STEPS TO SUCCESSFUL HOME OWNERSHIP
- DECIDING WHAT IS BEST FOR YOU
- PROPER PREPARATION
- COMING TOGETHER
- FIND A HOME
- PURCHASE AND CLOSING
STEP 1: DECIDING WHAT IS BEST FOR YOU
The first step in the home buying process is to make important decisions. Important questions are addressed early, like: How much home you can afford? What type of home you want to buy? This proper planning will make the overall process much easier.
The Path to Buying a Home
A Step-By-Step Guide to Home Buying
On the journey to homeownership, this helpful guide will serve as your purchase map with information to make you feel confident in your decisions. If you ever find yourself feeling confused or unsure, a First Nations Loan Officer is always here to offer further guidance and clarification.
PHASE 1: Decisions
The home buying process begins with important considerations that will ensure that you start this journey correctly.
For some, renting is the more prudent option, especially if these things need to be worked on. The Rent vs. Buy Calculator can also be a useful tool in your consideration.
How much can you afford? Knowing what you can afford in a home will help narrow your search.
Consider the differences between a Single-Family Home, a PUD and a Condominium. This will help save you time and frustration in your search. A Realtor can be very helpful in this aspect.
Ask the Experts
The home-buying process is a major investment, of both time and money. Working with the right Loan Professional and Realtor will make the process infinitely easier on both your peace of mind and your finances. They key is to work with a team that you trust will have your best interests at heart.
Step 2: PROPER PREPARATION
You have decided that you are ready to begin your home buying journey. There are a few steps to take that will help you get the right mortgage that will fit your particular needs.
PHASE 2: Getting started
You’ve done your homework, and reached the informed decision that buying a home is the right choice for you. In this section, you will get an idea about how much home you can afford. This will narrow down what kind of home you want to buy. Now it is time to start working with the right mortgage company.
Luckily, First Nations is on your team to help guide you through this.
Building Your Budget
A good, thorough budget is key. Answering a few questions before you begin looking will help you find the best loan option to fit your budget.
Planning Your Payments
Your monthly payments amounts will show you how much you can comfortably afford. Typically referred to as PITI your monthly mortgage payment consists of Principal, Interest, Taxes and Home Owners Insurance. Work with a First Nations Loan Officer on this aspect. They will help guide you through this part of your Budget Building.
The initial amount you borrow to purchase the home and the remaining outstanding balance throughout the life of the loan is the PRINCIPAL.
The charge for borrowing the money is the INTEREST.
TAXES are assessed by your local government and typically paid to your lender as a portion of your payment and collected in an impound account. The lender will then pay them to the government upon their due date.
Established in a similar fashion as your taxes, INSURANCE is collected by the lender and also put into an Impound Account. Your insurance comprises two prominent types of coverage. Homeowner’s insurance provides you with coverage for damages inflicted by hazards such as (but not limited to) wind and fire. Mortgage Insurance typically is required for those making a smaller down payment on their loan; it provides protection for your lender in the instance that you are not able to fulfill the mortgage requirements and repay your loan.
STEP 3: COMING TOGETHER
Getting prequalified for a home loan is a great way to guide you on your home search. What is prequalification? What are the benefits? A First Nations Loan Officer can help you answer all of these questions and many others.
PHASE 3: Loan Prequalification
Getting prequalified for a loan before you start looking for a home serves as the best method for your home buying path. Do you have a down payment? What is your income-to-debt ratio? What is your credit score? Here, those questions will get answered.
What is Loan Prequalification?
Loan Prequalification is an accurate estimate of what you might be able to borrow. You will provide your First Nations Loan Officer with information about your income, liquid assets, and a credit check. Your First Nations Loan Officer will then give you an accurate estimate of your loan amount and loan programs that are available to you.
How Does Getting Loan Prequalified Benefit You?
- You will be able to shop with the confidence of knowing your exact price range.
- You can identify credit problems that can be addressed early in the lending process.
- You will typically have more negotiating power, as a Loan Prequalification is required by almost all Realtors and Sellers when considering an Offer to Purchase.
- If you are self-employed or a commission-based buyer, loan prequalification can demonstrate financial backing if your income fluctuates more than those of salaried buyers.
- Loan Prequalification gives first-time homebuyers the advantage of equalizing their offer with similar offers made by previous homeowners.
Other Prequalification Facts
- Loan Prequalification is offered by First Nations Home Finance Corp at no cost.
- The loan prequalification process is not comprehensive and therefore is not guaranteed, nor is it considered any type of loan commitment. However, it shows that your serious about purchasing and determining what you can afford and are thoughtfully going through the process.
STEP 4: FIND A HOME
You have your Loan Prequalification in hand. Now is the time to shop for that home!
PHASE 4: Starting Your Search
Before you start looking at houses, make a wish list for the features that you will be looking for. We here at First Nations Home Finance Corp strongly advise you to work with a licensed Realtor. Their professionalism will help tremendously in your search, as well as getting you through the process of getting your Offer to Purchase negotiated and accepted.
- What do you need in a home?
- What do you want in a home?
- Would you like a one-story or two-story home?
- How many bedrooms and bathrooms would you need?
- Would you like a home office?
- What type of backyard would you like?
Consider all the different aspects and prioritize the features of the home you’d like to have. This is just a small example of the things to consider
Finding your right neighborhood is often just as important as finding the right house to insure your happiness.
When considering a neighborhood, ask yourself these questions: Is it near your work? How about areas, of the city, that are important to you and your family? Is it in a school district that you want for your children? Does the neighborhood appear to be a good fit for you and your family, both for today, and tomorrow?
There are several types of homes out there, with each one providing different options in terms of space, responsibilities, and upkeep. Consider all the differing factors that would make a single-family home, a condominium or a PUD the best choice for you. Your Realtor will prove to be a valuable asset in your guidance here.
STEP 5: PURCHASE AND CLOSING
So, you’ve found your dream home. What comes next? Your First Nations Loan Officer and Realtor will work together, as a team with you, so you will know the next steps to actually buying a home.
PHASE 5: The Purchase
You’ve found the perfect home. Now what?
Extending an Offer
Purchasing a home is a legal transaction that often involves heavy negotiations. A Realtor is a valuable resource to have on your side as you determine the appropriate initial offer, and any subsequent offers, to extend. During this part of the process, you’ll want to consider the following:
- To add extra weight to your offer, you’ll want to provide the Loan Prequalification letter from your First Nations Loan Officer. Sellers prefer an offer with financial certainty..
- You’ll want to have money ready to use as an earnest money (or “good faith”) deposit. While the amount varies depending on your location and transaction, all of it will be placed into a safe escrow account, until the purchase transaction is completed.
- Remember, the negotiations can go back and forth many times, depending upon the requests that each side is asked to consider.
The Closing Process
The seller has accepted your offer. Here’s what you’ll need to do, now that you’re in the final stretch:
- Review the loan commitment with your First Nations Loan Officer and be sure you understand your loan’s rate terms and any additional requirements or details. Fulfill any Loan Conditions.
- Obtain and order Home Owner’s Insurance and, if required, Flood Insurance.
- Using your Purchase Agreement as guides, set a closing date.
- Prepare your move, by making a checklist of necessary actions and setting timelines.
- Do a Final Inspection of the home you purchased with your Realtor.
- Confirm that you have met all the guidelines and conditions in the Purchase Agreement. Go over these items with your Realtor.
- Bring the total you owe for closing in the form of a cashier’s check, or wire the necessary funds to the proper Escrow Account. Personal checks and/or cash are not accepted.
- Execute your Final Loan Documents.
- Await the funding of your loan, and the recording of the Deed. This transfers the ownership of the property to you.
- Congratulations! You now have joined the ranks of Home Owners!
Single Family Residence: Also referred to as a “SFR”, it is a house, on its own individual lot. There are no common areas with other homes.
PUD: Also referred to as a Planned Unit Development, or Townhome. It can be attached to other homes (like a Condominium), or it can be unattached like a Single Family Residence. A PUD has common areas and a Home Owners Association to administer to those areas.
Condominium: An interest in a building (being the “unit”) that is owned in common by all the unit owners.
Principle: The loan amount (dollars) borrowed
Interest: The rate of charge for the principle borrowed
Taxes: Property taxes. Charged by the State and/or Local Governments (i.e.: Mello-Roos)
Insurance: Home Owner’s Insurance Policy. Insures against loss due to fire, flood, wind. Liability is usually included.
Mortgage Insurance: This is not the same as the above, Insurance. It is a policy that insures the Lender against a loss in default/foreclosure. This type of insurance enables borrowers to participate in loan programs that require less than 20% down payment.
Impound Account: A Trust Account, established by a Lender, that pays out Property Taxes, Insurance and Mortgage Insurance (if necessary). The established amount is collected with each Mortgage Payment. An accounting is provided to the borrowers once a year.