Everything You Need to Know Before Buying a House or Getting a Mortgage


Buying a house and getting a mortgage involves a surprisingly large number of legal, financial, contractual, and regulatory obligations. Below is a complete breakdown of things to know and do before, during, after closing.

Everything You Need to Know Before Buying a House or Getting a Mortgage

Buying your first home can feel exciting—but legally and financially, it is one of the biggest commitments you’ll ever make. Use this guide as your roadmap.

Before You Start

1. Check your credit
Know:
  • Score - one of the easiest to look up and keep an eye on these days. Most banks and their app let you quickly access it. You can also sign up for ID Shield which will give you your credit score and provide monitoring for any changes on your credit report.
  • Report errors - after reviewing your credit report, make sure to highlighted and square away any erors
  • Debt-to-income ratio - these numbers also great to know and will be checked by banks
Get official credit reports:

There are many sites that will try go get you to sign up and pay for your credit report. Some are legit and some are a scam. UseAnnualCreditReport. It is an official site get your free annual credit report.

Your credit score has impact on many aspects of getting a mortgage. The better the score the better the terms will be and the rate.
Credit scores grading:
  • 740+ best rates
  • 680+ usually workable
  • Below 620 harder
2. Determine affordability
  • Don’t use lender's max alone.
    • Just because they can give you $$$, does not mean that is what you should take. Make sure you know the total number you will need to pay and include below in the calculations. Include:
    • Mortgage
    • Taxes
    • Insurance
    • HOA
    • Repairs
    • Utilities
    • Emergency savings

    Rule to follow for affordability:
    Keep housing near 25–30% of gross income if possible.
3. Save more than just the down payment. See Costs Associated with Home Ownership

Mortgage is not even close to the only expensive thing you will have at the time of the purchase.
You will need savings for:
  • Down payment
  • Closing costs (2–5%)
  • Moving costs
  • Reserves
  • Repairs
  • Furniture
4. Get pre-approved for the mortage as soon as you start considering a home purchase.
This is not the same as pre-qualified. Pre-qualification is more informal and can be done verbally with little or no verification. Pre-approved carries significantly more weight than pre-qualified. While both help you understand your budget, they require different levels of financial verification. Pre-approval is a lender’s actual commitment to lend to you a certain amount.

To get pre-approved at a lender online or in person you will need:
  • Pay stubs
  • W-2s
  • Tax returns
  • Bank statements
Getting pre-approved ahead of time makes you a better candidate and your offers stronger.

Before Making an Offer

Research the neighborhood where the home is located
Check:
  • Schools - if you have kids, this would be an important consideration. sites niche.com and greatschools.org are some of the top used by real estate listings. Make sure you review what goes into the rating for each one and choose categories that are important to you.
  • Crime - it effects the cost of the home and the quality of life
  • Commute - something to consider especially if you have to be at the office or work location on regular basis. It adds up.
  • Flood zones - A very good one to consider also with rising water levels. Sometimes the properties look good and the price looks even better. Flood zone is frequently the reason.
  • Future development - if you looking at a home with great views and environment around it, make sure it will not change soon after you move in.
Understand the mortgage types:
  • Conventional - a home loan offered by a private lender (like a bank or credit union) that is not insured or guaranteed by the government. Because they carry more risk for the lender, they generally require stronger credit scores and financial stability than government-backed loans
  • Federal Housing Administration (FHA) - a government-backed mortgage insured through Fannie Mae and Freddie Mac
  • U.S. Department of Veterans Affairs (VA)- a 0 downpayment mortgage option backed by the U.S. Department of Veterans Affairs (VA) for veterans, service members, and eligible surviving spouses
  • United States Department of Agriculture (USDA)
  • Jumbo loan - a mortgage loan that may have high credit quality, but is in an amount above conventional conforming loan limits
When choosing a lender or type of mortage compare:
  • APR
  • Fees
  • Points
  • Closing speed
  • Reputation
Shop around for quotes based on these comparisons. It is not a good idea to jump on the first one. Get at least 3 quotes.

During the Offer Process

Never waive protections lightly. Do the due diligence

Do:
✓ Home inspection
✓ Title review
✓ HOA review
✓ Insurance quotes
✓ Appraisal review
✓ Final loan review

Before closing to ensure all runs smoothly Do Not:
  • Open new credit cards
  • Buy a car
  • Quit your job
  • Move money without explanation
  • Miss payments
All of these could have a negative impact on your scores and can kill approval.

On Closing Day

Bring:
  • ID
  • Certified funds/wire confirmation
During the closing you will sign:
  • Note
  • Mortgage
  • Title docs
  • Disclosures
There are a lot of papers to sign. Bring your "John Hancock" and warm up your wrist. While these are important documents, your attorney and realtor should have gone through most of these beforehand. You can review, and you should, most of the paperwork that you are signing. Once you are done autographing all of the page you will receive:
  • Deed records
  • Keys released

After Closing

Immediately after getting the deed and keys you should:
  • Change the locks
  • Store documents safely
  • Set up online mortgage account and autopay
  • Update estate plan
Final rule to keep in mind when getting a mortgage and buying a home

Never sign anything you do not understand.
  • Contact an attorney with any questions you might have or something you do not understand
  • If you do not have an attorney contact a company such as LegalShield. LegalShield gives you and your family the ability to talk to a lawyer on personal legal matters without worrying about high hourly costs.
  • LegalShield can also help with document notarizing and lawyer review of documents
A home purchase is not just a purchase—it is a legal contract, a debt obligation, and a long-term financial commitment.
Ask any of the professionals below before signing any contractual documents:
  • Lender
  • Title company
  • Real estate attorney
  • Tax advisor