6 Steps to Financing a New Home

There are 6 steps that need to be taken in order to finance a new home. 

The first step is getting pre-approved. But, before starting the pre-approval process, start to get all the documents you’ll need in one place. I always recommend starting a folder on your Google Drive to put all your documentation in. That way, it is all in one place and easily available when you need it. Your pre-approval can take 1-2 weeks and will usually last for 60 days. Your lender will look at 3 key criteria when creating your pre-approval: Debt-to-income ratio, assets, and credit. 

The second step in financing a new home is the home search and signing of the purchase and sale. The purchase and sale agreement (sometimes referred to as the P&S) is a legally binding document that commits you to buy the home as long as certain contingencies are met. 

During step three your lender will take examine all of your financial information again. This is typical and you may be asked for more documentation. 

The fourth step of financing a new home is lender appraisal. Your lender will request an appraisal of the property to ensure it is a “good investment” for them to be making. The lender wants to make sure that the property is worth the amount of money they are loaning you. 

During the fifth step, the lender will do a title search on the property to make sure there aren’t any legal claims or liens on the property. This is also when the buyer should be ensuring their homeowners’ insurance.

The sixth and final step is the closing! You will receive your closing disclosure at least 3 days before closing. The closing disclosure includes all loan information and closing costs. These are all of the final numbers and may be slightly different from your pre-approval.