by Mindy Laughton

Congratulations on taking the first steps toward purchasing a new home. As a first time home buyer, you probably feel like there is a world of possibility ahead of you. However, there is also a world of headache and hurdles before you if you don’t understand what you’re getting yourself into.

Everyone who buys a home goes through the same frustrations to varying degrees. It’s up to you to prepare yourself for what’s to come. Buying a home isn’t an ugly process, but it does demand a lot of your patience and it’s easy to overlook things when you’re reviewing an overwhelming amount of information. Here are the ten things every first timer should focus on to help guide you through the process.

Credit Check and Prequalification

If you’re already talking to an agent, chances are the question of prequalification has already come up. Pre-qualifying for a loan means that the bank has reviewed your documents and given a cursory stamp of approval. It’s not a guarantee of loan terms, but it’s the first step in the buying process. Typically, this requires a credit check and that can be scary if you have negatives you haven’t dealt with in the past. Banks want to see at least one year’s worth of payments made on time, but dings to your credit can add to the already complicated review process.

Often times, settling with your debtor or requesting removal of old challenges can raise your score high enough to get a decent rate on your mortgage.

Bank Statements

The bank will want to see practically every bank statement you’ve come across in the past six to twelve months. They also lose things during the process, which is common given the amount of paperwork, so don’t be surprised if statements are requested more than once. Simply put, this is a hassle and nothing more. Try to ask your broker up front what he or she may need, and you’ll learn to anticipate documents throughout the process. One piece of advice: get receipts for everything. Any money moving from one account to another usually requires documentation.

Bills and Payment Histories

The bank will also request bills, but only certain bills will work for them. They tend to like utility bills, which are easy to verify. They want to see that you’ve made all of your past year’s payments on time, and that you are current on your payments. According to Lexington Law, it’s a good idea to pay your bills ahead of time anyway. It reduces your debt-to-income ratio and can have a slight improvement to your credit score.  This step may not apply to all first-time home buyers either. You can try and circumvent this with a credit statement from your utility companies. Call and ask for proof of payment history for the past year, and be prepared with a documented explanation for any late payments that may appear.

Also, keep a spreadsheet of your own expenses and refer back to this frequently throughout the home buying process. This will help you zero in on what you can afford, and help you gauge roughly how much money you’ll be able to put away each month for improvements or retirement after you’ve assumed your mortgage payment.

Letters and Statements

The bank may request certain letters from you that state things about your intent. For instance, if you plan to move more than 50 miles from your job the bank may request a letter stating how you intend to commute and that you acknowledge the distance you’ll need to travel. You may also need letters from employers or creditors acknowledging that you are who you say you are, and you work where you have stated. These are mostly for verification, and may even be prepared by your broker in advance of any signing of loan documents. Of course, the process does differ from bank to bank, so what is requested may not be a standard across-the-board.

Signatures

You will need to sign so many documents that you may forget how cursive handwriting works. You will need to sign a number of disclosures, in addition to your loan documents. Also, due to changes in the law, you’ll sign repeat documents as well. At the end of all of this, you should receive a detailed statement known as the HUD-1, which gives you exact amounts for what you own and where that money is going. However, this may change as you get closer to actually signing for the loan. Also, you should read everything you sign. This sounds like a given, but a courier delivering loan documents at 8 PM the day before escrow closes can create a high-pressure situation for you as the buyer. Don’t let that happen! Schedule in advance when you can, and apologize if you can’t. These documents are extremely important, so read them.

Home Inspections

The burden of a home inspection is on you, the buyer. Don’t kid yourself either, these are crucial to your purchase. If you don’t get an inspection, you won’t catch things like leaks or electrical shorts and those can be costly. Even with an inspection, you still may miss things, but that’s why it’s important to visit the home multiple times before you buy.

Comparables and History

Your agent should be prepared to help you find comparables to determine the value of your property. Comparables are basically recent sales in the area, and they help appraisers assign and verify the value of a home. Also, knowing the history of the property is important. Especially if you plan to sell later on down the line. Disclosures like whether the home was used as a drug lab are next to impossible to bury, but it is easy to overlook something like whether you are in a flood zone or a fault line.

If you know the history of the property, especially past sales, you can make an informed decision about your investment. You should set a goal to recoup your investment on a home, and comparables are the best way to help you predict the outcome of your purchase.