(BPT) - A high demand for homes, coupled with low supply, has made California's housing market especially competitive. While buying a home may seem out of reach for many first-time buyers, it could be a lot closer than you think. There are many programs and people out there to help you make your home buying dream a reality, including a new home buying assistance program from U.S. Bank launched just last week. Here's a road map of what your process could look like:
12 to 6 months out: Do your homework and get started
The first thing to consider as you set out on your homebuying journey is what you need and want in your first home - maybe it's all about location for your lifestyle, extra room for growing a family or a yard for pets. Once you've determined your wish list, it's time to explore how much you want to spend.
A mortgage payment calculator can instantly give you an idea of what your monthly payments could be. Lenders look at several factors - from assets and debts, credit score to your employment history - to determine how much you qualify for. Generally, they'll want your mortgage payment to be less than 28% of your current gross income.
When looking at the mortgage payment calculator, you may wonder how much of a down payment you may need. Keep in mind that there are many mortgage options with low or no down payment requirements. Speaking with a mortgage lending professional early on can also help identify down payment assistance or other unique mortgage products you might qualify for.
'There is a perception that you need to put down 20% of a home's value in order to get a mortgage. But that's not true - currently, 6% is the average down payment of a first-time home buyer,' said Lenny McNeill, Executive Vice President, Strategic Markets and Affordable Lending for U.S. Bank.
4 to 3 months out: Assemble your homebuying team (a lender and Realtor), get pre-approved and start looking
Once you've made the calculations and determined your budget, it's a good time to get serious about a mortgage and find your homebuying team: a mortgage lender and a real estate agent, real estate broker or Realtor.
If you're not sure where to begin looking for your team, reach out to a U.S. Bank mortgage lender. They may know Realtors and can help you choose the best kind of mortgage for your needs and goals. They're knowledgeable about down payment assistance programs, including new programs you could qualify for.
U.S. Bank's newly launched Access Home Loan is a great option for qualified buyers within certain areas of Sacramento, Los Angeles, Oakland, Fresno, San Diego and Riverside/San Bernardino. The program can provide up to $12,500 in down payment assistance and up to $5,000 lender credit. It is designed to increase access to homeownership, since down payments can often be a big obstacle for first-time homeowners and people from underrepresented groups. The U.S. Bank American Dream loan is another example of an assistance program.
At this stage, you likely have a ballpark of what your budget looks like. Getting pre-qualified for a mortgage will give you a more accurate estimate of what you might be able to borrow and what you can afford. With U.S. Bank, prequalification is free, doesn't impact your credit score and takes about five minutes.
As you compare mortgage options, getting pre-approved for a mortgage is a good way to help you move more quickly with a bid on your future home, since you're looking in a fast-moving, competitive market. Pre-approval is usually good for 90 days and can make your offer more appealing to sellers. If you haven't gotten pre-approved, you'll need to fill out a mortgage application when you think you've found your future home and obtain an offer letter.
Three months out to closing day: Offer and close
When you have your offer letter in hand and are ready to make a bid on your first home, there are a few tips to keep in mind. Bidding low can work in a weaker market, but low-balling may not bode well in a hot market. Remember, sellers are people too. Be polite and respectful. Make it easy for them to sell by taking on minor repairs or setting up housing inspections quickly, if possible.
When your offer is accepted, underwriting can begin. Your lender may ask for further documentation as this process moves along. Underwriting can take anywhere from a few days to several weeks. A few days before you're scheduled to close, you'll receive your Closing Disclosure. This document includes all the terms and costs of your loan. You should also have a chance to do a final walkthrough of your new home. Then, it's time to get your keys and celebrate!
While this is a snapshot of what buying your first home could look like, everyone has a unique situation and needs. U.S. Bank financial experts and mortgage lenders are here to help.
Equal Housing Lender
Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.
The assistance funds loan payments are deferred, due upon sale of the property, first mortgage is refinanced or the first mortgage is paid off.
The closing cost credit will be up to $5,000 for all approved loans at closing. If the amount due from the borrower for closing costs, points and prepaid costs exceeds $5,000, after the minimum $1,000 borrower out of pocket and all other applicable credits, the credit will be $5,000. If the final amount due from the borrower is less than $5,000, the credit will cover only the amount due, after the minimum $1,000 is applied.