The Homebuying Process | homegenius

    Ready to buy? We've got your back.

    Congratulations are in order — you’re ready to buy a home! This is an exciting life milestone. But it can also be a stressful one. There’s plenty to juggle. And you’ll be speaking with many different people, all performing specific functions and roles along the way.

    But never fear: Together, we’ll make sure that you’re fully informed and prepared for each of these steps — from financing to getting your keys.

    The Homebuying Process
  • Step 1. How Much Can I Afford?
  • Step 2. Hiring a Real Estate Agent
  • Step 3. Financing Your Home.
  • Step 4. Finding the Right Home
  • Step 5. Navigating the Deal
  • Step 6. Moving and Owning
  • First-Time Homebuyer Resources
    Step 1. How Much Can I Afford?
    Step 2. Hiring a Real Estate Agent
    Step 3. Financing Your Home.
    Step 4. Finding the Right Home
    Step 5. Navigating the Deal
    Step 6. Moving and Owning
    First-Time Homebuyer Resources
    Step 1.

    How Much Can I Afford?

    You’ll want to consider your income, your credit, your downpayment savings, your closing costs, and more. Don’t worry: Here are some tools to help you figure it out.

    A Final Word (on Words)
    Along your homebuying journey, you may encounter some unfamiliar phrases, terms, and acronyms. Consider this your secret decoder ring for all the real estate jargon you will want to know.
    Credit or FICO Score

    A credit score is a number assigned to a person that indicates creditworthiness. Lenders use credit scores as a factor when evaluating a buyer’s ability to repay a mortgage. There are three credit reporting agencies (Experian, Transunion, and Equifax) and each have their own scoring methodology. The FICO score, a credit score calculated with software from Fair Isaac Corporation (FICO), is the most common. A FICO score may range from 300 to 850. Generally, a higher credit score, such as 700 or above, is considered good to excellent.

    Debt-to-Income Ratio

    A debt-to-income ratio is one way mortgage lenders measure your ability to manage the monthly payments to repay the money you plan to borrow. You may calculate your debt-to-income ratio by adding up all your monthly debt payments and dividing them by your gross monthly income. Your gross monthly income is generally the amount of money you earned before your taxes and other deductions are taken out. For more information on calculating your debt to income ratio, you can visit the CFPB website.

    Earnest Money Deposit

    It is typical for a buyer to deposit earnest money when entering into a contract to buy a home. This is NOT an additional cost but a portion of the money that will be needed to close the purchase transaction and acts as a deposit on the property you’re looking to buy. This money is typically held in trust by the real estate agent and will be applied to settle the total costs of the transaction (including any contractually obligated costs, loan fees, down payment, etc.).

    Earthquake Insurance

    Earthquake insurance is a type of property insurance that covers some of the losses and damage to your home, belongings and other buildings on your property caused by earthquakes. Some lenders may require this insurance in addition to ordinary homeowner’s insurance if a property is located in areas of the country where earthquakes are common.

    Escrow Account

    Every mortgage loan servicer is required to establish an escrow account where funds from the monthly mortgage payment are maintained separately from the account holding the principle and interest amounts for the mortgage payment, and used to make payments for certain fees that apply to the mortgage, usually property taxes and homeowner’s insurance.

    Escrow or Closing Agent

    Your escrow or closing agent is responsible for making sure that all of the contract conditions tied to the purchase and sale of a property have been met. This can include money collected and transferred, documents signed, and deeds recorded. These agents typically work for an escrow company. In some states, they may be an attorney.

    Escrow or Closing Company

    An escrow or closing company is commonly used in the transfer of high-value personal and business property (like real estate). If you have an escrow company handling your closing, that means that the agent will ensure that all of the conditions of sale are met and any money transfers happen within their trust accounts.

    Flood Insurance

    Flood insurance is a form of property insurance that may pay the policyholder if a flood damages the property. In certain flood-prone areas, a mortgage lender may require flood insurance as a condition of approving a mortgage loan. This coverage is in addition to ordinary homeowner’s insurance. And it does not cover your personal property.

    Full eClosings

    An eClosing is the act of closing a mortgage electronically. Loan documents are electronically accessed and signed by the borrower(s) through a secure digital environment; documents requiring notarization may need to be printed and signed in ink.

    Hazard Insurance

    Hazard insurance is part of the coverage provided by your homeowner’s insurance policy that provides specific protection for a broad number of perils. Some of these perils are natural hazards, such as fire or hail damage, while others are manmade, such as theft or vandalism. 

    It's important to remember that not all insurance policies are the same. In some cases, coverage may differ from one state to another. For this reason, it's vital that you have a clear understanding of what is covered by your policy and never assume that certain hazards are covered.

    Homeowner’s Association Dues (HOA)

    Association fees are collected each month for common area maintenance and ongoing costs of managing the property. The association uses this money to pay for monthly expenses and repairs.

    Interest Rate Float

    A floating interest rate is one that changes periodically, reflecting economic or financial market conditions. While the rate is floating, you may be assuming the uncertainty that interest rates will not go up or that they will fall. For example, if rates have been dropping, you might want to float the rate in the hope that rates will be even lower by the time you close your loan.

    Interest Rate Lock

    A rate lock is a commitment from a mortgage lender that will give you a certain interest rate, at a certain price, for a specific time period. The price for a mortgage loan is typically expressed as points (percentages of the amount borrowed) paid to obtain a specific interest rate.

    Lender's Title Insurance Policy

    Lenders may require title insurance on mortgage loans. Such insurance is usually purchased by the buyer, and protects the lender’s security interest in the property. This policy DOES NOT protect the buyer.

    Loan-to-Value (LTV)

    The LTV ratio is a financial term used by lenders to express the ratio of the loan amount to the value of the underlying subject property. For example, if the purchase price is $100,000 and the loan amount requested is $97,000, then the loan-to-value is 97,000/100,000, or 97% “LTV”.

    Monthly Mortgage Payment (PITI)

    Your monthly mortgage payment, also referred to as PITI, often includes the following:

    1. Principal and Interest (P&I): the amount collected by the lender to repay the amount you borrow (and the interest on it).
    2. Property Tax (T): The amount collected by the lender to pay local property taxes when due.
    3. Insurance (I): The amount collected by the lender to pay hazard or homeowner’s insurance. This covers the property in case of fire or other disasters. Lenders typically collect a monthly amount necessary to pay the annual premium.
    Mortgage

    A mortgage is a type of loan used to purchase residential property (your home). The property serves as security, or collateral, to a creditor (your lender) for the debt (the amount you borrow). This means the lender may take possession of the property and sell the property to pay off the loan if the borrower defaults on the loan or fail to adhere to its terms.

    Mortgage Insurance (MI)/Private Mortgage Insurance (PMI)

    Mortgage insurance enables homebuyers to become homeowners without a 20% downpayment. For mortgage lenders, mortgage insurance is the first level of credit protection against the risk of loss if a borrower isn’t able to repay the loan. Or if there is not sufficient equity in the home to cover the amount owed. There are generally two types of mortgage insurers: government agencies and private insurers. The main government mortgage insurer is the Federal Housing Administration (FHA). Like private insurers, FHA insures lenders from losses when borrowers default. But unlike private insurers, the taxpayers bear substantially all the financial risks when these loans aren’t repaid.

    Owner's Title Insurance Policy

    An owner’s title insurance policy protects the buyer and heirs against any financial loss from potential title defects (for example, forged documents, undisclosed or missing heirs, missing signatures, unknown creditors, mistakes in public records, zoning violations, etc.). The policy may cover legal assistance and any valid claims. An owner’s policy is optional but offers peace of mind that comes with knowing interests are protected. The policy is usually purchased at closing for a one-time, upfront cost. More information on owner’s title insurance can be found on the CFPB website.

    Personal Tax Rate

    Your personal tax rate is the percent of taxes to gross income you pay on your federal income tax return.

    Property Tax and Property Tax Rate

    Property tax is paid to your local  tax authority. Each county and municipality sets its own property tax rate. Your property tax is calculated by taking the tax authority's assessed value of the property and multiplying it by the tax rate.

    Title Insurance

    Title insurance protects an owner's or a lender's financial interest in a property from losses due to title defects, such as liens against a property that have priority over the mortgage loan. It may be purchased as part of the closing process for a mortgage loan.

    Traditional Wet Ink Closing

    With a traditional wet ink closing, all parties to the transaction appear in person. All loan documents are printed, then signed and notarized in ink.