If purchasing a home is on the horizon, it’s time to start educating yourself about the road ahead. There are tools and resources in place to help service members and veterans through the home buying process, but knowing the steps will help to minimize the potential for issues along the way.
While the path to buying a home will look slightly different for every individual, there are some universal stages.
Step 1: Deciding whether home-ownership is for you
The choice of whether or not to become a home owner while Active Duty can be a difficult one. Military service demands flexibility that can feel incompatible with the implied permanence of buying. However, with some planning and research, home ownership can offer both financial incentives and much appreciated stability. Minimizing the more stressful aspects of home ownership is rooted in making sure that you are ready to make the investment. Explore your readiness with AHRN.com’s 6 questions to ask yourself before you decide to buy blog post.
Step 2: Get Pre-Qualified
You’ve decided that the time is right! Your first step is to make sure that you are financially set to get a mortgage loan by ensuring your credit report is accurate, pulling your credit report from the 3 major reporting bureaus and addressing any negative reports. Gather your financial information ahead of initiating the loan process. Forms you might need include your two most recent W2s and 1099s and your two most recent paycheck stubs covering a 30 day period.
Step 3: Get pre-approved
Speak with an experienced loan officer who can walk you through the process and provide you with a qualifying loan amount. If you are considering using your VA Loan benefit, there are some extra steps like obtaining a Certificate of Eligibility for VA Loan. In that case, prevent issues further in the process by working with a loan officer who is very familiar with the VA Loan process. A pre-approval letter is issued by your VA Lender stating that you have applied for a VA mortgage and that your income, credit and assets have been reviewed and approved.
Step 4: Find a Realtor
Often, service members find themselves searching for a home from a distance before a PCS move. This added challenge makes the services of a trusted realtor even more useful. Essential to forming a productive relationship with a realtor is establishing that they are looking out for your interests. Professional realtors know the ins and outs of their area and can help you to match your wants and needs with the different neighborhoods around your installation. While it is possible to work through the Seller’s Agent that a home may be listed through, that realtor is working in the seller’s interest as opposed to yours. Having someone dedicated to ensuring you make the best possible investment safeguards you through the home buying process.
Step 5: Look at Homes
Home shopping is both tremendously exciting and nerve wracking – there are so many choices! Take a deep breath and start by identifying your baseline needs. How many bedrooms and bathrooms? Is a particular school district a sticking point? If all the choices are overwhelming, run through the AHRN.com Choose The Right Home checklist in our PCS Toolkit. You can also create a profile on AHRN.com and save your favorites to come back and review.
Step 6: Choose a Home(s)
With the input of your realtor, weigh your options in the market against your desired mortgage amount, long term goals (to sell or rent it if you move), current needs and future plans.
Step 7: Obtain Funding
- Respond immediately: Lenders often need more information from you while your home loan is being processed. Even if it seems excessive, make sure you provide everything needed as promptly as possible
- Minimize Money Movement: If you need to move money around for your home purchase, maintain specific records. Your lender may ask you to provide documentation of substantial deposits or withdrawals. To simplify the process, keep financial maneuvering to a minimum.
- A Quiet Credit Report: Plan to not apply for new credit, use your credit cards or close any credit accounts while your loan is processing. Any one of these moves could impact your credit score or alter your debt-to-income ratio.
- Keep communication open: Everyone involved in the process (loan officer, realtor, etc.) should maintain open communication channels right up to settlement day. Check in regularly to ensure that everything is running smoothly.
Step 8: Make an Offer
Work with your real estate agent to determine the appropriate amount for your initial offer based on comparable home sales, market value, condition of the home, and your closing date. Handle all negotiations regarding your offer in writing to make sure the terms of the agreement are clearly understood by everyone involved. If there is any negotiation done verbally, follow up the conversation by stating the points made in writing.
Step 9: Closing
In general, the mortgage process takes between 45 to 60 days from the time of application to closing. The exact timing will depend on a number of factors including the lender’s process and any qualifying issues. During this process, an attorney, real estate agent, or title company will help negotiate and draft the contract – a legally binding contract between the buyer and seller describing all the terms of the transaction. Your lender will order your closing papers, ensure that all necessary money is collected, and then the funds will be disbursed.