6 Steps to Take When Buying Your First Home

By: Joanette Cintrón, Community Development Outreach Officer, VP, Old National Bank

As a previous mortgage loan officer with more than 20 years of experience, I’ve seen firsthand what it takes for homebuyers to purchase a house with the least amount of stress possible. Buying a home to call your own is such an exciting time, but without a clear understanding of the process — and the proper amount of preparation — things can become tense quickly. Here are some tips to follow to avoid having that happen to you.

Sidestep the biggest first-time homebuyer mistake

The biggest mistake I see is when would-be home-buyers don't understand how their credit can work for or against them when buying a home. Your credit score is your biggest asset when it comes to loan options and opening the door to lower interest rates. Depending on the loan program you go with, your mortgage insurance premium may even be lower if you have a good credit score.

There's no such thing as starting too early when it comes to building credit. You should start to pay attention to your credit report and spending habits as soon as you turn 18 and can obtain credit in your own name. This will make an impact later on in life when you decide to become a home buyer. If you’re past that phase, check your credit score and credit report 60 to 90 days from when you believe you'll be ready to start the process. This gives you time to correct any inaccurate information or to improve your score before it has a chance to impact your buying options.

Decide if you're ready to buy a home

Life-changing events — like a new job, a move out of state or a marriage — are often major impetus’ for home buying. If you’ve had a life-changing event, or you simply feel ready to move out on your own, start by comparing the market for rentals with the home-buying market in the areas where you’re interested. What will you pay to rent an apartment with the number of bedrooms you want, in the location you’d like, and with access to the transportation you need? Use that information to determine if you’re ready to move forward with buying a place of your own, or if renting is the better option for you at the moment.

Follow the proper steps for financing

After you’ve checked your credit score and decided that now really is a good time to buy, you can move on to the financing portion of the process. These steps will help you get everything together on time so that when someone asks for something along the way, you’ll be ready.

1. Do your research. In Minnesota, our slogan for homeownership is, “Get ready, be ready.” What we mean by that is to get informed. Learn about the different loan programs available to you based on your location, your job and other factors. Getting referrals from friends and family is a good start, but do some research on your own. Depending on where you live you may qualify for state, county or city down payment assistance. Different banks also offer different loan and assistance programs, like the Old National Down Payment Assistance Program, for example. Interview at least two or three banks before deciding which to go with for your mortgage. Real estate agents and nonprofit housing agencies are also good, non-biased resources for this type of information.
   
   
2. Get prequalified/pre-approved. You’ll need a lot of documents in this step. Gather your paystubs (actual paystubs, not screenshots) and tax returns and bank statements (actual statements, not screenshots). You’ll be asked to provide up-to-date documents for these things throughout the process, so know where to go to generate recent documents quickly for a smoother process.
   
   
3. Review loan options and determine your budget. Once you’ve picked a bank to work with for your mortgage, your loan officer can help you understand the nuances of the different options, as well as walk you through how to decide how much house you can afford. Depending on the loan program you go with you may need different down payment amounts. This information — along with estimated closing costs — will help give you a better idea of what your initial investment will look like so that you can start determining how you’ll cover it. Do you have that money in a savings account? Is a gift from your family an option? Are you eligible for down payment assistance? These are all questions your loan officer can help you answer.
   
   
4. Find an agent, put in an offer. Consider interviewing at least two to three real estate agents before picking one to work with. You’ll be spending a lot of time with them while you house hunt, so you want your personalities to work well together just as much as you want them to be informed on the areas you’re interested in making a purchase.
   
   
5. Get the property inspected. Once you have an accepted offer, we always highly recommend you get the property inspected. This report tells you the actual condition of the property — not just what’s visible to the naked eye — so you know you aren't walking into a money pit.
   
   
6. Enter into the loan process. Let your loan officer know that you’ve had an offer accepted. Besides an inspection, you’ll need an appraisal to confirm the value of the property. Once all those conditions are met, you’ll head to the closing table and sign the documents to buy your house. Depending on the loan program, and whether you’re obtaining down payment assistance, the loan process could be anywhere from 30 to 45 to 60 days. 

Get ahead of common surprises

Most people have heard of or are aware of closing costs, but they might not know that the closing costs listed don’t always include every component that you’ll be responsible to cover. Knowing and understanding the role of each professional in this process will help you determine who to go to when you have questions, or when something surprising pops up. For example, when it comes to your finances, housing numbers and closing costs, talk with your loan officer. If you have a question related to the property itself, your real estate agent should be your point of contact.

It might seem like a lot, but that’s why having the right experts by your side makes all the difference. To learn more about how Old National can help, check out our Home Mortgages page, or find a mortgage expert near you.