Before you start shopping for a home, you should get prequalified for a mortgage. This will tell you how much the bank is willing to lend you and how much you can spend on a home once your down payment is factored in.
Tip: A loan prequalification is important for two reasons: 1) You'll know what housing price range you can shop in; and 2) Sellers will know you're serious and qualified to buy, which is especially important in a competitive housing market.
Find a home and get your offer accepted [Average: 10 Weeks]
Armed with your prequalification, you can begin seriously shopping for a home that matches your dreams and your budget.
Shopping for a home and making an offer can take as little as a week and as long as several months. The average time it took buyers to search and get an offer accepted was 10 weeks, according to the National Association of Realtors' 2019 Profile of Home Buyers and Sellers.3
Your loan prequalification will typically last 30 to 60 days or perhaps 90 days depending on your lender so you will need to get a new prequalification letter if you're still shopping after it expires.4
Tip: You may want or need a new loan prequalification if your situation changes, such as a job or income shift that could mean you can shop for a more expensive home.
Formal loan application [One Week]
Once you have an accepted purchase offer on a house, it's time to start a formal loan application.
Your lender will review all your financial documents.
Expect another check on your credit score and credit report.
Tip: Avoid taking on new debt until after your loan closes to reduce loan delays or denials.
Three days before the closing you'll receive a Closing Disclosure form to review.
Closing costs range from 2% to 7% of the purchase price of the house. The average is 3%.
If escrow is required, your lender will set up an escrow account to pay your property taxes and homeowners insurance premiums.
At the closing, you can review your amortization table so you can understand how your loan payments will work over time.
Tip: The Consumer Finance Protection Bureau7 warns that scammers try to take advantage of buyers by emailing fraudulent wiring instructions. Don't respond to an email asking for funds until you check by phone with your title company to make sure it's legitimate.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
Ellie Mae, "Origination Insights Report," published May 2020, accessed July 16,
https://www.annualcreditreport.com/, accessed July 16, 2020.
National Association of Realtors, 2019 Profile of Home Buyers and Sellers, accessed
July 21, 2020.
Consumer Financial Protection Bureau, "Get a prequalification or preapproval letter"
accessed July 21, 2020
Consumer Financial Protection Bureau, "What's a lock-in or a rate lock on a
mortgage?" Updated August 4, 2017, accessed July 17, 2020.
Hal Bundrick, "Title Insurance: What it is and why you probably need it," Nerdwallet,
published September 18, 2017, accessed July 1, 2020.
Melissa Yu, "Mortgage Closing Scams: How to protect yourself and your closing
funds," Consumer Financial Protection Bureau, published June 3, 2019, accessed July
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