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Get your keys! This is the way to a home of your own

Habit #4 — Home Ownership 

If this is your first time buying a home, you probably have plenty of questions. The journey to homeownership can have its ups and downs, but for most, the ride is well worth it. According to the Bank of America 2017 Homebuyer Insights Report, nearly three-quarters of first-time buyers say their home has had a positive, long-term impact on their finances. Hop on the 90-Day Financial Fitness Challenge and learn the home-buying process inside and out, from creating a budget to prequalifying for a mortgage to closing the loan on a home of your own.

STAGE 1: Prepare your finances — before leaving the gate

Don’t hit the open houses just yet. Make sure your finances are in order so you know what you can realistically afford. Use a mortgage calculator to estimate your budget. given your income, debt, savings and other financial obligations. Check your credit score and compare your debt to income. You should be able to comfortably pay your full mortgage payment (including taxes and insurance) each month. And you likely need money up front for a down payment and closing costs. The good news is that most first-time homebuyers put down less than 20 percent.

STAGE 2: Land on a loan that’s right for you, and prequalify

Now that you have a budget, you’re in a better position to meet with a lender and discuss loan options, current interest rates and how much you can borrow. Once you find a loan that fits your needs, get a prequalification letter, which estimates your borrowing power based on your financial information. Keep in mind prequalification is not a commitment to lend. You will need to submit additional information for review and approval. Still, having this letter in hand when you make an offer shows sellers you are serious and gives you some negotiating leverage. Talk with a Bank of America lending specialist about getting prequalified.

Stage 3: Zoom in on your property and get your offer accepted

Now that you know what you qualify for, the fun of looking for homes with your real estate agent can begin. Save time and emotional energy by narrowing your search to homes that fit your financial criteria. Preview property online, and have your real estate agent show you only listings that are right for you. When you find a match, your agent can help you make an intelligent, informed offer. If it is accepted, a purchase contract is drawn and typically contains a good-faith deposit (“earnest money”) that you are willing to put in escrow to show your commitment.

Stage 4: Hold on through the mortgage process

Once the seller accepts your offer, it’s time to apply for a mortgage. You typically have 45 to 60 days to fulfill your purchase contract, so you need to move fast. Within three days of submitting your application, your lender sends you a loan estimate, including your approximate interest rate, monthly payment and closing costs. Review this document carefully. To move forward, you need to verify your income and assets. This requires extensive documentation, which is necessary for the lender to ensure you’ll be a successful homeowner who can handle loan payments over the long term.

Stage 5: Coast into your closing

You’re almost home. Once your mortgage is approved and at least three business days before you close, you receive a closing disclosure. It lists the fees you must pay, which typically total 2 to 5 percent of the home price. Read this closely and tell your lender if anything seems off. Know what to bring to your closing, such as your ID and any payments that are due. If you have a cosigner, that person needs to be there. Most of the time is taken up carefully signing forms.

Stage 6: Pick up your keys!

Once the loan closes, which may take a couple days, the funds go to the seller, you get handed the keys and the home is yours!

For more information on saving money and budgeting, visit Bank of America’s BetterMoneyHabits.com. To sign up for the 90-Day Financial Fitness Challenge, go to MichiganChronicle.com/Business

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