Section 1.5

What to Expect from the Home Buying Process

Buying a home for the first time can seem really intimidating, especially when the process seems long, daunting, and unfamiliar.

Luckily, however, we're here to explain the home buying process to you, step by step, so you know exactly what to expect when you're ready to purchase your first home.

What to Expect from the Home Buying Process

Buying a home for the first time can seem really intimidating, especially when the process seems long, daunting, and unfamiliar.

Luckily, however, we're here to explain the home buying process to you, step by step, so you know exactly what to expect when you're ready to purchase your first home.

Before you start diving into house hunting, you should first make sure you prepare a few things, including:

• Your credit score
• Any documents you might need
• Your savings account (in order to afford closing costs)

Finally, like we talked about in Section 1.4 of this guide, you will also need to prepare by figuring out how much you can comfortably afford each month on your mortgage payment.

Preparing Your Credit

Some of the main things you should do to make sure your credit is robust and healthy are to:

• Check your report for errors
• Dispute any mistakes
• Always make on-time payments
• Not open new lines of credit
• Cut back on your spending

If you commit to doing each of the above suggestions, your credit will be in good shape, which will give lenders more confidence in you as a potential borrower.

Preparing Financial Documents

When you apply for a home loan, lenders need to verify a lot of your financial information. From your income and employment history to copies of pay stubs and W2s, there are a lot of documents you'll need to find and gather to give your lender.

For many first-time home buyers, this can be one of the more time-consuming aspects of buying a home, so getting it done ahead of time can streamline your experience.

Some of the documents you'll want to find and gather include:

• 2 years of addresses
• 2-year job history
• 2 years of W2s
• Pay stubs from the last 30 days or your latest Leave & Earnings Statement (LES)

While this isn't a full list, you can check out Section 3.7 of this guide to get more details.

Preparing Your Savings Account

While some home loan types require a down payment and others do not (see Section 1.3 of this guide for more details), all of them typically require some kind of closing costs.

Many new home buyers don't realize how much these closing costs can be, and often get sticker shock when they do find out towards the end of the loan process.

On average, closing costs tend to be anywhere from 2% to 5% of your total loan amount. Since the median cost for a home in the US is around $285,000, that means you'll need to be prepared to pay $5,700 – $14,250 at closing.

In addition, you may want to consider saving up some extra, either because your loan type requires it or because you want the benefit of a lower interest rate or, on a VA loan, you want a lower funding fee.

Either way, putting enough money aside in your savings account will help make sure your finances are ready to help you become a homeowner.

Finding a lender before you start looking for a home is a good idea for many reasons, including the following:

We personally recommend contacting a few lenders. When you shop around to different mortgage companies, you're almost always able to find a better deal for things like a lower interest rate, better APR, and even a better experience and customer service.

• Most sellers won't take you seriously until you have a pre-approval letter from a lender
• You won't know what home prices you can consider until a lender lets you know what you qualify for
• You will want enough time to be able to shop around at more than one lender
• Your lender can recommend an experienced real estate agent for you to work with
• If you want a VA loan, a lender is the best option to request your Certificate of Eligibility (COE)

Once you've selected 2–3 of the most promising lenders, you will want to get a pre-approval letter from each of them.

You can start this process by filling out each of their loan applications and giving them permission to pull your credit. As long as these credit pulls all occur within a 45-day window, they should only have a minor impact on your credit score, since the credit bureaus will treat them all as a single pull.

Once you've received all of your pre-approval letters, you should be able to start comparing the proposed terms, interest rates, and APRs.

When you see one company with a lower offer, you can go a step further and instead of just accepting the lowest APR or interest rate, you can make the lenders compete for your business.

This sort of competition can lead to even lower interest rates as lenders start dropping their offers in order to try to secure your business.

With pre-approval letters in hand, you now have a rough idea of what you'll likely qualify for from a lender, which means you can finally start looking for your perfect home that's within your budget.

During this stage, you should also start working with a real estate agent—either one recommended by your lender or one you've found yourself.

However, if you're hoping to get a VA loan, we definitely recommend working with the real estate agent your lender suggests. Not all real estate agents have experience with VA loans, and since VA loans are so unique, finding one who does have experience can make the whole process easier and more efficient.

This is the stage in the process that you can expect to negotiate the purchase of the house.

Some of these negotiations may include the home's purchase price and any fees or closing costs you'd like the seller to pay.

Once all these details are hammered out and your offer is accepted, you're ready to sign the purchase agreement.

At this point, you will also need to pick your winning lender so they can order an appraisal as well as finalize and lock your loan. Your lender and their underwriting department will be working hard behind the scenes to get you the clear to close on the loan.

Once you've got your clear to close, your lender will schedule the closing date with you. At this point you'll need to secure your homeowner's insurance so you can bring proof of coverage to the closing appointment.

On your closing date, you'll simply show up and sign all of the closing documents, pay any out-of-pocket closing costs, and make your down payment (if applicable).

Then, after everything is signed, ownership of the home transfers to you and the process is over. You're a homeowner! Now it's time to move in and make your new house a home.

Funding Fee Exemptions and Waivers

From start to finish, it's normal for VA and other types of purchase loans to take anywhere from 30 to 45 days to close.

However, be prepared that it might take a little longer if you hit any bumps in the road. Most of these aren't a big deal and simply need to be dealt with before moving on.

As long as you start off as prepared as possible, and you respond quickly to communication from your lender or loan officer, the mortgage and home buying process should be fast, simple, and straightforward. At least that's always what we aim for here at Low VA Rates.