The Home Loan Process
During the pre-qualification process, we will review your personal finances and home-buying goals. This step will allow you to match the type of home you want to buy with what you think you can afford. We will discuss loan programs and down payment requirements. This step is not approval for any loan; all loan terms and conditions are subject to final approval by an underwriter.
Whether you’re getting pre-qualified or requesting a full loan approval, you’ll need to document your assets, income and credit history. This step is done by providing bank and investment statements, pay stubs and tax information such as a W-2 or tax return, and I will also request a credit report.
Shopping for a Home
The first thing many potential buyers do when they decide to shop for a home is hop on the Internet. On many sites you can obtain more data about homes and neighborhoods in an hour than you could ever discover offline. With that said, I highly recommend that you choose to work with a real estate agent. When you utilize a real estate agent, you’re getting a licensed professional, often with years of experience. Agents are knowledgeable about trends in home values in different neighborhoods, and are often part of a network that trades information about unpublicized properties. Your agent can also make an informed judgment on the value of a home and negotiate a price on your behalf.
Making an Offer
If you’re using a real estate agent or Realtor®, he or she does the legwork of checking the prices of comparable homes in the area (“comps”) while you make your decision on an offer. Together, you will balance an optimal selling price against the current demand in the marketplace to come up with your offer.
Negotiating a Final Sale
Here is where your agent proves to be your strongest ally. A sale can be a stressful situation for both buyer and seller, so it’s often valuable to have someone in your corner who can logically explain and detail the reasoning behind an offer or counter. Ultimately, you and the seller will agree on a price and any conditions (“contingencies”) placed in the contract, like the amount of time the seller can remain in the home or the seller’s need to finalize the purchase of a new home. You will pledge to put an agreed-upon amount of money on deposit (also called escrow or earnest money deposit) to show your good faith in fulfilling the contract. You should expect that this deposit would be non-refundable. Finally, you’ll set a closing date.
Applying for a Loan
This is when I formalize your application and discuss your short and long-term goals, as well as the reasons for wanting to become a homeowner. I’ll also review with you your credit history, which can be very helpful when evaluating which loan fits your needs best.
Choosing the Right Loan
With so many loan programs to choose from, I understand that it can be difficult deciding which loan is best for your individual situation. During your application process, I will walk you through each loan option to find the one that best suits your personal funding needs and to answer any additional questions you might have.
Locking Your Loan Rate
If you have a Purchase and Sale Agreement, you can lock-in your interest rate. In most instances, you have the choice to either lock your loan at a set rate and fee for up to 30, 45, or 60 days, depending on the lock-in period you’ve selected, or you can let the loan float. I will help you with this decision, but ultimately the choice is yours.
Getting Homeowner’s Insurance
While it may seem like putting the cart before the horse, it’s important not to rush your insurance at the last minute. In fact, you can begin looking for an insurance agent as soon as you start searching for a home, which will offer you time to shop around and obtain multiple quotes. You may qualify for a discount if you bundle your home, car and life insurance with one company.
An insurance agent will discuss deductibles, coverage amounts and limits, personal liability coverage if someone is injured at your home, and other aspects of insurance and home ownership. Your lender will also require that you purchase flood insurance if your home is in a flood plain. Additional coverages, such as for wind and earthquake, should also be discussed with your insurance agent.
The Home Inspection
A home can be an emotional purchase, and no home is perfect, not even a new one. So before you finalize the purchase with the seller, it’s important to have an independent, qualified inspector evaluate the property, for your own peace of mind. Attend the inspection, ask questions and take notes. You might learn about issues you’ll need to take care of in the future.
The Home Appraisal
In order to finalize your loan, an appraiser must determine that the selling price is consistent with current market values, and provide a value for the subject property by performing an on-site review, taking photos and documenting its value. There are a number of factors the appraiser takes into consideration to come up with a market value, starting with the size of the property and important structural features, such as the condition of the roof and foundation.
Next, the appraiser looks at the unique features of the home that might impact its value. Finally, the appraiser compares your home with similar homes in the area (the comps) and determines a market value. We will provide a copy of the appraisal report once it’s completed.
Processing Your Loan
Once you have completed and signed your loan application, I will work with you each step of the way to get your loan approved and closed in a timely manner. After you have provided the necessary financial information, I will arrange for an independent appraisal and preliminary title report.
In many cases, loan approval can be completed at the time of application. However, certain loan programs require that your loan file be sent to an underwriter for review. Your underwriter may request more specific details about the property or your financial information before approving your loan.
Final Loan Approval
Depending on the number of items that need to be addressed, the final approval can take anywhere from a day to a month. The length of time for an approval is determined by the number and type of outstanding conditions. You can help minimize the amount of time it takes by providing documentation as soon as it’s requested.
Once you have satisfied any conditions, your application will be submitted for final approval. Once you receive a “Clear to Close” instruction, you’re on your way to the final phase! A Closing Disclosure (CD) of the final loan terms and the costs associated with the loan will be sent to you for review. There is a mandatory waiting period of three days from the time you receive the Closing Disclosure before you can sign the final loan documents.
Preparation for Closing
After your loan package is complete, the file is prepared for closing and sent to your closing agent.
Your closing agent will call you to set up an appointment to sign the final papers. At that time, you will be asked to bring a certified check for the closing costs and down payment. After you sign, the closer will prepare the final loan papers so that they can be legally recorded.
Getting the Keys
Generally, unless you’ve prearranged otherwise, you should receive keys to your new home the same day as the closing. Although a shiny set of keys will feel great in your hands, your new home won’t quite feel like “home” until you finally move in and make it your own!