Start by learning as much as you can about how the home buying and mortgage application process works. Read as much as you can about buying a home. Check out the many books in your local library that offer hints to first time home buyers. Read financial web sites on the internet for tips for first time home buyers.
It is important to find out how much you can borrow before you start looking for a home. Talk with several mortgage lenders in your area and get pre-qualified for a particular price range.
The mortgage lender will be able to help you determine how much you can borrow based on your annual income. In general, mortgage lenders recommend that all home related expenses, including the mortgage payment, insurance premiums and real estate taxes, do not exceed 28% of your monthly income.
The next step is to get pre-approved for mortgage financing. This is similar to getting pre-qualified for a price range, but it is a more formal process. You will need to supply proof of your income for the pre-approval process to move forward. Most lenders will want to see income tax returns from the past two years as proof of the income you are claiming.
After you have been pre-approved for your mortgage loan, it is time to actually start house hunting with a Realtor familiar the area(s) in which you are most interested. Your Realtor will guide you through the process of identifying your needs, wants, and desires as it relates to the home you intend to purchase.
Make sure to provide your Realtor a copy of your mortgage pre-approval as this will help the Realtor understand your price objectives and limitations.
Once you have found a home that meets your needs, it is time to make an offer on the property. Your Realtor will guide you through the negotiation process and offer procedures, and will start with providing you information on comparable properties that have recently sold. This will serve as the basis for determining your offer price. A copy of your pre-approval letter will be presented as part of the written offer. Your Realtor will also ask that you provide an initial deposit, generally in the $1,000 - $5,000 range, depending on the purchase price and other factors. In the State of New Jersey, this deposit is 100% refundable to you in the event your offer is not accepted, or if your contract is terminated during the Attorney Review process.
If the seller accepts your first offer, congratulations. Your negotiations are over and you're ready to start preparing for your move. More likely, however, is that the seller will come back to your Realtor with a counter-offer. This negotiation process can go on for a short or long period of time, depending on factors like the motivation of the seller, the local real estate market, and a host of other factors.
After you reach agreement with the Seller as to price and terms (e.g., closing date, etc…), the contract will be written up and provided to your Attorney to begin the Attorney Review process. In the state of New Jersey, the Attorney Review period is a minimum of 3 business days, during which the attorneys representing the buyer and the seller will refine points written into the standard contract used by the Realtors.
After the negotiation process has been completed, you will need to present your mortgage broker with a copy of the contract for the home.
After the 3 business day Attorney Review period, you will want to have a thorough home inspection performed by a qualified and certified home inspector. A home inspection will identify flaws in the construction and condition of the home that are not obvious to the naked eye. Home inspections can uncover things like foundation cracks, termite infestation and other home quality issues. Your inspector may also identify cosmetic or non-structural issues with the home (peeling paint, hardwood floors in need of refinishing, etc…). These are identified for your information only, and there should be no expectation that the Seller is going to make repairs or updates to such items.
Within 5 – 10 days of the conclusion of Attorney Review, the Buyer is generally required to make a second deposit. The amount of the deposit is planned when you make your original offer, and is generally 5% - 10% of the total purchase price.
After presenting the Purchase and Sales Agreement, you will need to work with the mortgage broker to ensure you meet all the conditions required for the closing of the mortgage loan.
Several days before the scheduled closing, you should contact the local utility companies to establish service in your name as of the date of closing. You should also speak with your Attorney to determine the exact amount of money you will be required to bring to the Closing. The money you bring to Closing will need to be provided via a certified check.
Prior to attending the closing, your Realtor will ask you to take one final look at the home to ensure any repairs that should have been made by the Seller as a result of the home inspection have actually occurred. Assuming no issues are identified, you should proceed to the location identified for the closing (generally the office of the buyer’s attorney) and sign the appropriate papers under the direction and counsel of your Attorney.