Are you interested in buying a house in Baltimore? Hell, are you interested in buying a home anywhere in Maryland? If your answer is yes, we have 6 steps anyone can follow to become a homeowner in less than 90 days.
1. Get Pre-Qualified and Pre-Approved
It is super important to get pre-qualified so that you know what you can afford, what you will qualify for, and what types of homes you should be looking at. Once, your lender has made those determinations, a pre-approval letter is issued. The pre-approval letter allows the buyer to submit an offer on the home of their choice. Without the pre-approval letter, or bank verified proof of funds any offer that a buyer submits will be overlooked and never seriously considered.
The pre-approval letter and the pre-qualification process in general, tells all parties involved (real estate agents, and seller) that the buyer has took the proper steps to determine their fitness to buy a home and their ability to get to the closing table.
The pre-approval letter is proof that the meeting took place, and the buyer’s finances were analyzed. The letter contains very important details such as the lender’s business name, address, buyer name, loan amount, loan type, date letter was issued and expiration date. Most pre-approval letters expire after 30 days. If your pre-approval letter expires, you simply need to go back to your lender and request that the loan officer re-issue a new pre-approval letter.
How Do I Get Pre-Qualified?
Call a lender, any lender and simply tell them you want to get pre-qualified for a home loan. Our lender of choice is Main Street Home Loans. However, it is advantageous to shop around. Make sure that you are getting the best interest rates, terms and overall deal available.
What happens if I don’t get Pre-Qualified or receive a pre-approval letter?
Pre-Qualification isn’t necessary if you plan to pay for the home with cash funds from your personal/business bank account. However, if you are like the majority of Americans who need a home loan to purchase a home, you won’t be able to put in an offer, buy a home, or even get a real estate agent to help you tour homes. Being void of a pre-approval letter stops the home buying process before it even begins.
2. Determine Your Loan Type
Conventional? FHA? USDA? VA? 203K? Find the best loan for you based on your personal financial situation, how long you plan to live in your home, how quickly you plan on paying your mortgage bank, etc. Loan type determines the condition of the home you ultimately buy, as well as, the downpayment amount.
FHA Loans
FHA loans require homes to be in move-in condition. Therefore, homes that qualify for FHA loans, must have working appliances, but cannot have broken windows, structural issues, water in the basement, chipping paint, missing roof shingles, etc. A credit score of 580 and at least a two-year work history is required to qualify for this loan. To learn more about FHA loans, click here.
USDA LOANS
USDA loans are preferred by borrowers who prefer to buy homes in rural areas. This loan requires $0 down payment, flexible credit requirements, competitive interest rates and low monthly mortgage. It is guaranteed by the United States Department of Agriculture, which means lenders are willing to take on more risk and provide more advantageous interest rates and terms. The purpose of the USDA loan is to provide low to moderate-income individuals affordable opportunities to become homeowners in rural and suburban areas. A credit score of 640 is required to qualify for this loan. To learn more about USDA home loans, click here.
VA Loans
VA loans are partially backed or guaranteed by the Department of Veteran Affairs and issued by private lenders. This loan also requires $0 down payment. Only individuals who have served in the military, or who have had a spouse die in the line of duty, or die due to an injury acquired in service are eligible for VA loans. VA loans much like FHA loans are only eligible for move-in ready homes.
One of the great benefits of buying a house in Baltimore using a VA loan is there is no pre-penalty fee. This means that you can pay off your loan early without penalty; saving thousands of dollars. VA loans are only for primary residences or to refinance a current loan. Other qualifications include but are not limited to a minimum 620 credit score, and a steady work history. To learn more about VA loans and how to qualify, click here.
203K Loans
203K loans are for borrowers who would like to buy an older home or a damaged home and complete repairs on it. They are also called renovation loans. Although, the federal government guarantees this loan, only an FHA approved lender can issue it. Furthermore, since repairs are required to be completed in the home the borrower must provide a detailed proposal of the work they plan to do.
Once the loan is approved, 20% of the home loan is typically reserved for repairs. About 6 months of mortgage payments can be provided to the homeowner in most circumstances since the homeowner will not be able to live in the home while the repairs are being completed. Some of the loan qualifications include, 620 – 640 credit score depending on the lender and a steady work history. To learn more about 203K loans and how to qualify, click here.
Conventional Home Loans
Conventional home loans are not guaranteed by the federal government or any state department. This is the most popular home loan. 60% of homeowners have conventional loans. Typically, borrowers are required to come to the table with 5 -20% for the down payment. However, it can be as little as 3% in some instances. One great benefit of the conventional loan is if a borrower provides at least a 20% down payment, they are not required to pay mortgage insurance. To qualify for a conventional home loan you must have at least a 620 credit score, and a steady work history. However, to obtain a good mortgage rate a minimum credit score of 740 is required. To learn more about conventional loans and how to qualify, click here.
3. Find Your Home (And Make an Offer)
This may be the most exciting part of the process! It is important to make this decision carefully, consider your options, and work with knowledgeable professionals who can help you make the best choice. At this time your Realtor’s knowledge of the market and expertise will really come into play.
Once the pre-approval letter is in hand, talk to your Realtor about the type of homes and neighborhoods you would love to live in. Your real estate agent will then begin to send you a list of homes according to your preference. When you have determined what homes you would like to tour, reach back out to your real estate agent. Your realtor will schedule a show tour based on your schedule and availability.
Once you have toured your dream home, the one you’re already decorating in your head, its time to make an offer. Sometimes there are negotiations that take place, sometimes there are not. Nonetheless, once the price and terms are agreed upon your real estate agent will present you with a standard contract of sale and addendums that you must review, initial and sign. Your real estate agent will guide you through each document and thoroughly explain the significance of each provision and addendum. Once all documents are signed, the contract is sent to the seller for their initials and signatures.
4. Apply for the Home Loan
Once the contract is signed, contact the loan officer who worked with you during the pre-qualification and pre-approval stage; inform them that you would like to submit a loan application. Make sure you have all your paperwork in order (such as pay stubs, W2s, and tax returns, bank statements, etc.). Because, at this stage in the home buying process you have a limited amount of time to get this done. The contract of sale states how many days, you, the buyer has to secure financing. Most sales contracts will state between 15 days – 25 days. If you do not secure financing within the allotted time period then there is a breach of contract, and you risk losing the home.
5. Processing & Underwriting (Don’t forget Inspections)
Your mortgage loan officer will submit all of your documentation to Processing. From there, your loan will be sent to Underwriting where it will be determined if the loan is a good fit, and a clear-to-close (CTC) will be issued if approved.
During this time period, a lot of inspections are being done. Most lenders will require an inspection of some sort in order to finalize the loan. This is especially true for FHA loans and VA loans. Once a loan is approved, the lender will send your title company a clear to close file, with all of the loan details.
The title company then prepares a final settlement sheet called the final ALTA. This document will break down all of the charges, taxes and fees associated with your real estate transaction. These line items and amounts are called closing costs. By law, when buying a house in Baltimore or anywhere, title companies are required to provide these documents to the seller and buyer at least 3 days before closing. However, the law isn’t enforced and you’d be lucky to get the Final ALTA at least 24 hours before closing. However, once the ALTA is obtained it is important that you go over each line item with your realtor, just in case something needs to be disputed and possibly removed.
6. Go To Closing (And Enjoy Your New Home!)
During closing all necessary paperwork is presented and signed by both the seller and buyer. Then the title of the property is transferred and all of the documents are recorded.
Finally, you have achieved homeownership. The wait is over and you’re officially buying a house in Baltimore. All documents have been signed, and the keys are on the table. You can finally start your new life in your new home. For about 30 minutes you’ll initial and sign documents. Your excitement will grow with the flip of each signature page and each pen stroke. And then finally the title agent, and your real estate agent will say “Congratulations, on buying your new home. Welcome to home ownership.” Lastly, the keys are placed in your hands, and the home buying process is complete.
Buying a house in Baltimore from beginning to end takes about 60 – 90 days. Just imagine in two months your entire life could be different. One more goal checked off your list, one less thing to worry about. Home is where true wealth and the heart reside. And, one of the best investments you can make in your future and your family’s future. If you would like to start buying a house in Baltimore, contact us now. We work closing with Main Street Home Loans and Universal Title. Call today to speak to our licensed realtor and start searching for your dream home.