Steps to Buying Your First Home
What is the home buying and mortgage process?
Knowing what to expect on your home buying journey can help you feel comfortable as you look for your first home. Understanding what documentation and responsibilities you need to take care of, as well as what your loan officer and bank will handle, can help you prepare for every stage of the mortgage process – from prequalification and application to underwriting and closing.
Are you building or renovating a home with a construction loan?
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Are you a doctor, dentist, resident or fellow who is less than 10 years out of residency?
You may qualify for a TD Bank Medical Professional Mortgage
How much can I afford to spend on a new home?
The first step in finding your first home is knowing how much you can afford to spend. In addition to how much mortgage you're comfortable with, you'll also want to consider your current expenses plus the new ones that come with home ownership.
Understanding all the costs associated with home ownership will inform the potential price range of your future home and help you define your housing search. You can look for your first home with confidence once you identify how much you can afford. As a first-time homebuyer you may also qualify for an affordable home loan
Download this expense checklist (PDF) to help you determine your monthly and long-term expenses as a homeowner.
- Your monthly living expenses
- Car payments
- Other loan payments
- Other monthly bills or regular expenses
- Rainy day fund (similar to an emergency repair budget)
- Rent for where you're living now
New expenses that come with owning a home:
- Property taxes
- Homeowners insurance
- Private mortgage insurance (PMI): if placing less than 20% down
- Homeowners association (HOA) fees: for condos or homes in a planned development
- Emergency repairs and ongoing maintenance costs: A general rule for estimating these costs is to set aside at least 1% of your home's value every year for home maintenance. So, for a $270,000 house, that would be $2,700 per year, or $225 per month
Estimate my monthly mortgage payment
How much do I need upfront to buy a home?
Mortgage down payment
Down payments typically range from 3% to 20% of the purchase price. If your down payment is less than 20%, you may be required to purchase private mortgage insurance and, depending on your loan, you may be required to pay your first premium as part of your closing costs.
Depending on the area your plan to purchase in, along with your income level, there may be programs sponsored by local governments or non-profit charitable organizations that provide down payment assistance. These programs can help lower the initial barriers to homeownership.
Home inspection isn't required as part of the mortgage transaction, but many people decide to complete an inspection. Water, soil and other tests on the new home are generally only completed if the appraiser identifies an issue or it is required through a government product.
You would cover the costs of all these services and pay the service providers directly at the time of service.
- New home buyer fees
These include underwriting, credit report, appraisal, attorney and any other applicable fees
At closing, you'll pay the first year of your homeowners insurance along with title search and title insurance
- New home prepayments
This includes any applicable real estate taxes and insurance, including homeowners, title, flood or private mortgage insurance
- Property taxes
A few months of taxes are collected at closing based on the closing date and how the municipality collects
- Per diem interest
Closing costs include interest due on the mortgage from the date of your closing through to the last day of that month
- Mortgage discount points
You may decide to pay points at closing to secure a lower mortgage interest rate. One-point equals 1% of the mortgage amount charged at closing as prepaid interest. This may benefit you if you plan to reside in the property long term. Talk to your Mortgage Loan Officer about your options
How do I get prequalified and explore my home loan options?
Once you have an idea about what you can afford and you're ready to find a home, you can talk to a loan officer. Your loan officer can help you explore your mortgage options and get you prequalified.
To get prequalified, you provide your loan officer with your basic income, asset and debt information, and they provide an estimate of the mortgage amount you may qualify for.
Your loan officer can also help you understand all the available mortgage options, and which works best with your budget and home-buying goals. Talk to a TD Bank Mortgage Loan Officer today at 1-866-325-4516.
Two important aspects of mortgages to consider are:
Fixed rate mortgages have the same monthly payment for the life of the loan, which may be a good option for long-term homeowners.
Adjustable rate mortgages (ARM) usually have low monthly payments at the beginning of the loan with the ability to switch to a fixed rate. They are generally a good option for short-term homeowners.
- 15-year fixed rate term mortgages will have higher monthly payments, but less in interest
- 30-year fixed rate term mortgages have lower monthly payments with more interest
Ready to get started?
Apply online or contact a loan officer, who can answer your questions and help you get prequalified.
How do I prepare for my mortgage application?
When you apply for a mortgage, you'll need to provide your income and asset information. Here are a few things you can also do now to help prepare:
- Get your credit report
You can request a free copy of your credit report† from all 3 major consumer reporting companies. Read them carefully and notify the companies of inaccuracies as this may negatively affect your credit score. Your credit report and your credit score provide lenders with information about your financial background
- Don't make any major purchases
Hold off on making any big purchases, such as a car or furniture, until after your closing. Taking on significant new debt now can impact your mortgage loan decision and how much you can borrow
- Start saving pay stubs along with bank and retirement statements
Start collecting these documents as you may need to provide them to verify your application details when you apply for your mortgage
How do I make an offer on a new home?
When you find the home you want, you'll need to enter into a written contract with a written offer. Working with a real estate professional can simplify this process because they will:
- Provide you with standard forms that comply with state and local laws
- Guide you on your offer amount based on comparable home sales in that area
- Present your initial offer and any counter offers to the seller and assist you with negotiations
What does a written offer on a new home include?
The written offer that your real estate agent will present to the seller includes:
- Purchase offer
This written proposal specifies the price you're willing to pay, as well as all the terms and conditions of the purchase
- Earnest money
This is money you put toward your new home with your purchase offer to show the seller your commitment to the offer (A real estate professional or attorney usually holds your earnest money and that money becomes part of your down payment, or is returned to you if your offer is declined)
Your realtor can help prepare you for the back-and-forth with the seller on both the amount of your offer, as well as terms and conditions of the purchase
- Purchase agreement
Following any negotiation and modifications to your purchase offer, once a final price for the home is reached, you and the seller both sign off to create a final binding contract; this is the document you will need to start your mortgage application
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