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What is Escrow? Definition and How to Prepare

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Are you a first-time homebuyer? Are you looking buy a home in the near future? Understanding escrow is an important part of the process.

what is escrow and how to prepare for it. picture of a white front door

What is escrow? That’s a fair question. That word comes up a lot in the home-buying process. Escrow is a legal process where a third party holds on to money or assets during a transaction. Once both parties have completed their portions of the transaction the money or assets can be released by escrow. Essentially the assets are held in escrow while the transaction is being completed.

Escrow is most often heard when buying a home but it can be used in other transactions as well. This third party is in place in case one of the other parties does not hold up their end of the deal.

In addition to the escrow process you can also have an escrow account. An escrow account is typically set up when purchasing a home. This is a secured account that is set up for you. Part of your mortgage payment will be deposited into this account on a monthly basis to pay for insurance and property taxes. This is an automated process so as a new homeowner you do not have to make separate payments to the escrow account. The money needed to fund this account will be taken from your monthly mortgage payments and paid to the insurance and property taxes on your behalf.

In this post I am going to focus on preparing for escrow. In a previous post I detailed ways that you can save money throughout the home-buying process. If you’d like to learn about how to save money while in escrow check out that post HERE.

Now that we’ve determined “what is escrow” let’s get into how to prepare for escrow

1. Be available

When you are in escrow you need to be available. Now that your offer has been accepted and escrow has been opened you will be contacted by several different people. First you’ll be in contact with your realtor and/or realtor’s assistant. They will keep you updated with the process and how everything is going. Secondly you will be in contact with your escrow agent regarding forms that need to be reviewed and signed. You will also need to speak find an insurance company to select a homeowners insurance policy. Then there’s your mortgage broker and lender. The emails, calls and texts are pretty constant throughout the escrow process. Be sure to check your phone and emails frequently if you’re in escrow.

2. Keep contact information ready

What I mean by this is keep contact information for everyone related to the escrow process available for when you need it. This includes the names, phone numbers & company information for you realtor, mortgage broker, escrow officer, escrow company, insurance company, etc. You’re gonna need this information when filling out forms. You’ll also want to know who to reach out to when you have specific questions.

3. Keep track of important dates

When you’re in escrow there are certain dates that you have to remember. For example you’ll need to have your inspection, appraisal & loan approval all completed by specific dates. Keeping track of these dates is very important. Of course your realtor will be keeping track of these dates as well. You are responsible for choosing your inspector and scheduling the appointment. I highly recommend being there for the inspection if you can because you can learn a lot about the house and get a walk-through from the inspector. It’s also important to keep track of deadlines for signatures and paperwork. A lot of paperwork is time-sensitive so be sure that you are completing paperwork on-time and not delaying the escrow process.

4. Have documents ready

When you are getting ready to buy a home there are certain documents needed for the loan approval process. You can start getting this paperwork together even before you open escrow to make for a smoother process. Things like ID’s, social security cards, recent pay stubs, recent bank statements, verification of assets, etc. You’ll also need tax returns for the last 2 years. It’s a good idea to start getting these records ready ahead of time and you’ll be glad you did.

5. Have earnest money ready

When your offer is accepted on a home you will need to wire earnest money into the escrow account within 3 days. Earnest money is used toward the down payment. The amount depends on the price of your home and how much the seller requests. Earnest money needs to be liquid meaning it needs to be readily available for use. It should be held in a savings account that you have easy access to. Because down payments are so expensive a lot of people rely on their 401k to pay for their down payment. While I don’t recommend using a 401k for a down payment on a house I do understand that it may be the only option for some people.

One important thing to know about using your 401k is that the money in that account is not liquid. Although you can use it for a down payment you will not be able to use funds from a 401k for earnest money. You cannot receive the funds from your 401k and wire them within the three days. I think this is important to note if you are looking to use funds from your 401k to purchase a home. You can use your 401k for a down payment but you will also need enough money in a savings account to cover your earnest money.

6. Talk with a mortgage before you start the process

Mortgage brokers ultimately want your business and often times they are willing to meet with potential clients to answer questions. I highly recommend taking advantage of their knowledge if you are thinking about buying a home in the near future. It’s especially important to discuss anything that may affect your escrow process. If you have had a recent leave of absence, name change, maternity leave, change in career, etc. Those are things that can potentially affect your home buying timeline and ultimately your loan approval. Talking about these things beforehand can keep you from having a rough escrow process or even getting denied for a home loan.

There you have it. I’ve defined “what is escrow” and told you how you can prepare for escrow.

I hope this post was helpful. As a recent first-time homebuyer I know that this information would have been helpful to me when I was looking to buy. If you’d like to see more posts from my Homebuyer series they will be listed below.

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Home Buyer

Save Money on a Home With These 15 Simple Steps

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Are you concerned with all the costs associated with buying a home? Here are 15 ways you can save money on the purchase of a home.

Are you looking to buy and wondering how to save money on a home. There are multiple ways you can save. You can save money on the home itself and you can save on the home buying process as well. The process of buying a home is costly. There are a lot of upfront costs that people don’t really talk about. You’re not only required to pay the down payment. There are a lot of upfront costs that you will have to pay for while you are going through the home buying process.

When most people think of the upfront costs of buying a home they think of the down payment, furniture and maybe closing costs. Unfortunately there are numerous upfront costs and hidden fees associated with buying a home. Most of these costs do not get discussed until you’re actually in the process of buying your home.

In addition to the down payment some other upfront costs may include:

  1. Closing costs
  2. Inspection
  3. Appraisal
  4. Furniture
  5. Repairs
  6. Home owners insurance
  7. Household necessities
  8. Application fees
  9. HOA fees

The process of buying a home can be frustrating especially because there are so many upfront costs associated with purchasing a home.

It is really important to understand all of the costs that come with buying a home. If you only save enough money to cover the down payment you will not have enough to complete the purchase. Also, I don’t recommend draining your entire savings in order to buy your home. If the costs keep adding up and you realize that your savings will be depleted, this may not be the best time for you to buy. I recommend waiting until you have some more money saved before purchasing.

If you’re feeling defeated please read on. The purpose of this post is to inform you of the costs of buying a home. My personal goal is to help first time home buyers be prepared for the home buying process. I want to be upfront and honest with you so you are prepared when you decide to buy a home. The good news is that I’ve found several ways to save money on a home as well as ways to save throughout the home buying process.

Now let’s get into ways to save money on a home

1. Research and apply for first time home buyer programs

If you are thinking about buying a home you should look into first time home buyer programs. These programs can definitely save you some money. First time home buyer programs can offer assistance with down payment and closing costs. These can be in the forms of forgivable grants or low to zero interest rate loans. These programs are not just for low-income families. They can also apply to moderate-income families so I highly recommend researching these programs.

If you are ready to buy a home I recommend going to a mortgage broker who works with these programs. Mortgage brokers want your business so they will meet with potential clients just to answer questions. You can set up a meeting with a mortgage broker who works with these programs to see if you are potentially eligible to any first time home buyer programs.

It’s also important to know that first time home buyer programs do not exclude you if you have previously owned a home. In my area, these programs apply to anyone who has not owned a home in the last 3 years. Again, do your research. You can find first time home buyer programs on the local, state or federal level so hopefully you can find a program that works for you.

2. Research employer or union discount programs

If you work for a large company you may have access to certain employer discount programs. I will use my employer as an example. We are part of the Coastal Housing Partnership. This programs offers a lot of incentives for us as employees. Some of the incentives include closing cost contributions, lender contributions for mortgage refinance and reduction in market rent on new leases.

My husband and I were able to take advantage of the closing cost contribution. We were able to get a few thousand dollars to go toward our closing costs. It was a big help and saved us money upfront.

If you are part of a union you can do some research to see if you union offers any discounts or incentives for home buyers. My union offers an incentive for using a specific bank as your lender. It doesn’t hurt to ask around and see what benefits your employer or your union might offer.

3. Credit union incentives

Credit unions are great for so many reasons. One of those reasons is that they can offer certain incentives if you choose to use them for your home loan. Credit unions often, but not always, offer lower interest rates. They are also, typically, much smaller banks so they have a bit more freedom. Our credit union was able to waive the application fees for the loan because they wanted our business. I mention interest rates quite a few times throughout this post because that is a key factor when you’re researching how to save money on a home.

4. Shop around for the best rates

If you are ready to start the home buying process the first step is getting pre-approved. If you are not sure that you’re ready to buy check out my How to Know if You Are Ready to Buy a Home blog post linked HERE. When you are ready to get pre-approved I highly recommend getting pre-approved by 3 different lenders. Multiple pre-approvals will not negatively affect your credit score as long as they are all done within a 2 week time span.

The reason I recommend getting 3 pre-approvals is so you can compare the rates. Interest rate matters. Paying more in interest, even as little as .01% will make a huge difference in the amount you will pay over the life of the loan.

5. Put a higher down payment

If you put less than 20% down on a home you will have to pay private mortgage insurance (PMI). To avoid PMI you need to put down at least 20% of the purchase price. For a $400,000 that would be $80,000. That amount does not include any other upfront costs that come with buying a home. PMI is added to your mortgage every month and it could be upwards of a few hundred dollars. If you are able to make a larger down payment and avoid the PMI that is ideal.

Now I know this is not always practical. In fact, if you live in an expensive area like southern CA a down payment of 20% can seem unattainable. Luckily there are loans that will allow you to put less money down, as little as 3%. Just remember that you will have PMI added to your mortgage so make sure that you can afford the mortgage rate along with all taxes, home owners insurance, PMI and interest.

6. Compare loan types

The type of loan you choose can affect how much you save as well. If you’re eligible to a VA loan you can save a ton of money upfront because you are not required to put a down payment on your home. For an FHA loan you can qualify with a lower credit score but you will have to pay PMI for the life of the loan. A conventional loan usually requires a bit of a higher down payment but you can eliminate PMI after you have 20% equity in your home.

Talk with your mortgage broker and compare the different loan types and find what will work best for you. If you don’t plan on being in a home very long it may be more beneficial to go with the FHA loan. That’s because you will not be there long enough to get the 20% equity necessary to eliminate PMI on a conventional loan. Be sure to weigh the pros and cons of the different loans before you choose.

7. Have a credit score of 740 or higher

Let me be clear, you do not need to have a credit score of 740 or higher to buy a home. However, the higher your score is the better interest rate you will receive. Typically a credit score of 740 or higher is always eligible to the best interest rates so make that your target credit score. As I mentioned before interest rate makes a big difference. If you can, try to wait until your credit score is 740 or higher before purchasing a home. If you need tips for raising your credit score I will link my How to Raise Your Credit Score blog post HERE. In that post I detail the steps I took to raise my credit score over 100 points and was able to qualify for a home loan.

8. Find an experienced real estate agent

This is so important. Having a good relationship with your agent is important. You want to feel comfortable with them and feel free to express your feelings openly. It’s also important that your agent be very experienced. If you decide to go with a newer agent make sure that they have a good company behind them that can offer support and guidance when needed.

An experienced agent can help you make sure that you’re not over paying for a home. Also having a well-known and respected agent can help when you’re in a competitive market and you’re competing with multiple offers. Although agents do not work with the financial side of buying a home I found that my agent was able to give good advice that ended up saving us money.

More ways to save money on a home…

9. Look outside popular areas

To save money instantly on a home try looking outside of the most popular areas. I know it can be tempting to be close to certain popular neighborhoods but that will cost you more. When you buy a higher priced home not only does your mortgage increase but closing costs fees and even the down payment amount can increase as well. Be open to looking in other areas, maybe up and coming areas to save some money upfront. Ask your agent if they know of any up and coming areas near you. An up and coming area might get you a higher return if you eventually decide to sell the property.

10. Stay away from turnkey homes

I know I know, turnkey homes are so tempting. Being able to simply move in and start your new life sounds amazing. The fact is turnkey homes will cost you more. Turnkey homes are often highly sought after so if there is a bidding war you may end up paying more for the home than it’s worth. You don’t have to buy a complete fixer upper to get a good deal. If you’re really looking for how to save money on a home this is one of the biggest money savers. Look for a home that needs a little work but something that you’re comfortable with. If there are minor issues that you don’t mind fixing over time you can save some money upfront and fix up the home on your time.

11. Don’t feel pressured to over-pay for a home

If you’re looking at a home that has multiple offers you may be tempted to increase your offer to stand out. Remember, every time you increase your offer you are going to pay more upfront and pay more over the life of the loan. If you really love the home and you’re financially prepared enough to increase your offer that is your choice to make. I just want to stress the fact that it can get really tempting to increase your offer and you may feel pressured when there are multiple offers. Don’t let this pressure get to you.

Make the decision based on your financial situation. If you end up losing the home because you don’t want to increase your offer that’s okay. There will be more homes. This is one of the biggest purchases you will ever make so make sure you are being financially responsible.

12. Shop around for homeowners insurance

Homeowners insurance is another upfront cost that you will pay. You will pay for the first year insurance premium with all the other upfront costs of buying a home. You get to pick your homeowners insurance so get quotes from several companies and compare the rates. Your required coverage may vary depending on the type of home you purchase so the rates can vary greatly. You can also try bundling your home insurance with your car insurance to get a discount.

13. Ask for credits or discounts for errors

The home buying process can be long and strenuous. There are so many people involved and so much paperwork which means there is a lot of room for error. If you end up with a mortgage broker or lender who is making a lot of errors, costing you more money or extending your escrow timeline you can ask for a discount or credit. They may not give it to you but it doesn’t hurt to ask.

I know from experience that it’s worth a try. My husband and I had a terrible mortgage broker who turned our 30 day escrow into a 75 day escrow and almost lost us our home several times. Because we had such a bad experience we asked for a discount. The mortgage broker ended up waiving all of his fees for our transaction which saved us some money upfront. I hope no one else has a terrible escrow like we did but if you do come across issues just know that it’s okay to ask for discount.

14. Negotiate closing costs

Did you know that you can negotiate closing costs? Neither did I until we bought our first home. Essentially mortgage brokers and lenders want your business. They are willing to negotiate certain fees if it means they will get your business. You can also choose your escrow company. One will be assigned to you but you have the option to choose your own so feel free to shop around and compare fees.

15. Negotiate with the seller

Everything is negotiable. When you are purchasing a home you can write almost anything into your offer. You can ask the seller to leave certain appliances or furniture. You can ask them to pay all or part of your closing costs. After the inspection you will have another opportunity to negotiate. If the inspector finds issues with the house you can negotiate that the seller either fix the issue or give you a credit so you can fix the issue. Now, just because you ask doesn’t mean you will receive. But it doesn’t hurt to ask right?

There you have it. 15 ways to save money on a home

Some of these can save you money right away, some can save you money over time and others can do both. As a recent first time homebuyer I have done most of the things on this list.

The best advice I can give to someone purchasing a home is to be prepared. Do your research, have a good amount of money saved, get that credit score up and only buy when you are prepared financially and mentally.

If you want to learn more about first time home buyer programs check out this post by Nerdwallet linked HERE

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Here are some other posts that you may enjoy

Here are some other posts you might enjoy

Home Buyer

Things You Need to Know Before You Buy a Home

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I’ve compiled a list of things you need to know before you buy a home. These are things I wish I had known. My husband and I recently bought our first home and there were so many unknowns. Neither of us work in real estate or any other profession that would have prepared us for the whirlwind that is buying a home.

Things you need to know before buying a home written in white with a peach background and a picture of a house

We were so unprepared. My goal with this list is to help you be more prepared. Some of these things have been mentioned in a previous posts but I think they’re worth repeating. I’m sure I can come up with another list in the future but for now these are things you definitely need to know before you buy a home.

If you are married, only the lower of the 2 credit scores will be used

This shocked my husband and I. We had no idea that they only use the lowest of the 2 credit scores on the loan application. I’ve given this example before but I’ll give it again just in case you didn’t the last post. For example, Mr. Smith has a credit score of 680 and Mrs. Smith has a credit score of 775. For the loan application 680 will be used because it is the lower of the 2 scores. This was not something my husband and I knew going into this process. This is something that can dramatically alter the home buying process if you are unaware.

Credit score written in red with poor, fair, good, very good and excellent written in back and a black check mark next to the word good. Things you need to know if you are buying a home
Blog post on credit score coming soon…

The inspection

Before you buy a home you will need to get an inspection. You don’t have to be there when your home is inspected but I HIGHLY recommend that you are. After our inspection the inspector walked us around the entire property. He pointed out everything that he was going to put on his report and why. He also gave us tips for how to properly maintain the property. Because he took the time to explain everything we were not confused when we received the inspection report. If we had not been at the inspection there is a good chance that we would not have understood most of the inspection report.

Another thing to know is that the inspector may not find every single problem. Hopefully they will find most of the issues, especially the major ones. But there could be underlying issues that are not found. I recommend keeping money in your savings account just in case there is an issue that the inspector did not catch.

You can’t use credit while in escrow

Technically you can use credit while in escrow but you shouldn’t! One of the requirements is that your debt-to-income ratio (DTIR) stay under a certain amount. I believe it’s under 40% but I don’t remember the exact percentage. When you are in escrow the lender will review your DTIR throughout the escrow process. If you are using credit and your DTIR rises your loan can be denied. Don’t go out and buy appliances, furniture or any big ticket items on credit until you’ve closed and you have the house keys in your hand. I will link a DTIR calculator here for you to use as a resource.

There are a lot of people involved

You will have calls, emails & texts from your realtor, realtor’s assistant, your mortgage broker, etc. There are so many people you will need to contact and communicate with. Just make sure that you are answering emails and calls promptly so you don’t delay the process.

You need to be available

You may get calls, emails & texts throughout the day and into the night. There are certain time-sensitive parts of the escrow process that will need to be handled immediately. In order to keep things running smoothly I recommend making yourself available as much as possible while in escrow.

Other things you need to know if you before you buy a home…

You need money readily available

When your offer is accepted you will be asked to put down earnest money. Earnest money lets the seller know that you are serious and you intend to go through with the sale. Earnest money, in our case, had to be deposited within 48 hours. We had to wire money from our checking account to the escrow account in order for it to be received in time. If you intend to use your 401k for a down payment you may not have access to that money quickly enough to use it for earnest money.

Do you have a 401k written in white on a black background with cartoon drawing of cash and cartoon drawing of a house. Things you need to know if you are buying a home

If you are using your 401k for a down payment I suggest that you also have at least $10,000 in a bank account that is easily accessible. When you borrow from your 401k it takes time to process the request and you may not have access to those funds for 3-5 days. So, 401k may not be an option for earnest money.

Be sure to read your 401k’s rules

Speaking of 401k’s, these are a great way to help you make a down payment if you need it. Some retirement accounts will allow you to pull money out for a down payment but make sure you read the fine print. Some plans will charge you a flat fee and others will require you to pay back the money within a specific time. Each plan will have specific requirements so just be sure to read the requirements for your plan.

Read every single form

Mistakes happen. I found several mistakes on different forms throughout our escrow process. Some were minor mistakes like spelling or a wrong phone number. Other mistakes were huge like a misplaced decimal point or forms stating that we got an FHA loan when we actually got a conventional loan. I highly advise you to read every single form. I know it’s time consuming. Some forms are 20 pages long but it’s important to read every page. I caught at least 5 mistakes on our forms. Luckily I caught these errors before I signed but I wasn’t joking about the decimal error or the loan type error. I found both of those errors and a few others which is why I recommend reading everything before you sign.

Your actual mortgage amount

You will not find out your actual mortgage amount until right before you close. This was a shock to us. We found out our exact mortgage amount 2 days before we closed. Throughout the process we were given estimates but you have to wait until you sign the final paperwork to know the exact amount.

You might get a refund

A couple weeks after closing you might get a refund from escrow. After you close escrow and all the calculations are done you may have overpaid and escrow will send you a refund check. There is no way to know if you’re getting a refund or how much you will be getting until after you close. If you do get a refund it is fun surprise. We were able to make some major improvements to our house with our refund and increase the value of our home.

Refund written in black with a cartoon drawing of a hand holding a check. Things you need to know if you are buying a home.

I hope this list of things you need to know before you buy a home was helpful.

I may make another list like this in the future because there were so many things that my husband and I did not know. Please feel free to reach out with any questions or comments. If you like this post or found it helpful please share it on Facebook or Pinterest!

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How to Know if You Are Ready to Buy a Home. 10 Steps to Find Out

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Picture of a home. Written on top is are you ready to buy a home? Written on the bottom is follow these steps to determine if now if the time to buy

Are you ready to buy a home? Are you trying to decide if now is the time? I have compiled a list to help you determine whether or not you’re ready to buy.

My husband and I just bought our first home. It was a crazy experience and there is so much we didn’t know going into the process. Now, having gone through the home-buying process, I feel like I can give some advice. I recommend going through all of these steps to determine if you are ready to buy a home. I think once you’ve completed these steps you’ll be more prepared and you’ll know if you are ready to move forward and start the home-buying process.

Get on the same page

If you are buying a home by yourself then you would skip this step. This step applies to anyone who is buying a home with a co-buyer. It doesn’t have to be your spouse. If you’re buying a home with a parent, friend, sibling or anyone for that matter you will need to make sure you’re on the same page. Make sure that you both understand that all financial information is shared during the home-buying process. Your credit score, debt and income will all be revealed during this process. If you are not willing to share this information or if you have debt that the other person does not know about, now is the time to share it.

Sit down with your co-buyer and make sure that you’re both willing to share all financial information with each other. Once that is out of the way, you can start to discuss the areas you might like to live in and the type of home you’re looking for. This does not need to be exact at this point. Sometimes the type of home you want can change depending on your budget but it is nice to start having these conversations with your co-buyer early on in the process.

Review your budget

If you don’t have a monthly budget, make one! I highly recommend doing this even if you’re not buying a home but especially if you are planning on buying one. This might sound crazy but I recommend going through your bank statements for the last 3 months line by line. It’s amazing how many extra charges you’ll find and how many monthly potentially unused subscriptions you may have. Get the bank statements out, get the credit card statements out and make a budget. Going through 3 months of statements will help give an average of what you actually spend in a month.

Remember!!! Owning a home comes with a lot of costs, not just mortgage. You have to pay for mortgage, property taxes, insurance, utilities, maintenance & repairs. You may also have HOA fees and/or Mello Roos.

Review your credit score

This is so important. You have to have a good credit score to buy a house. It doesn’t have to be great but the higher the score the better your interest rate will be and that makes a huge difference overall. I was told by my mortgage broker that it is much harder to finance a mortgage if your score is under 680 but he has seen scores as low as 640 get approved.

Make sure that your co-buyer also knows your score. When you buy a home with someone else the lender will take the lowest credit score and use that for the loan application; at least that’s how it was for my husband and I here in southern CA. So, for example, Mr. Smith has a credit score of 685 and Mrs. Smith has a credit score of 775. For the loan application they will only use Mr. Smith’s score of 685. To review your credit score for free check out Credit Karma.

Review your debt

You CAN buy a house with debt. You do not have to be completely debt free to purchase a home. What matters is your debt to income ratio. The bank will add up all of your minimum monthly debt payments (mortgage, student loans, credit cards, car payments) and divide that by your gross income to determine your debt-to-income ratio (it will be given as a percentage). I was told by my mortgage broker that you’ll want to keep your debt-to-income ratio under 40%. Keep in mind that this only includes debt. Things like groceries, phone bill and utilities are not included in this calculation. If you need help with your debt-to-income ratio try using a debt to income ratio calculator like this one.

Review your savings

When you buy a home you will need to have some money saved. Most home loans require a down payment, which is anywhere from 3%-20% of the purchase price. Depending on the purchase price a down payment can be very expensive. It is important to know that the down payment is not the only upfront cost of buying a home. You will also have to pay closing costs up front as well which range from 3%-5% of the purchase price. In addition to those costs you will have to pay for a home inspection, an appraisal and possible application fees.

There is also furniture, appliances, possible repairs or renovations and any other small necessities to consider. To be frank, it takes quite a bit of money upfront to purchase a home. I don’t say that to scare anyone. I just want you to be prepared and know what you’re getting into. Surprises are fun on your birthday, not when you’re buying a home.

Other steps to determine if you are ready to buy a home…

Look at the market

At this point it’s still early on and you haven’t officially started the home-buying process yet but it is a good idea to start looking at real estate apps. You won’t know how much home you qualify for yet but at least you can get an idea of what homes are selling for in your area. If homes are selling for $500K then you know that a down payment of 10% will be $50k and closing costs will be about $15k-$25k. You can also start looking into average costs of HOA or mello roos in your area. The app I really like using is Redfin. I find it easy to navigate.

Research home buying requirements in your area

I bought my home in southern CA so some of the information I give may not apply where you live. Be sure to look into what it takes to buy a home in your area, what paperwork/ documents you will need and if there are any first time home buyer programs that you qualify for. First time home buyers can get federal assistance (FHA loans) or local assistance from their city or state (in the form of down payment assistance or closing cost assistance). There are a ton of programs out there to help first-time home-buyers so I highly recommend researching these programs or meeting with a mortgage broker who works with these programs. Mortgage brokers are willing to meet with you because they want your business so try making an appointment to information and ask questions

Do you foresee any major life changes in the next 6 months?

Buying a home is a long process. From the time you get pre-approved to the time you have your house keys it can be several months. You’ll want to consider any major life changes that may interrupt or stop the process all together. For example, you have to have a work history in the same job, or the same field, for at least 2 years. So if you’re considering changing jobs you may want to wait, especially if it’s in a completely different field from your current job. Also consider any maternity leave or leave of absence that may occur as these may alter your home-buying timeline.

Prepare yourself mentally

Getting ready to buy a home is really fun but it’s also very stressful. For most of us it is the biggest purchase we will ever make. My husband and I almost lost our home about 5 times before we actually closed escrow. I’m not joking. It was 2 months on an emotional roller coaster, back and forth with the mortgage broker and the underwriter and by the end I was exhausted.

The process is not perfect. You may get outbid for a home, the underwriter can find something unsatisfactory with your financial history or the seller can back out for whatever reason. There are so many things that can go wrong and there are so many people involved in the process that lack of communication is almost inevitable. But, I will say that it is worth it. All the stress and tears are totally worth seeing a piece of property put in your name.

You are ready to buy a home. Go get pre-approved!

If you’ve made it through this list and you feel confident going forward then do it! Getting pre-approved is the first step in the home-buying process. I highly recommend getting a few pre-approvals so you can compare interest rates and maximum purchase price. Good luck and happy house hunting!

Tips for when you are ready to buy a home:

-Get advice from multiple real estate agents and mortgage brokers. Also, talk to friends or family who recently purchased a home and ask lots of questions

-Consider waiting to tell friends and family that you have started this process. It’s so exciting and you’ll wanna share it with everyone but keep in mind that if something doesn’t go your way you may have to explain that to everyone you’ve already told. This is just something to consider.

One last note- IT’S OK TO WALK AWAY. If at any time during this process it doesn’t feel right or you’re concerned that you may not be able to afford it, it’s okay to take a step back or to walk away completely. Don’t worry about what others might say. This is one of the biggest decisions in your life and it needs to feel right for you.

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