15 Steps to Home Ownership
1. Pre-qualification - This is an informal determination of the maximum amount you are eligible to borrow and is not a guarantee of a loan.
2. Pre-approval – Pre-approval is similar to a pre-qualification, but with the pre-approval, we review your income, credit history, debt. All of those are verified to determine what type of loan product and amount of loan we can approve you for. Obtaining a pre-approval gives you the advantage of knowing what type and price of property to shop for. It saves you time by allowing you to narrow your search parameters. The other advantage to a pre-approval is that you can submit it with your offer on a property, which is typically required before negotiations start on your offer.
3. Find Your Property – Now that you can set your search parameters, you can begin searching. Ask your Realtor® to search the MLS (Multiple Listing Service) frequently for properties that match. If your local Realtor® board has the technology to set up a daily search that will email you results, request that so that you can see the market changes on a daily basis and have that delivered to your email inbox every day.
4. Purchase Contract – Once you have found that “IT” property, have your Realtor® draft your Purchase and Sale Agreement with clearly stated terms for submission to the seller. Be sure to include your pre-approval! This pre-approval can give you a competitive advantage in multiple-offer scenarios. After the offer is submitted, the negotiations will start.
5. Loan Application – Once the negotiations have been completed and you have an executed purchase contract, you need to leap into securing the financing. If you didn’t do the pre-approval, you now need to start your loan application.
6. Documents – All conforming loan applications require supporting documentation. This list typically includes two years’ tax returns, pay stubs, account statements to verify the source of the down payment and funds to close the loans as well as cash reserves. Again, if you got pre-approved, you have already completed this step of the process.
7. Property Inspection - Don’t forget to hire a property inspector to lend a professional eye to the condition of the property. Once you have the inspection report, review it with your agent and determine if you need to have further negotiations with the seller. Ask your agent how long you have to complete this step. Some states have a set number of days and some states leave the determination of the “Option Period” or “Due Diligence Period” to be determined by the parties.
8. Appraisal – We, as the lender, require that the property be appraised. We want to make sure that you aren’t paying too much for a house and that there is no discrepancy between market value and the price you are paying. While this can happen on occasion, it is rare.
9. Title Search – A title company or a real estate law firm will assign an escrow officer and his or her team to begin their process. During this, a search for liens against the property will be conducted. Occasionally, liens will be placed against a property to make sure that payments of outstanding debts are paid before a title can be transferred to a new owner.
10. Loan Processing – Our loan processing team will review and package all relevant information related to your loan to be sent to our underwriter. This will include any explanations or supplemental documentation. You will either hear from the loan processor assigned to your loan or your loan officer if we find that additional documentation is needed.
11. Underwriting – The underwriter will review your file as presented to him or her by the loan processor and/or your loan officer. The underwriter will make the final determination on whether or not your loan is approved. All lenders are looking for borrowers that will keep their mortgage payments current. We are also looking to finance properties that will maintain their value in the event of a foreclosure and these are both determined by the underwriter.
12. Mortgage Insurance – All conforming loans (Conventional and FHA) will require that some form of Mortgage insurance is in place for all loans that are below a 20% down payment or 20% in owners’ equity. Be sure to talk to your loan officer about this and which products require the insurance for the life of the loan and how much such coverage will cost.
13. Loan Approval – Predominantly, when a borrower has a good credit score and a good debt-to-income ratio, the laon will be approved. However, there are cases in which a borrower will need to put forward additional funds to improve a debt-to-income ratio, or cover the discrepancy in value based on an appraisal. There are also cases in which repairs or improvements or a number of other conditions may be required before approval.
14. Insurance – Lenders require that you have the property insured against fire and a number of other hazards depending on the environmental conditions of your geographic area.
15. Closing – You are looking at the finish line and are ready to collect your new keys. Below are the typical closing steps.
- Signing – You will sit down with the escrow officer or title attorney and have a lot of documents explained to you as well as put you signature one them. Feel free to ask questions when something isn’t clear. We don’t want you to be confused about what you are signing. You will sign the real estate documents as well as your loan documents in one sitting.
- Funding – Funds will be delivered to the title company either by check or wire as well as whichever form you brought your cash portion in.
- Close of Escrow – The title company will file the appropriate forms with the county to transfer title to your new property.
- Recording – After the above step is completed and confirmed, the title company will authorize for escrow to draft a check to the seller.
- Time to Move – You have the keys to the new property and it’s time to move. One of the first steps is to have those locks changed and get a brand new set of keys… We are all about the safety of our borrowers. Enjoy your new home and be sure to keep us posted about it. It was our pleasure to help you through this process!
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