The Path to Homeownership

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Here are the key steps in the homeownership journey:

Review Credit Scores, Credit Report

Credit scores range from 300-850, and generally credit scores 760 and above allow you to qualify for the most competitive interest rates. Your credit score is calculated based on many factors, including your debt payment history, debt-to-credit utilization, and length of credit history. Review your free credit report for accuracy via AnnualCreditReport.com. Review FICO® credit scores on platforms like CreditKarma.com or authorized retailers. Note: Mortgage lenders use FICO® Score 5 while most retail providers share FICO® Score 8.

Consult a Mortgage Broker

Working with an experienced mortgage broker can help guide you through the mortgage process from start to finish, expanding your options and answering questions along the way.

At StemLending.com, we are your personal mortgage concierge. We do the legwork — from gathering documents to pulling your credit reports and verifying your income and employment — and use that information to help you find the best mortgage.

Get Pre-Approved for Mortgage

Getting a pre-approval letter allows you to seriously shop for your dream home. We will ask you to provide bank statements, pay stubs, W-2/1099 forms, two years of tax returns, and authorize us pulling your credit report. We will work with our lending partners to help you find the best pre-approval based on the type of loan that’s personalized for your needs.

If the lender decides to offer you pre-approval, you’ll receive an estimate of what size loan you would qualify for and approximately what interest rate you’d get.

Pre-approval is typically good for 90 days. Pre-approval letters “expire” after 90 days as lenders typically need to update information about your salary, assets, and debts by then.

Working with an experienced mortgage broker can help guide you through the mortgage process from start to finish, expanding your options and answering questions along the way. Click To Tweet

 

Find a Real Estate Agent

Working with a seasoned professional who is knowledgeable and has sold many homes in your local market will help you navigate this competitive process. We recommend interviewing 2-3 real estate agents before starting your search.

Keep in mind that your credit score won’t immediately improve in a day or even a week. If you don’t meet the credit requirements now, you may need to revisit in a few months.

Decide how much you can save for a down payment, even if not 20%.

Figure out how much house you can afford, accounting for one-time fees due at closing, and recurring monthly expenses as a new homeowner.

Select Your New Home!

Now that you’ve interviewed and selected your real estate agent, it’s time for the fun part: shopping for your home! Use this time to check open houses, explore different styles of homes, and examine different neighborhoods within your search.

Is proximity to public transit a must? What is the quality of the school district where you are looking for a home? Figuring out which features of your home and the surrounding neighborhood you can and can’t live without is essential.

Select the Right Mortgage

With dozens of types of mortgage loan products, work with a specialist to understand your options:

  • 30 Year Fixed Rate?
  • 5/1, 7/1 or 10/1 Adjustable-rate (ARM)?
  • Government-backed or Conventional?

Calculate your monthly mortgage payment.

Need help digging up information? Websites like Realtor.com, Zillow.com, Trulia.com have interactive portals where you can enter a ZIP code, town, neighborhood, or other information to find out more about the area.

Make an offer, with the help of your real estate agent.

Address Underwriting Conditions

Even if you’ve provided the following documents during the pre-approval process, for the full application, be sure to have these documents handy:

  • IRS W-2 forms from the past two years.
  • Updated Pay stubs from the past 2 months.
  • If you have other income outside of W-2, have documented proof.
  • Federal tax returns from the past two years.
  • Bank statements from the past 2 months.
  • Details on long-term debts like car or student loans.
  • Government ID (Driver’s License, Passport) and Social Security number.

Don’t damage your credit

It can take weeks or even months to go from pre-approval to closing on your home. During this time, it is important that you don’t make any additional, significant purchases, because your loan isn’t fully approved until it goes through underwriting — which could take place just a few days before closing.

Avoid taking on new debt (e.g., getting an auto loan), opening new credit cards, neglecting student loan payments, or falling behind on credit card payments.

Close on your home

You’re almost there! Before getting the keys to your new home, work with your mortgage broker to get familiar with the standard closing documents ahead of time. You shouldn’t get caught off guard by unexpected closing costs.

Stem Lending team has broken down these costs, here.

Most of your mortgage closing costs can be broken down into these categories:

  • Lender Fees
  • Third-Party Fees
  • Prepaid Fees
  • Closing Date Changes (Interest Accrual)
  • Escrow Account (Property Taxes, Insurance)
  • Title Fees

Make sure you’ve set a closing date for your home, and that you have the location.

Know how much you’ll have to pay in closing costs — and how you’ll be paying (cashier’s check, certified check, wire transfer, etc.).

Schedule a walk-through of the home to be sure it’s in the same good condition it was when you first saw the property.

Schedule a security company (e.g. ADT, Honeywell, etc.) for changing out the old locks and installing new ones, with a new set of keys, along with a home alarm system.

Bring a photo ID and closing funds.

Post Closing

Congrats on buying your new house! Start closing out of your current utility bills, and sign-up for new ones at the address of your soon-to-be home.

Also, complete the Change of Address forms.