When it comes to buying a new home, the entire process can feel like an absolute whirlwind. It can be overwhelming to navigate the many steps and requirements involved before closing — especially when you’re a first-time homebuyer. To demystify the homebuying process, we’ve put together a step-by-step guide to help you understand what to expect when purchasing a new home from Empire.
1. Getting Pre-Approved
A mortgage loan officer will meet with you one-on-one to talk through your needs and goals before getting pre-approved. When you meet with your loan officer, they will first provide you with a pre-qualification estimate, which is a general approximation of how much you can borrow by looking at your credit score and income. Following this, a more formal pre-approval process will ensue, which is the more formal application that will provide you with an exact amount of how much you can borrow and at what rate.
To get pre-approved, mortgage lenders will consider four main criteria:
- Gross income
- Debt
- Available money for down payment, closing costs and reserves
- Credit history and credit score (which will affect the down payment requirement, interest rate, private mortgage insurance [PMI] and the type of loan for which you’re eligible)
They generally will require the following documents to complete the pre-approval application:
- Two years’ worth of W-2’s
- Two years’ worth of tax returns
- Two most recent bank statements
- Two most recent pay stubs
- Photo ID
Going through the pre-approval process will let you know exactly how much you can afford. Your approval will be determined using a DTI ratio concept (debt-to-income). The ratio divides all your monthly debts and liabilities by your gross monthly income to come up with a percentage that’s known as DTI; you must fall under a certain percentage to qualify for a mortgage.
2. Shop for Your Home
Once you’ve been pre-approved, the exciting part begins: it’s time to shop for your new home. A member from the Empire sales team will contact you to help set up your appointment in-person or virtually.
3. Sign Your Purchase Agreement
Once you’ve found the home that’s right for you and your family, you can sign your purchase agreement and formally begin your loan application. Your loan officer will receive a signed copy of your purchase agreement as well as your deposit checks. You will then be eligible to obtain homeowner’s insurance and your loan type will be finalized.
4. Submit Loan Application
Your loan application will be submitted for processing, where an underwriter will double check everything and decide on the loan. Once the home is ready for inspection, an appraisal will be ordered; following this, a closing agent will begin to prepare closing documents and loose ends will be tied up.
Types of Loans Include:
Government loans: FHA, VA and USDA loans are backed by federal and state agencies; they typically have more flexible guidelines and lower down payments.
Conventional loans: These are set by Fannie Mae and Freddie Mac.
5. Loan Underwriting
Once the loan has been pre-approved, we will issue a commitment letter and your file will be ready for closing. Additional documentation may be requested prior to closing.
6. Final Documents Sent
At this stage of the homebuying journey, your final loan documents will be sent to a closing agent for review.
7. Closing
You will sign your documents and bring any funds needed to close. Once the loan has been funded and your home complete, you’ll receive the keys to your new home.
Buying a home is only half the battle, and once you sign on the dotted line, you’re now faced with the great task of designing the interiors. Luckily, through our unique design experience, you can create a home with features and finishes that are perfectly tailored to you.