There’s dreaming of buying a home—and there’s turning that dream into a reality. When you’re ready to move forward on your homeownership journey, there can be a learning curve as you approach how to decipher mortgage-related terms and work on getting financially prepared. Fear not: There’s no need to get overwhelmed by the details. By steadily educating yourself on the process of buying a home while checking to-do items off the list, you will set yourself up for success when the time comes to make an offer.
Whether you are a first-time home buyer or one who is returning to the house hunt after years away, it’s important to familiarize yourself with the upcoming process. The good news is that it’s never been easier to get financially prepared to buy a home: With help from fully digital, fully human-backed tools like those offered by Rocket Mortgage® by Quicken Loans®, you can keep your homeownership goal on track in just five minutes a day.
Here are a few baby steps to help you feel more financially prepared to buy a home.
Understand key terms
When you are buying a home, you likely will start hearing some new real-estate and mortgage-related lingo, such as loan pre-approval, down payment, earnest money, escrow, closing costs, and more. Instead of relying on frantic internet searches to answer your questions during the process, take a few minutes up front to understand the meaning of these terms.
If you’ve done your homework and still have questions about how these terms will affect your actual search, first of all: You’re not alone! That’s where the Rocket Mortgage® team can help seven days a week, with a quick, no-obligation conversation. With a real, live professional from America’s largest mortgage lender, you can get clear on what to expect.
Get a handle on your financing
Before you ever start touring listings, you’ll want a clear sense of what you’ll be qualified to spend—and what you want to make your actual budget, which will likely be a little bit less.
As you go through the mortgage lending process, factors like your credit score, income, and employment will all be assessed before you are approved to buy a home. Thankfully, this doesn’t have to be a guessing game: With online calculators from Rocket Mortgage®, you can plug in your financial information and instantly get a sense of how much you would be approved to spend while adjusting for factors like your anticipated down payment or current interest rates.
Especially in fast-moving markets, not only will you want to have a clear sense of your budget, you may want to take it a step further by getting a Verified Approval Letter. This underwritten offer shows sellers that you’re serious and ready to buy, and that your financing already has been checked and certified by a mortgage lender, which can help you stand out in a competitive market.
Learn about down payment options and other expenses
Depending on how long buying a home has been in your sights, you’ve likely begun saving up for a down payment. But the traditional 20% down payment is actually far from the norm these days, especially for first-time buyers. By exploring what loan options are available, you may be able to put significantly less toward the down payment on the home.
In addition to the down payment, it is also prudent to save for other costs associated with buying a home, such as earnest money and closing costs. Earnest money, a sum put down when you go into contract on a home, will be applied to your final payment. Closing costs, however, are an additional amount that cover a lender’s processing fees for expenses such as the home’s appraisal and title searches. The final amount can vary, but a good rule of thumb is to anticipate paying 3% to 6% of the home’s cost.
Use a to-do list while under contract
As you move from planning to buy a home to actually buying a home, it will benefit you to have a system to continue keeping yourself on track. Yes, you should absolutely take the time to celebrate after an offer is accepted on a house! But know that your work isn’t done while you’re under contract. This is the period when your lender will assess the home, do a final confirmation of your finances, and issue the approval.
With assistance from the Rocket Mortgage® easy-to-use digital to-do list, you will know exactly what loan documentation you need to provide when, why, and how. Then you can monitor your loan’s progress in real time as you get closer to getting those keys in your hands. Keeping an eye on your to-do list should only take a minute or two each day.
While under contract, your lender will also talk to you about current interest rates. These can (and do!) fluctuate on a daily basis, but you don’t have to keep guessing until closing day. With their Digital Rate Lock feature, you can score the lowest interest rate the moment it’s available—even if you aren’t due to close on your home for a month or more. Also known as rate protection, this is a great way to get a clear picture of your monthly payments and closing costs ahead of time.
As they say, knowledge is power. And when it comes to getting financially prepared to buy a home, your five-minute daily knowledge gains about what to expect will give you the power to find your own home sweet home.
