Buying your first home and navigating the homebuying journey for the first time can be daunting. Luckily, our Empire Atlanta team has been developing and building homes in Atlanta for decades and has been an instrumental part in expanding high-growth markets across the city over the years. Members from our Atlanta team recently conducted a webinar that speaks to product innovation and lifestyle to help you in your homebuying process with our sales consultants and expert Patty Murray from Element Funding.
Here’s what we learned from them.
The Advantages of Buying vs. Renting
Deciding whether you should buy or rent a home is a big life decision that should be made while considering factors such as your financial position and lifestyle goals. And for many, the advantages of buying a home outweigh the benefits of renting, especially with today’s historically low mortgage rates.
“On average, a two bedroom apartment in Atlanta runs about $2,000 a month,” says Murray. “But with today’s low rates, you could easily buy a $375,000 home and have that mortgage payment be lower than the monthly rent payment, potentially by as much as two hundred dollars.”
Other reasons to buy versus rent include:
1. Building wealth and equity
2. Tax savings
3. Stability (you decide if and when you ever want to move, not your landlord)
4. Financial predicability (mortgage payments remain fixed, while rents increase annually on average between 5 or 7 percent)
5. Freedom and pride of ownership (you can decorate how you want, own a pet, etc.)
The Importance of Assembling a Homebuying Team
A homebuying team is a small but critical group of people that will help guide your journey and make the process as smooth and comfortable as possible. It consists of you (the homebuyer), a sales consultant, and the mortgage loan officer. Your Empire sales consultants will provide insights on Empire’s Intown communities to help you determine the location and home that best suits your needs and lifestyle, and provide guidance on the agreements and timelines required to have a seamless homebuying process.
Likewise, your Element Funding loan officer will give you a deeper understanding of the mortgage process to determine the right product that meets your individual needs. Communication lines remain open throughout the entire process so that you have a smooth home financing experience.
Understanding the Homebuying Process
The homebuying process can be broken down into seven steps:
1. Getting Pre-Approved: A mortgage loan officer will meet with you one-on-one to talk through your needs and goals before getting pre-approved. When you meet with your loan officer, they will first provide you with a pre-qualification estimate, which is a general approximation of how much you can borrow by looking at your credit score and income. Following this, a more formal pre-approval process will ensue, which is the more formal application that will provide you with an exact amount of how much you can borrow and at what rate.
To get pre-approved, mortgage lenders will consider four main criteria:
1. Gross income
2. Debt
3. Available money for down payment, closing costs and reserves
4. Credit history and credit score (which will affect the down payment requirement, interest rate, private mortgage insurance [PMI] and the type of loan for which you’re eligible)
They generally will require the following documents to complete the pre-approval application:
1. Two years’ worth of W-2’s
2. Two years’ worth of tax returns
3. Two most recent bank statements
4. Two most recent pay stubs
5. Photo ID
Going through the pre-approval process will let you know exactly how much you can afford. Your approval will be determined using a DTI ratio concept (debt-to-income). The ratio divides all your monthly debts and liabilities by your gross monthly income to come up with a percentage that’s known as DTI; you must fall under a certain percentage to qualify for a mortgage.
2. Shop for Your Home: Once you’ve been pre-approved, the exciting part begins: it’s time to shop for your new home. A member from the Empire sales team will contact you to help set up your appointment in-person or virtually.
3. Sign Your Purchase Agreement: Once you’ve found the home that’s right for you and your family, you can sign your purchase agreement and formally begin your loan application. Your loan officer will receive a signed copy of your purchase agreement as well as your deposit cheques. You will then be eligible to obtain homeowner’s insurance and your loan type will be finalized.
4. Submit Loan Application: Your loan application will be submitted for processing, where an underwriter will double check everything and decide on the loan. Once the home is ready for inspection, an appraisal will be ordered; following this, a closing agent will begin to prepare closing documents and loose ends will be tied up.
Types of Loans Include:
Government loans: FHA, VA and USDA loans are backed by federal and state agencies; they typically have more flexible guidelines and lower down payments.
Conventional loans: These are set by Fannie Mae and Freddie Mac.
5. Loan Underwriting: Once the loan has been pre-approved, we will issue a commitment letter and your file will be ready for closing. Additional documentation may be requested prior to closing.
6. Final Documents Sent: At this stage of the homebuying journey, your final loan documents will be sent to a closing agent for review.
7. Closing: You will sign your documents and bring any funds needed to close. Once the loan has been funded and your home complete, you’ll receive the keys to your new home.
To learn more about the homebuying process, be sure to watch our webinar on how to buy a home in Atlanta, with insights from Element Funding.