Important Steps in the Homebuying Process

To improve your credit score, make sure you pay your bills on time and reduce your credit card debt, if possible.

Save for a down payment and other closing costs. Some ways to save include cutting unnecessary spending and saving extra income like tax refunds or work bonuses.

• Once you’ve found a house that meets your criteria and budget, it’s time to make an offer. Your real estate agent will send an offer on your behalf. If your offer is what the seller is looking for, it might be accepted. However, sellers also may make counter offers until you can land on agreeable terms.
• If your offer is accepted, you may also want to make an earnest money deposit. This money, which is typically 1% to 2% of the purchase price, shows the seller you’re serious about purchasing the home. It’s a type of security deposit and helps protect the seller if the deal falls through. Later, when the home sale is finalized, the earnest money can be applied to the closing costs or down payment.
• If you decide not to purchase the home for a permissible reason, you may be able to get this money back. However, if you decide not to purchase for a reason not covered in the contract, you may have to forfeit this earnest money.

A home inspection is generally optional depending on the loan type and conducted by a professional home inspector. The inspector does a visual assessment of the home's condition and safety; the inspection can help identify issues with the home that you may have missed. The inspection typically takes place after the offer is accepted by the seller. Once the inspection is complete, the inspector will provide a report that details repairs you may want to negotiate with the seller.

Appraisal requirements may vary depending on the loan type and purpose of the mortgage. During the application process, your home mortgage consultant will tell you if an appraisal and what type will be performed when one is required. For loans that require an appraisal, the lender will order the appraisal during the application process to be conducted by a professional appraiser and provide you with a copy prior to closing. The lender uses the appraisal to verify the property meets their underwriting criteria and the value supports the mortgage application.

Homeowners insurance rates vary by state and region, but most policies typically cover the following:

• The home in the event of fire, wind, hail, frozen plumbing, vandalism, or theft
• Additional attached or unattached structures on the property (depending on the policy), such as garages and sheds
• Personal property, such as furniture, electronics, clothes, etc.
• Additional living expenses if you need to leave your home temporarily while it’s being repaired under a claim
• Medical payments if someone is injured on your property

You may also need to purchase flood insurance for your home, depending on the location. The National Flood Insurance Program has more information about flood insurance.

Your lender will require you to have homeowners insurance secured before closing. You typically have the option to pay your first year’s premium prior to closing or have it included in your monthly mortgage payments.

Consider autopay. Autopay is a convenient service that helps ensure your mortgage is paid on time. This not only can help you avoid late fees and penalties, but it can also have a positive impact on your credit score because automatically paying your mortgage account can help you build an on-time payment history. 

Review your escrow account. If you have an escrow account associated with your loan, your lender reserves a portion of your mortgage payment to pay your taxes and insurance on your behalf. These expenses can change from year to year, and in turn, change your monthly mortgage payment. Taking time to review your escrow statements can help you adjust your monthly budget to accommodate any payment changes.

Make your lender your partner. Life can bring unexpected challenges. If you find yourself struggling to keep up with your mortgage payments, talk with your lender about possible options for getting things back on track. At Wells Fargo, we have trained specialists to help our customers navigate through financial hardships and provide the guidance so they don’t have to go through it alone.

• Track your equity. Your home’s market value often fluctuates, but with the help of various online tools, you can learn the estimated value of your home. This information can help determine how much equity you’ve built over time, and in turn, help you decide if tapping into your equity to achieve other financial goals is right for you. When our customers are ready to search for homes or simply curious about their home’s estimated value, we offer a one-stop real estate tool exclusively for Wells Fargo customers.
• Know when you may be eligible to drop private mortgage insurance (PMI). For some mortgage loans that require PMI, you may be eligible to drop this fee if your home equity increases or when you’ve paid down your loan balance. Talk with your lender to learn the criteria required to remove PMI. Once you understand these requirements, you can periodically review your mortgage account to see how close you are to meeting them.
• Understand how many years are left on your mortgage. This detail can help you evaluate when refinancing your mortgage is right for you based on your financial profile and goals. This information can help you determine if you are likely to recoup the costs incurred when you refinance your home. You may also want to set financial goals based on how long you want to stay in your home before you sell.

If you extend your loan term, you may pay more interest over the life of your loan.

If you are a service member on active duty, an eligible spouse, partner, or dependent, or currently receiving SCRA benefits, please consult with your legal advisor prior to seeking a refinance of your existing mortgage loan. In some cases, a refinance may impact your eligibility for benefits under the Servicemembers Civil Relief Act or applicable state law.