking Real Estate Agent 

An experienced and successful real estate agent has cultivated an extensive network of other real estate agents and homeowners alike who might hold the key—literally—to your dream home. An agent from a large office can tap their colleagues for intel on pocket listings. They might have connections at other offices who are willing to share their “coming soon” listings before they hit the market or the agent themselves might have a listing they’re hoping to get soon. The most tenacious of agents will even be willing to reach out to homeowners directly to see if they’re open to selling; while you could do the same, a blind inquiry coming from an agent might carry a little more clout. 

2. Explore the Neighborhood

If you’ve got a neighborhood in mind, exploring it yourself just might help you turn up a secret listing. Attend any open houses, even if you’re not interested in the listing, to gauge the market and maybe meet some neighbors who might be interested in selling their own homes. Walk the streets and see if any of the homes, in particular, catch your eye, then reach out (or ask your real estate to do so) to see if they might be interested in selling. (You can find their contact information via municipal tax records.) 

3. Network, Network, Network

It’s the key to many a successful career, and it just might help you find an off-market listing. Let friends, family, and colleagues know you’re interested in buying a home, especially if they have a connection to a certain neighborhood; they just might know of someone who’s thinking of selling. The same goes for social clubs; groups like the Junior League, professional organizations, or even country clubs are another resource for insider intel on potential sellers. 

4. Contact HOA or Neighborhood Groups 

If the community you’re interested in has a homeowner’s association (HOA) or board, contact them to see if they’ve heard any residents mention they might be ready to sell. Similarly, most neighborhoods now have their own Facebook or Nextdoor groups, which are a great forum to learn about soon-to-be-listed homes. 

5. Track Down Homes in Pre-Foreclosure or Foreclosure

Owners who are at risk of losing their home are probably amenable to the idea of walking away with cash instead. There are services like CoreLogic’s RealQuest express and RealtyTrac that can help prospective buyers identify properties where the owners are delinquent on their mortgage payments. 

6. Advertise to Owners

If you’re willing to invest a bit of cash in the potential of an off-market listing, you could try a mass mailing. Write up a succinct letter for residents of your dream neighborhood; say you’re interested in moving to the area and ask if they’d be open to selling anytime soon. Then use a company like Dietrich Direct to send the mailings. 

Be Ready to Buy 

As you begin your off-market search, make sure you’re prepared to carry through on your inquiries if you turn up an interested seller. Speak with a mortgage lender in Charlotte or Raleigh to ensure you understand your financing options (our mortgage calculator is a great first step) and have a down payment set aside. While pocket listings have a lot of pros, they’re also a little less stable than traditional listings. The more prepared you are for closing — like getting prequalified for a loan— the more efficient the process will be and the less likely the seller will get cold feet. 

Opinions expressed are solely my own and do not express the views of my employer.

Mortgage loans are designed slightly differently from other types of loans. The value of the home backs the loan – that’s the easy part. It gets a little confusing navigating the types of loans, however: how they work and which one is best for your needs. But that’s what Dash Home Loans is here for. We’re your partner in this process, giving you the information you need that gives you the confidence to choose wisely. 

Are you ready to buy a home? Reach out to Dash Home Loans now. Let our Mortgage Consultants help you start the process. If you’re doing preliminary research, read on. Here’s what you need to know and what you need to do to get the best possible results.

Five Signs You’re Financially Ready to Buy a Home

We hear it all the time: Buying a home and building equity is the best way to accumulate wealth. It’s the American dream, right? We need to add an important caveat: In order for homeownership to create wealth, it needs to come at the right time in your life. Time your home purchase well to set yourself up for success. Here are five financial signs you may be ready to take the leap:

1. Credit score: The better your score, the lower your interest rate. You’ll need a FICO credit score of about 580 for an FHA loan, but if you get that past 620, your loan options improve. If your score is lower than you’d like, consider investing time in bringing that score up to bring your interest rate down. If you’re unsure, call us. Even with a less-than-ideal credit score, you may have better loan options than you expect.
2. Debt-to-income ratio: It’s the first rule of personal finance. Earn more than you spend. But lenders get specific about this for potential homebuyers: Your monthly bills plus your new mortgage payment should not equal more than 43% of your monthly income. If your percentage is higher, consider a less expensive home or paying down debt first.
3. Down payment: Ready for some good news? You don’t need a 20% down payment. According to the National Association of Realtors, first-time homebuyers made a median down payment of 13% in 2019. While a lower down payment may add mortgage insurance to your monthly payment, you may be able to get a conventional mortgage for as low as 3% down.
4. Out-of-pocket costs: The down payment isn’t the only upfront cost you’ll face, however. Consider appraisal fees and inspection costs, not to mention closing costs – which may be 2% to 5% of the home’s price. Also, remember that right after you buy a home, you begin maintaining it. A trip to a hardware store for a lawn mower and tools is probably in your imminent future.
5. Steady salary history: Another myth that lingers in mortgage lore is that it’s impossible to get a mortgage if you’ve started a job within the past two years. While lenders do want to see a stable employment history, many will take a more holistic view and consider the stability of your earnings, as well as your credit score and debt ratio. 

Don’t Count Yourself Out – Ask Us

Is your credit score not as high as you’d like? Is your down payment too small? Don’t assume you’re not ready to buy a home. Call us and we’ll take a holistic view of your financial readiness and give you a realistic assessment. We don’t want you to hold yourself back unnecessarily. We have loan types for all kinds of buyers, and we pride ourselves on matching the right buyer with the best loan for them – even if they have a low down payment or borderline credit score. Learn your options from the professionals to make your savviest decision.

Should I Rent or Buy?

You can probably guess how we’ll answer: Buy, buy, buy. Not necessarily! There are good reasons to choose renting over buying. Do you expect to move or make a big relationship change within the next couple years? Rent. Do you value flexibility over all else? Rent. Are you struggling to establish savings? Renting may be better. When you buy, you no longer have a landlord to fix leaky pipes or a broken air conditioner – you’ll need a fund for maintenance and home emergencies. 

If you’re at a stable point in your life – when you don’t foresee changes in your career or location – home ownership may be for you. If you value roots over flexibility, it may be time to buy. For the right person at the right life stage, purchasing a home may become the investment of a lifetime. 

What Comes First: The Mortgage Company or the House?

This answer is an easy one: Always start with a mortgage company. Always. When you have that pre-approval* letter in hand, real estate agents and sellers will know that you are a qualified, serious homebuyer. Often, you can’t even look at a home or make an offer without this letter. The pre-approval process will also help you understand your appropriate price range, which could save you a lot of time during the home-shopping process.

With DASH, we can help you with both. Not only can we get you pre-approved (and you do know about our $10,0000 closing guarantee, right?), we can also link you to a trusted realtor when you’re ready. You and the realtor will have all the information you need to shop confidently. 

Start with Research

You have options about the mortgage companies available to you. Learning about your lender is important – it sheds light onto their business practices and the types of service you can expect. Here are some key areas to focus on when comparing mortgage companies.

Recommended Reading

Pre-Qualified vs Pre-Approved: What’s the Difference?

Mortgage Companies: Should I Go Local or National?

While this does not define the quality of a company, it can make a difference in the type of experience you have. Both local and national mortgage companies are likely available to you. Local lenders are those you can visit in person to meet with and handle the transaction. National lenders may have local agents, but other times the transaction is handled online until the closing process, when you’ll meet with a title agent.

How to Find a Reliable Mortgage Company

Finding a reliable mortgage lender – one that you can connect with and trust to help you with the process – is crucial. There are a few places to look for this type of lender:

• Ask your real estate agent if they have recommendations. Many times, they will have strong relationships with existing lenders. You can ask questions about most area lenders, too. Real estate agents have gone through dozens and dozens of transactions with lenders, and they often know which are the most flexible to work with.
• Ask for recommendations from friends and family. If you know of someone who recently purchased or refinanced a home, ask about their experience with their lender. Most lenders have a variety of different lender agents, so you may want to get a specific person’s name and contact information if your friends had a positive experience.
• Learn about the agency online. Doing a search online will give you lots of information – and hopefully plenty of reviews – about available mortgage companies.

What to Look for in a Mortgage Company

Once you find a few contenders, take the time to reach out to them to inquire about the services they offer. Ask for a consultation. Then, take a closer look at these important factors:

• Are they good at communicating with you? Do they get back to you quickly and show up for appointments on time? Do they talk to you in easy-to-understand terms or are they only fluent in finance jargon?
• What type of education and training does the representative have? Are they skilled in this area?
• What is the process for obtaining a loan? At Dash Home Loans, we make it as easy as possible for you to secure a loan through a streamlined process. (Warning: Not all lenders do.)
• What are they offering to you? Do they have access to the loan programs you are interested in?
• How do their numbers stack up? How acceptable are their interest rates and monthly payments?

Know Who You Will Deal with During the Transaction

When you learn how to buy a house, one of the most confusing aspects could be this one. Not every person on the phone with you will be a lender who can offer you a loan. There are several people you could be working with, such as:

• Loan processors who take in your loan information
• Loan officers who present offers to you and provide you with insight into your options
• Loan officer assistants who handle the paperwork and tend to be the person you talk to about documentation
• Administrative assistants also handle documentation and the process
• Closer, a person who prepares the documents prior to closing

That’s a lot of people – and that means a lot of potential risks. At Dash Home Loans, we get rid of this confusion. Our Mortgage Coaches replace all of these individuals. You have just one person you have to talk to and discuss your needs with for a home.

Get Pre-Approved

Now that you have a lender, pre-approval comes next. You’ll usually do this about 30 days prior to the closing on the loan. We recommend working on this step quickly to ensure that you can start bidding on the home of your dreams.

How to Get Pre-Approved

To obtain pre-approval, you’ll need to submit information to the lender. Your online application is the first step. The goal is to provide accurate and complete information so that the lender can easily go through and verify it. Your lender is looking at your income, credit, employment verification, and other steps to know exactly what your credit qualifications are.

How Long Does Pre-Approval Take? 

This part is often the quick one. You can usually have a pre-approval letter within one to ten days of submitting your application.

Know the Details of Your Loan Offer

Once you submit this information, the lender will provide you with a detailed loan offer. This will outline what you can expect to pay to buy the home. It will include details about:

• The down payment, including how much you need to pay down
• The type of loan available to you (including FHA, conventional, VA, and other offers)
• Mortgage term, or the length of the loan (usually 15, 20, or 30 years)
• The interest rates and all fees, so that you understand what exactly you’ll pay to buy your home 
• Estimated closing costs, which are dependent on the closing terms with your lender
• Escrow fund requirements, which holds any funds you need to put down for good faith transactions, like the earnest money check 

The lender should make all of this information clear and easy to understand. Having questions at this stage is completely expected, so ask about anything that seems confusing. This is a big deal (and a lot of money!), and it’s important that you understand and are comfortable with the details.

When to Obtain a Pre-Approval Letter

Once you start to look for a home, you’ll want to have your pre-approval in place. You will find that many home sellers like to hear you’re pre-approved because it means the transaction will move ahead quickly. It can be a negotiating tool for you if other would-be buyers do not have pre-approval.

To prove this to them, you can provide them with a copy of a pre-approval letter. It is a simple document that states that the lender has verified your financials and is willing to lend to you once you find a home to buy.

What Does Pre-Approval Mean?

Pre-approval is not a guarantee of a loan. It means the lender has verified your information and has made a loan offer to you. They have provided information to you about the fees and costs to borrow from them (which you agree to). In addition to this, they also commit to lend to you, as long as none of the information you provide changes – and assuming the home meets their requirements.

Go Shopping and Make an Offer

It’s time for the fun part! Now it’s time to find homes that interest you. When you find one that you wish to buy, you can then make an offer. An offer is a legal contract you must stand behind, so make sure you’re serious about the purchase.

How Does Pre-Approval Fit into Your To-Do List?

Good news: It’s a good step toward buying your home. Bad news: There’s still a lot to do. (Sorry.) One of the most important first-time home buyer tips is this one: Always work with your lender hand-in-hand. When they ask for information, provide it in a timely manner. Stay in contact with them throughout the week to check off a few key things, including:

• Due diligence fees and timelines: These will include the research that the lender will do to ensure you are ready to buy.
• Earnest money deposits: These deposits – which are put into escrow to show the seller you are serious about making a purchase – are made once you place an offer on a home and the seller agrees to it.
• Home inspection: A good inspection will tell you and the lender that the home is in good condition. If the inspection brings up any unhappy surprises, you may want to walk away from the offer you’ve made.
• Home repairs: If you find concerns with the home, you can ask the seller for repairs to be made or for compensation to be added to the transaction so you can handle these repairs.
• Appraisal: It allows the lender to have a third party to inspect the home to determine the value of the home based on recent sales in the area. The value must be at least what you are borrowing to buy the home.
• Settlement date: This is when you agree to purchase the home, and the lender starts working on the closing documentation to move your transaction forward.

What is a Real Estate Attorney?

Once you have a home to buy, and you have worked through the details with your lender, the real estate closing process begins. You may work with a real estate attorney during this process, who will draw up the contracts, including purchase agreements, mortgage documents, and title agreements. Some states require that a real estate attorney be a part of a real estate transaction; other states allow buyers to handle this themselves. (A note of caution: Handling this portion of the sale yourself would require a lot of knowledge of real estate law.)

Your real estate agent can refer you to a real estate attorney who will help you in the closing process.

Why is Insurance Necessary Now?

Before you can close on the home’s sale, you will need to talk to your insurance agent. Your lender will require that you have a home insurance policy that is ready to go on the home. Insurance helps the lender know the home is protected, in case a covered incident, like a fire, should occur. Within your mortgage contract will be a requirement for you to maintain your insurance policy to at least the value of the loan. Insurance policies are good investments because they protect your investment.

Your mortgage lender may offer recommendations on a home insurance company if you do not have one. Shop around for a comfortable insurance rate and be sure you purchase coverage that reflects your needs.

Do I Need a Home Warranty?

Home warranties are an added benefit to buying a home with certain real estate agents. The seller may provide a home warranty to the home buyer at the time of the transaction. They often do this – at no cost to the buyer – as a way to encourage offers on the home. Warranties differ widely, however. That means it is very important for you to know what type of warranty you are getting and the terms of it.

If the seller does not offer one, and the real estate agent does not, you can purchase a home warranty separately. If you consider this option, be sure to review what you are buying and the cost to you. Often, these warranties will provide financial protection for you that covers larger systems in the home from costly repairs.

The Importance of a Good Partner in the Home Buying Process

As you can tell, a lot can go poorly without a good partner guiding you through the process. A home is a big investment – likely your biggest investment. Every step of the way, you want to ensure you have the very best team by your side to support you as you buy a home.

If you’re a first-time home buyer evaluating lenders, contact us to hear how our Mortgage Coaches can help you. Ask us about our $10,000 wager that your home will close as expected (warning: we don’t expect to pay up because we’re that confident in our process!). We’d love to tell you how we can guide you through the tricky parts toward the best one: Walking into your very own home.

At Dash Home Loans, there’s no doubt that we love to help our clients build wealth through real estate; however, we know that may not be the best option for YOU. See what our home loan team members have to say about renting vs. buying, and be cognizant of these five common mistakes. 

1. Assuming your rent will stay the same

One thing renters often do when considering a home purchase is compare their current rent to the potential mortgage payment of a home they could buy. What they often forget is that rents almost always increase over time, while a mortgage’s principle and interest stay the same. 

2. Forgetting to calculate principle pay down

A second thing renters can forget to calculate is that a portion of their payment goes towards paying down the principle balance on their loan. On the flip side, each mortgage payment brings you one step closer to owning that home, while you also get to build equity that you can potentially tap into by selling or applying for a home equity line of credit.

3. Forgetting to calculate appreciation

That house you own may also appreciate in value. Every dollar in value that your home goes up in value is an extra dollar of net worth on your balance sheet. Appreciation on a home, typically your largest asset, can be the single biggest wealth building tool available to most people.

4. Calculating upfront costs

When determining whether to buy or rent it is also very important to analyze how much money it is going to cost you out of pocket. What down payment options are available to me? What are closing costs going to be? These are questions you should ask your loan contact to get a feeling for your upfront investment. Then you can compare this cost with how long you plan on staying in the house. It may take several years to recoup your upfront costs with appreciation or principle pay down. So, if you plan on keeping the house for a short period of time, it may not be in your best financial interest to buy.

5. Calculating cost to sell

To piggyback on number four, there is also a cost to sell. This is very important to remember because a typical agent compensation on a sale is around 6%. If you don’t stay in the home long enough to build substantial equity, a quick sale may end up losing you money.