Resources    Home Purchase Basics

Congratulations on your decision to buy a new home! There are many important things to consider throughout the process, especially if you're a first-time homebuyer. Here's some information that will keep you on track.

Step 1: Get your finances in order.

Know what is on your credit report. If you haven't looked at your report in a while, you might be surprised by its contents. You don't want to wait until after you have made an offer to find out that there is an error on your credit report that needs to be corrected.

Step 2: Get familiar with mortgages and what will work for you.

Find the right loan and lender to best suit your needs before you find a property. It is always good to have at least a bit of background about the loan process before going through it yourself.

Step 3: Get pre-approved for a Mortgage

Your lender can help you find out how much house you can afford? In addition, pre-approval can help your offer become more desirable to the seller when considering several similar offers.

Step 4: Determine your Wants and Needs

Figure out what you want and don't want in a house. This will help the process you a lot smoother if you have narrowed down some of your choices before you start looking.

Step 5: Consider Working With a Real Estate Agent

Real estate agents represent buyers, sellers or both. It is imperative that you be aware of agent duties and loyalties before starting the process.

Step 6: Start Searching for a Home

Listings from your agent, magazines, classified ads, the Internet. All of these are possible tools for finding homes and narrowing your buying search.

Step 7: Handle Pre-Offer Tasks

Make sure that all the features of the house are things that you would like to live with before you make an offer, as they are just as important to your purchase.

Step 8: Make an Offer

Its time to make a decision on how much you would like to offer for the property you are interested in purchasing. If you are working with an agent, they should be able to offer advice on this topic.

Step 9: Home Inspections and Other Tests

Determine the appropriate time for a home inspection (depending on state regulations.) Talk to your agent or advisor on when/what inspections should be done.

Step 10: Avoiding and Correcting Last Minute Problems

As your closing date nears, everyone involved should be checking on their progress on a daily basis, because staying on top of things means any problems can be dealt with right away.

Step 11: You're on the Way to Closing

This is the event that will transfer ownership of the property to you.

Remember: Never hesitate to ask questions. You are making a long term commitment and spending a great deal of money. You will feel much better about the process if you stay informed and understand what is happening each step of the way.

Before you begin

Talk to relatives and friends in your area about their home buying experiences. Remember, these people can offer great general advice on the home buying customs in your area. Avoid the mistake of relying solely on their advice when making important decisions, however. Consulting an expert, such as a real estate agent or mortgage broker for advice will be a smart tool in the home purchasing process. A real estate agent should be willing to take a few minutes for a general discussion on real estate customs in your area. This does not need to lead to signing an agreement for representation, just fifteen minutes of their time to familiarize you with the process. A loan officer or mortgage broker, although looking at the process from a different perspective, can also give you a basic overview of the home buying process also.

Questions to Ask:

  1. Who will be composing the offer to purchase the home? If working with an agent, will they use fill-in-the-blank forms? Ask for a blank sample copy to study at home.
  2. What types of disclosures are sellers in your area required to give to buyers? If working with a real estate agent, ask that they provide you a sample copy of typical disclosures.
  3. What types of home inspections are standard in your area? Are there other recommended inspections? What is the cost? Who incurs the expense? When are they done?
  4. Is a survey required? If so, at whose expense?
  5. Who does the title search? What is the average cost?
  6. Who will act as the settlement agent, preparing the closing paperwork to be signed?
  7. How long does it take to close a home once an offer is accepted?

What You Should Know About a FICO Score

What is a FICO score?

FICO scoring is developed through a formula for credit risk assessment that is used to determine a person's payment risk

The score is derived by weighing credit information at a specific time and assessing points for each piece of information. It looks at credit patterns over a period of time. The information is taken from each of the three credit bureaus and is based on credit information only.

FICO scores can fluctuate. Depending on the credit repository the information is taken from and the geographic location of the borrower, there may be more or less information available, which can lead to variation in the score.

What can impact my credit score?

  • Bankruptcy
  • Derogatory Public Records
  • Charge offs or Loan Defaults
  • Repossessions
  • Serious delinquency
  • Number and age of Trade Lines
  • Derogatory Trade Line Information
  • Current level of debt
  • Types of Credit (revolving vs. installment)
  • Amount of time credit has been in use
  • Credit inquiries

What if there is a mistake on my credit report?

Errors on a credit report occur for many reasons. Your credit report scores are developed from information provided by three agencies. It is recommended that individuals check their credit reports at least once a year in order to be on top of any errors as soon as possible.

If you feel that there are errors on your credit report, you should contact the credit bureau from which the issue was reported and alert them to the mistake. You may dispute transactions on your credit report by filing a credit dispute form with the credit bureau to request an investigation.

How do lenders use your credit score?

When lenders/banks loan money, they want to know the probability of receiving repayment in a timely manner. The credit score is one way of getting insight into that probability. Since credit scores are determined based on the following; payment history, amounts owed, length of credit history, new credit and types of credit, lenders can gain valuable insight into how a borrower has handled credit and repayment in the past and reflects an overall lending history.

By viewing your credit score, lenders can determine their risk in loaning you money. They want to see your responsible use of credit. In general, the greater the risk, the higher your interest rate will tend to be.

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