Embarking on the journey to homeownership may seem like an intimidating process, but it doesn’t have to be. By doing your research beforehand and following every step in a well-thought out and organized matter, you’ll be saying “Hello new home!” before you know it.
Start with credit.
Credit reports are kept by three major credit agencies, Experian, Equifax and TransUnion, and show whether you’ve consistently been late on payments or run into serious credit issues in the past. Know your credit score beforehand, check for errors and if you find any — contact the agency directly. Your credit score can directly affect your interest rate or whether you can get financing at all.
Set your budget.
An easy place to start is with an online mortgage calculator to figure out how much home you can afford. For a more accurate figure, you can get pre-approved with a lender who will help you take a closer look at your income, debt and credit to help you find a loan you can handle. Generally, people aim for a home that costs about two-and-a-half times your annual salary. However, other factors such as credit card debt, student loans or other financial obligations can definitely come into play.
You will need to have some money in the bank for your down payment. Typically, lenders like to see 20 percent of the home’s price. You can put down more, which might get you a bigger loan. If you have less, you’ll have to find a loan that can accommodate you and you’ll probably end up having to pay private mortgage insurance (PMI) which adds about 0.5 percent of the total loan amount to your mortgage payments for the year. You also want to make sure you’ve got enough money to cover your closing costs, which can include the appraisal fee, loan fees, attorney fees, inspection fees and the title search. Often, it will easily add up to more than $10,000.
Search for a new home.
There are a lot of things to consider when looking for your new Lennar home. You’ll want to consider variables such as what type of community is right for you based on location to work and what schools fall in which school district. What type of floorplan do you need to accommodate your family, is it going to grow anytime soon?
Figure out your financing.
Once you’ve discovered how much home you can afford and found your perfect home that meets your needs and falls in your price range, it’s time to figure out what type of loan you need. There are different loan options to consider with the most common being the adjustable-rate mortgage (ARM). In a fixed-rate mortgage your interest rate never changes. With ARMs, the interest rate adjusts periodically during the life of the loan. You can use a calculator to adjust how different rates will affect your monthly payments and be sure to consider PITI — principal, interest, tax and insurance.
Purchasing and closing.
Here comes the time for the big step of making the purchase. This part can seem like the most confusing yet exciting part. Start with obtaining an estimate of closing costs through your lender, this will be the amount of money you pay to close a mortgage loan aside from the down payment and are generally placed into one of three categories: lender fees, title fees and escrows/impounds—money collected upfront to pay your taxes and insurance.
One of the final steps in purchasing your dream home will be signing the sales documents and disclosures. You will want to set up an appointment with your sales associate to sign the sales documents. Verify all information is accurate; read all the disclosures carefully and ask questions; sign all title documents; schedule a final walk-through to verify everything in your home is in working order.
Signed, sealed and delivered.
After all the paper work is done and your inspection is completed, which usually takes place about 24 hours before your mortgage closes, it’s time to get the keys and move-in. For tips on what to do once you move-in to your brand new home, check out our helpful move-in guide.