A little play on a book title, but if you’re like me, you feel better about taking on something new when you’re prepared –whether it’s going to college, starting a new job, becoming a parent or buying your first home. When you understand the process, the task itself isn’t so daunting.
The first thing to realize, as you leap into home-ownership, is the need to get pre-approved for financing. The lending industry is under scrutiny in an effort to protect you, the buyer. Due to this, lenders are required to prove you have the ability to repay the loan. This means you will be required to provide supporting documents. This can become quite cumbersome, and frankly, frustrating. We understand – believe me! Our goal is the same as yours … help you get a loan.
The first step is the loan application. To make this convenient, we can gather this
information over the phone, on our internet site or in-person, whatever is best for you. We need information such as your name, contact information, addresses and employers for the last two years, income, assets and your debts. The application enables us to obtain credit to determine if you meet today’s credit guidelines, which vary by program and financing type.
From there, if all looks good, we gather supporting documents, such as paystubs, bank statements, etc. This information will initially be reviewed by the loan officer for validity and to determine if income matches what’s on the application, among other things. It’s important to meet with your loan officer to discuss your options, the costs of buying a home, and most importantly, your comfort level in terms of a payment.
Once pre-approved, you’ll look at houses, and hopefully, will find one you want. At this point, you and your Realtor will draft a purchase agreement stating the terms of your offer – price, closing date, what you may want the seller to pay toward closing costs, earnest money amount and any contingencies you desire, such as having a home inspection. Assuming you get the “your-offer-was-accepted” call, we move on to the next steps.
You may have chosen to do a home inspection. You will pay the inspector directly; this is not part of the closing costs the lender would have gone over with you. The inspection will help you determine if you want to move forward on the purchase or not. Hopefully, you are full speed ahead!
Now that you have a property address and aren’t just a TBD (to be determined) anymore, there will be disclosures that are generated for you to sign. Your lender may mail these, email you a link or sit down with you to sign depending on their process. At this point, you will receive a loan estimate, which will outline all your costs, including down payment and seller paid costs or down payment assistance, if applicable to your situation. Your lender most likely went over a similar type estimate at your pre-approval meeting so you had an idea what your costs would be. The loan estimate is still an estimate but is much closer to actual figures now that we know the price, taxes, rate (if you locked) and closing date.
At this point, you can lock in an interest rate. Your loan officer will check to see what rates are for the program you’ve decided to use. Keep in mind, if using a first time buyer program, they publish their interest rates right out on their sites – so the rate is the same with any lender. Rate locks have expiration dates – that means we must lock the rate long enough to cover you through your closing date. And something very important – once locked, you’re locked. If rates go down after locking, you cannot get a better rate and if they go up after locking, the lender must honor that rate.
Depending on how long the time-frame was between your initial pre-approval and the accepted purchase agreement, the lender may ask for updated paperwork – items that get old, like paystubs and bank statements. Eventually, when your earnest money clears, we will prove that left your account. And, if your credit report has, or will, expire before your closing date, new credit will need to be pulled. The life on the report is 120 days.
The lender will process your file, order verifications of income, flood certification, appraisal on the home and title work, among other things. Depending on the lender, the file may go directly to the underwriter, or may hang back while the ordered items come in. The best advice here – if the lender needs any additional information from you, please provide it in a timely manner to keep your process going as smoothly as possible.
Once all documents are in, including an acceptable appraisal and title work, your loan will go back in for final approval. Either after this, or prior to this, the lender will provide you with a closing disclosure, which you must have in your hands three business days (includes Saturday) prior to closing. Some lenders require you sign this to acknowledge receipt in that time frame. This will give you the final figures for your closing.
Now the fun — going to closing and getting the keys to your home! You will sign a bunch of documents, get a check or send a wire for money needed at closing (dependent on your program, down payment, etc) and will possibly have a chance to chat with the sellers to find out more about your new home, and maybe the scoop on your new neighbors!
For most people, this process, starting with the application, will take you 60-120 days depending on your situation and motivation. And for some, it may take nine months or longer J Either way, hopefully this has given you a little more information on what to expect when you expect to be a homeowner!