Overview of the Homebuying Process
We know that buying a home can be the biggest investment that most of us ever make. We know that many of us don't have 20% of the purchase price to pay for a down payment, not counting the closing costs. The loan process can sometimes be confusing and perplexing. We feel that by helping you to understand this process, you will feel more comfortable in your negotiation and ultimate purchase of your home. If you have any questions or clarification please don't hesitate to ask. Please remember that we are here to help. Let's get started.
Unless you have a specific property that you wish to purchase; You will need to get pre-approved for a loan. Some of the things that will affect whether you will be pre-approved for a loan and/or how much of a loan that you would qualify for are:
- Interest rate
- Amount of monthly household income
- Amount of monthly household debt
- Mortgage or rent history
- Credit history
- Time since Bankruptcy if applicable
- Cost of property taxes and homeowners insurance
- How closing costs are to be paid
Once you get your pre-qualification you can identify the home you wish to purchase and make your offer on the house subject to financing. Prior to your offer we need to establish how closing costs and prepaids are to be paid. Please bear in mind that interest rates fluctuate and until we have a contract we cannot lock in your interest rate. If we are unable to qualify you for a home loan we will explain why you were unable, at this time, to qualify and hopefully get you ready to reapply at a later date.
Closing costs and prepaids are stumbling blocks for many potential home buyers. Closing costs are cost and fees that are a part of receiving a home loan and prepaids are escrow accounts which are set up for future payment of taxes and insurance. Some possible sources to fund these cost are:
- Buyers own funds
- gift from a family member or charitable organization
- Seller paid
- Increase the loan amount
- DAP loans
The first cost you will incur is for the credit report. There are 3 Credit reporting agencies. They each have their own method of arriving at a credit score. All of our lenders use the middle score of the three. These scores can vary greatly. In order for us to properly pre-qualify you for a loan we must pull all three of the credit reports. The cost to us is $14.75. and that is what we charge you. You may pay for this by using Pay Pal; Mailing us a check; Or better yet stop by the office and visit with us.
When you know how the closing costs and prepaids are to be paid and have made your offer on the home and the offer is accepted; the following will occur. We can lock the interest rate interest rate and order an appraisal of the value of the property. The appraisal should run between $300.00 and $450.00 depending on the area and type of appraisal required. It will be your responsibility to pay for the appraisal before it will be ordered. The remainder of the costs will be paid at closing. In the meantime we will have various documents for you to sign and we will begin to verify things such as rent payments, income, deposits etc..
When all of the paperwork is assembled by our processors your loan package will be sent to the lender for final approval and underwriting. The underwriter can (1) Deny the loan (which is remote) (2) accept the loan, or (3) accept the loan with stipulations. The third point would require furthur explanations of some point(s) or additional documentation. When the underwriter is satisfied we will order a title opinion and a termite inspection. We will also ask you to purchase a years worth of homeowners insurance. This can be paid for at closing. When these things have been done we will set closing.
The closing will be handled by an escrow attorney or title company. We will have the closing in a mutually convenient place for all parties. The closing will generally consist of the escrow attorney; the buyers; the sellers; real estate agent; and a 1-2-3 mortgage representative. If you need to bring funds to the closing you will need to bring them in the form of a cashiers check made out to the escrow attorney. Once everybody has signed all of the necessary documents and all funds have been disbursed then the house will be yours.
If you make any changes in marital status; income;debts; or if you make some late payments or have overdrawn checks at the bank during the loan process, your approval could be withdrawn. If you will be patient your loan will flow smoothly. In order to make the loan process move quicker click on the loan checklist.