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Getting Your Financial House in Order Before Buying a Home

Buying your first home can be an overwhelming process. But if you break it down into simple steps, you can feel much more confident about what to expect, and start to focus on how exciting this phase of your life really is. Here’s what you can expect when buying a home in Southern California.

1. Save Up for Your Down Payment and Closing Costs

Before you start filling out any paperwork, start saving up for your down payment. Most traditional home loans require 20% of the home’s purchase price up front, while other types of mortgages, like an FHA loan, require much less. Regardless, you’ll want to make sure you have enough on hand to put down a good amount of money. The more you put down up front, the lower your monthly mortgage payments will be. You’ll also need money to pay for your closing costs, if you’re not financing them into your mortgage. The average closing costs for a $200,000 home in California are $2,257, per Bankrate.

2. Clean Up Your Credit

First thing’s first – before you apply for any loan, you’ll want to check your credit report and score. By law, you can get a free copy of your credit report every 12 months at annualcreditreport.com. Be sure to review your credit report for any errors and dispute them early in your home buying process. Cleaning up your credit can sometimes take a while for the credit bureaus to change the incorrect information, which is why it’s a good idea to start early.

3. Determine How Much Home You Can Afford

Before you start shopping for houses, you’ll want to figure out your budget to an idea of how much home you can afford. Use our home affordability calculator to get a good idea on the amount you can spend on your California dream home. This information will give you and your real estate agent a good idea of your price range so you shop for home within that so no one’s time is wasted.

Remember that you may get approved for more than you realistically can afford. It’s wise to add a dose of common sense to any mortgage payment decision, so that you don’t feel stressed over the monthly payments.

4. Get Pre-Approved for a Mortgage

Another step you’ll want to complete before shopping for a house is to get pre-approved and/or pre-qualified for a home loan. This will show sellers you are a serious potential buyer, which can help in the negotiation process. To get pre-qualified or pre-approved for a mortgage, reach out to one of our mortgage officers.

5. Shop for a Home Within Your Budget

Now’s where the fun begins – shopping for your next CA home. Before you start, you’ll want to figure out what amenities are required and which ones aren’t. Also, take into consideration the location you’d like to live and the quality of the school districts. Find a good real estate agent by asking for a referral from your friends, family or banker. If you’d like to save 25% on real estate commissions, check out our special program with HomeBenefitsPlus by calling (888) 603-9563.

6. Put an Offer on the House You Want

When you find the home in California that you’d like to buy, it’s time to make an offer and negotiate. Your real estate agent should be able to guide you through this process and handle everything on your behalf. A good rule of thumb is to offer at least 5% below the asking price. Make sure you know what other comparable homes have recently sold for, too, so you can negotiate accordingly.

7. Put a Deposit Down

Once you and the seller have both agreed to the home’s purchase price, you’ll need to put down a deposit to show you are serious and secure the home. This money will go into an escrow account.

8. Submit Your Mortgage Application

To get the financing for your home, you’ll need to submit your mortgage application. There are a variety of home mortgage options, from fixed-rate mortgages and adjustable-rate mortgages to JUMBO mortgages, FHA loans, VA loans and more. There are also numerous loan payment terms, typically 15 or 30 years for most loan types. Tall to your mortgage officer to figure out what works best for you and your family.

9. Close the Sale on Your Home

Before you can move in, you’ll need to get a home inspection. This can be a great tool to figure out if there are any major defects with the house before you are locked into a contract. This can also help with your negotiation, as many buyers ask the seller to fix things or lower the price based on the inspection results.

Once all terms are met, you will need to deposit the funds and the seller will need to deposit the deed. Depending on where you live, this process may vary. You’ll also need to get an attorney who will walk you through all the paperwork that needs to be signed.

10. Move to Your New California Home

Once you’ve gone through all those steps, you’ll be handed the keys to your new CA home. Start packing and calling up your friends to help you move, or get ready to hire a moving company. Don’t forget to set the date for your housewarming party!

Buying a home is one of the biggest milestones in your life and should be handled with care. Make sure you find friendly and knowledgeable people along the way to help you make this home buying journey positive. If you’re ready to talk to a mortgage officer, give them call or email them for a free consultation. You can also get started with your mortgage application online.

Everything, everywhere

E-Central Credit Union is a leading credit union located in Pasadena, California, serving Southern California members throughout Los Angeles County including Pasadena, South Pasadena, Alhambra, San Marino, Arcadia, Sierra Madre, Altadena, Temple City, Monrovia and beyond.