Buying your first home? Here’s how it works.

Learn what you’ll need to prepare yourself and feel confident during the process.

1. Prepare

The first step is finding out how much you can afford. Start by getting a picture of your current financial situation. This includes:

Your gross income. This is the total amount you earn before taxes and deductions.
Your monthly spending. How much do you spend on housing, utilities, transportation, entertainment, and everything else each month?
Your savings. You’ll need to have some savings to cover your home’s down payment and closing costs.
Your credit score. This will play a big role in how lenders evaluate your eligibility for a mortgage.
Your debt-to-income ratio (DTI). This is your monthly debt payments divided by your gross monthly income. In addition to your credit score, DTI is a metric lenders use to understand your financial picture.

Next, you’ll want to understand the two things you’ll be paying for in the short-term: your home’s down payment and closing costs.

Down Payment

Your down payment is the first lump sum payment you make towards your new home. It can be as little as 3% of the purchase price.

When you put down less than 20%, you’ll need to pay for additional monthly Private Mortgage Insurance (PMI).

What's PMI?

Private Mortgage Insurance, or PMI, is a monthly fee that you pay until your mortgage payments have reached 20% of your home’s value. It’s insurance that protects your lender if you aren’t able to pay your mortgage.

While it will cost you some money upfront, it allows you to secure a mortgage sooner rather than having to wait until you have enough savings to put 20% down.

Closing Costs

These are the costs that you’ll incur on your homebuying journey, and they’ll come from your lender, real estate agent, and other third parties. They’ll be around 2 – 5% of your purchase price and can include:

Credit report fees
Appraisal fees
Survey fees
Attorney fees
Title services

Government recording costs
Tax services fees
Underwriting fees
Lender origination fees

An Affinity Plus mortgage loan officer can help you create a savings plan or find down payment assistance programs in your area. Get started by applying for pre-approval.

2. Get pre-approved

Once you have a good idea of how much you can comfortably afford, your next step is to apply for mortgage pre-approval and get a pre-approval letter. This letter will tell you how much your lender is willing to lend you. It’s not a loan guarantee, and it eventually expires. But it’s a good way to show sellers you’re a serious buyer.

For your pre-approval application, you may be asked to provide:

Your government-issued ID. This is your driver’s license or passport.
Proof of income. Your recent pay stubs from the past 30 days, and your W-2 or 1099 forms from the past 2 years. If you’re self-employed, this will be your profit and loss statements, business tax returns, and individual tax returns from the past 2 years.
Proof of employment. This includes contact information for your current employer or recent pay stubs.
Proof of assets. This includes bank statements for your checking and savings accounts from the past 2-3 months, retirement account statements, and investment account statements. This will also include a down payment verification which will show the source of your down payment funds.

Credit information. When you apply, you’ll authorize your lender to do a “hard pull” of your credit history. This may affect your credit score by a few points, but only temporarily. If you’re shopping around for mortgages and multiple lenders pull your credit within a short period (a 14 - 45 day window), it’s usually treated as a single pull. Your credit is unlikely to be affected more than once.
Additional income. You’ll include this if you have additional income sources, like alimony, child support, or rental income.
Proof of residence. In some cases, you may be asked to provide recent utility bills or a copy of your current lease or mortgage statement.

Once you submit these, your lender will assess everything and send you an approval or counteroffer letter detailing how much they’re willing to lend you.

Get pre-approved with Affinity Plus and we’ll partner you with a dedicated mortgage loan officer from application to closing.

3. Find Your Home

Now for the fun part. With your pre-approval letter in hand, you get to start looking for your future home. A key player you’ll need for this step is a real estate agent. They’ll help you find a home, make an offer, negotiate with the seller, prepare your paperwork, and answer any questions you have along the way.

Finding a real estate agent

Choose someone you trust and feel comfortable with, who’s licensed and experienced. You should consider:

Collecting references from friends and family members
Interviewing multiple agents
Reading online reviews from past clients

Decide what you want in a home

You probably already have some ideas about this, but now it’s time to get really clear on what you want from your home.

Location

Where do you want to live?

Urban, suburban, or rural?
Do you need to be close to your job?
How about having access to public transportation?

Type of Home

Each type of home comes with advantages and disadvantages.

You may enjoy the privacy and space of a single-family home. And, you’ll be responsible for every aspect of maintaining it.
You might consider a townhome, which will require less outside maintenance. These often come with monthly Homeowners’ Association (HOA) fees.
Condominiums require the least maintenance. You probably won’t have a yard, but you may have access to shared pools and fitness facilities, and these will come with a monthly fee.

Additional Features

Once you’ve considered your location and type of home, make a wish list of the features you’ll want in your home. Think about what you value in your current residence, your wants, must-haves, and deal breakers.

Do you need a garage? How about a washer and dryer? Is it important that your home is energy-efficient?

4. Make the Offer

So you’ve found your dream home, and you’re ready to make an offer. Your real estate agent will help you through these steps.

Decide on your offer price

Your agent will help you determine an offer price based on their experience, sales of nearby homes, the house condition, and what you’re willing to pay for it.

Submit the offer

Your agent will produce an offer (or purchase agreement) and submit it to the seller. The offer will outline the price and the terms and conditions of the purchase. These will include:

A timeframe for the seller to respond to your offer. This is usually around 24 to 48 hours.
Any contingencies you want to include. These are elements you add to your contract to protect yourself if something comes up. As a minimum, you should include both an appraisal and inspection contingency.
The closing date.

Negotiate the offer

The seller will submit a counteroffer to your agent. This is usually to ask for a higher price or adjust the terms of the offer.

If you happen to find yourself in a bidding war with other buyers, work with your agent to decide whether to raise your offer or walk away.

Finalize the contract

This is when both parties sign the offer.

Open an escrow account

Once your purchase agreement is signed, work with your realtor to open an escrow account. You’ll typically need to submit an initial deposit, referred to as “earnest money.” Your escrow account is a neutral space where your money goes before it’s transferred to the seller.

5. Close on the home

Great, so you’ve both signed the offer and you’re eager to get the keys to your new home. This final stage of your homebuying journey typically takes about 30 to 45 days.

Schedule a home inspection

Do this right after your offer is accepted, so you can negotiate repairs with the seller as soon as possible.

Stay in touch with your lender

Keep an eye out for communications from your lender for details related to your loan and next steps.

Get homeowner’s insurance

This protects you against damage to your property and is paid annually.

Schedule a final walkthrough

Work with your agent to plan for a final walkthrough of the home to make sure everything is as you expect. If you find items that need fixing, your agent can contact the seller.

Review your Closing Disclosure

About a week before closing, you’ll receive your closing disclosure. This document replaces your loan estimate and gives you a final breakdown of the costs and terms of the loan, including the loan amount, interest rate, monthly payments, closing costs, and other fees. Take the time to read over this document carefully so you don’t get hit with any surprises.

Show up for closing day

This usually happens at a title company along with your agent, the seller’s agent, and a closing agent.

With an Affinity Plus mortgage, you’ll enjoy the convenience of our in-house Title and Closing services, giving you a streamlined experience throughout the closing process.

Mortgages Made Easy

When you’re ready to start your homebuying journey, trust our team of dedicated experts to guide you through the process. With competitive rates and personalized service, we’re here to turn your dream home into a reality.

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