Step 1. Obtain a credit report

You can get a free credit report once a year. It is prudent to monitor your credit report to determine that all of the credit belongs to you and that no incorrect negative information appears. If you have credit problems, you may need to fix them before you can seriously engage in purchasing a home.

The lender will order a credit report of its own during the loan application process.

DO NOT acquire significant debt during the loan application process. This may cause your loan to be denied.

Step 2. Attend a pre-purchase homebuyer class

At least one borrower per household must present a certificate of completion of a homebuyer education class before a lender is allowed to reserve funds for any HOC MPP financing option. Homebuyer education can be any class approved by HUD, Fannie Mae, or Freddie Mac, as long as it meets the insurer and master servicer requirements. Visit www.hud.gov for other Housing Counseling Agencies.  You may consult with the lender if you choose to take an online homebuyers class.

Step 3. Get pre-qualified by an HOC participating lender

Select a HOC participating lender from the list. Call to arrange a brief interview. Mention that you are interested in HOC financing and are seeking pre-qualification.

Pre-qualification is an estimate of what you can afford to purchase based on your income, credit and debt load. It is not a commitment to make a loan. Usually, there is no cost for prequalification. Pre-qualification serves two purposes: it gives you an affordability range and it gives a seller more confidence that you, as a buyer, are approvable for a loan. (Pre-approval is a longer process and does result in a commitment for a loan. You may have to pay for a pre-approval letter). Pre-qualification or pre-approval are lender decisions made prior to your purchase of a property.

Step 4. Find a home you want to purchase

HOC does not supply homes to purchase. You must search for your own home to buy. You may hire a real estate agent to help you locate a home in your price range or you may do this by yourself. A real estate agent will have access to homes listed for sale with the asking price and description. In addition, the agent understands and knows the sales contract and what belongs in it and what is negotiable. The seller will have an agent of his/her own. The property must be in Montgomery County and may be new or existing; market priced or Moderately Priced Dwelling Unit – MPDU.

Step 5. Make an offer – sign a sales contract

You will sign a real estate contract (purchase agreement) with the seller to purchase the home. A ratified contract is one signed by you and the seller. The contract is a legally binding document and identifies the obligations of the buyer and the seller. You will place a deposit on the property upon signing a contract. The amount of a deposit is at the discretion of the seller and is credited toward your downpayment when settlement occurs. You may make an offer and the seller may counteroffer. When everyone is in agreement, both seller and purchaser sign a contract at which time the contract becomes a ratified sales contract.

Step 6. Obtain a home inspection

HOC believes the buyer should be as aware as possible of the condition of the property to be purchased. If the property is resale, the HOC MPP requires the buyer to obtain a home inspection for the property. The buyer hires the inspector and pays for it. The home inspection is not the appraisal which is ordered by the lender in order to establish a value to support the mortgage. The sales contract should specify a contingency for a home inspection satisfactory to the buyer.

Step 7. Apply for a mortgage

HOC does not take loan applications for mortgage financing. For HOC financing, the purchaser must use a HOC participating lender. HOC loan terms are the same regardless of the lender being used.

You may select any HOC participating lender, although the lender that did your prequalification is a good first choice. You will need a ratified sales contract to take to the lender. The lender will collect credit information and other documentation and order a credit report and an appraisal of the property. In most cases, you pay for the credit report and appraisal at the beginning of the process. Those fees are for services by outside vendors and generally are not recoverable if the application does not proceed to settlement. For HOC financing, each borrower must provide the lender with a complete, signed copy of his/her federal tax returns for the last three years. From application to loan approval may take 30 to 60 days, but each case is different.

Step 8. Attend Settlement/Closing

Settlement or closing is the final stage when you sign all the loan and legal documents and pay for the closing costs and fees and receive the keys to the home. You will receive copies of all the documents you sign at settlement from the settlement agent.

The purchaser selects the agent to conduct the settlement. This agent does not specifically represent the purchaser.

All borrowers are required to attend settlement unless an approved power of attorney has been prepared for the absent borrower(s). Nevertheless, at least one borrower must attend settlement in person.

Step 9. Attend a post purchase class (optional)