BUY A HOUSE
Your Guide Through a Quick and Easy Mortgage Process.
Today, we will walk you through the process of buying a home.
This guide is best for First-Time Homebuyers.
But… even if you’ve bought a house in the past, you can use this guide to refresh your memory and get the best deal your second time around.
TRUST US, it won’t disappoint.
By reading along, you will learn everything you need to know for your home purchase…
From getting your mortgage pre-approval, to getting the best deal and closing on your new house...and everything in between!
The Home buying process
Get Pre-Approved Find A Home Processing Underwriting Clear to Close Move In
Step 1: Get Pre-Approved for a Mortgage
This is generally the first step of the mortgage process.
You should begin your mortgage process here, as it will give you a better idea of what your mortgage program and loan amount might look like in advance.
Basically, you (the borrower) are asked to paint a general picture of your credit worthiness to your lender.
Step 2: Complete a Mortgage Loan Application
You will start by submitting your loan application.
A mortgage loan application requires you to submit your financial information to a lender to determine the amount you receive.
You can meet with your lender if you would prefer to complete your loan application in-person.
Most lenders even allow you to apply for a mortgage online if that is more convenient for you.
What are the 6 PIECES OF INFORMATION your Lender NEEDS for a complete Loan Application?
Social Security Number to obtain a credit report
Estimate of the property value
Mortgage Loan Amount you are seeking to borrow
If you have any questions, ask your loan officer and they will help you complete your mortgage loan application.
Remember, your loan officer will always be available to help you through the process and is willing to answer all your questions along the way!
Your loan officer will also look over your loan application to verify, or confirm, that all the information that you provided is valid and correct.
Once they finish reviewing your application, they will then send it to the next person in command to get you the approvals needed.
What are the POSSIBLE OUTCOMES to your loan's approval decision?
If you receive a full approval on your loan application, the underwriter decided that you are fully qualified for the requested loan amount and trusted to pay it back.
If you’re fully approved, no further questions will be asked and no conditions are required.
This is a rare outcome, but it does happen!
If your loan is suspended, don’t panic… your loan is still alive!
At this point, your loan approval is pending.
If this is the case, there are some important qualification questions that need to be answered before your loan can be approved. The underwriter will ask for more documents or an explanation for something not previously addressed.
Once you provide the requested documents or provide an explanation that meets underwriter’s satisfaction, your loan will be approved, usually with conditions.
If your loan is suspended and you have any questions, don’t hesitate to reach out to your loan officer!
If your loan is conditionally approved, that means your loan was approved “with conditions”.
This is when the underwriter approves your loan, on the basis that you will satisfy specific underwriting “conditions”
prior to closing on the loan.
You cannot receive a Clear-to-Close (CTC) until you satisfy all of the conditions with the underwriter.
This is the most common outcome for an approval decision.
Be prepared to submit all requested conditions immediately, as we do not want the rate lock or pre-approval letter to expire.
If your loan is conditionally approved and you have any questions, don’t hesitate to reach out to your loan officer!
If your loan is denied, the underwriter decided you are unfit to receive a loan to buy a house. In most cases, a loan is denied because one of two reasons: either the buyer has insufficient funds to purchase a home or they have poor credit.
This outcome is rare and usually only occurs if the lender made a poor judgement call when prequalifying the buyer. If your loan application is denied, don’t be discouraged.
This doesn’t mean you will never be able to qualify for a mortgage. You’re just not ready to buy a house at this moment in time.
Step 3: Getting Your Pre-Qualification
First, your lender will verify your income and pull your credit report.
If your application is approved, your lender will issue a Pre-Qualification Letter.
A Pre-Qualification letter means that you meet the minimum FICO credit requirement and lending guidelines for an approval.
Give your Realtor® a copy of the pre-qualification letter as soon as you get it so they can know exactly what you can afford to spend on a home.
A pre-qualification letter will not only speed up your home search, but also encourage the sellers of a home to take your offer more seriously.
Step 4: Reviewing the Loan Estimate
THE HOUSE HUNT
One document that your lender must provide you with is the Loan Estimate, as this is one of the forms required by law for your protection.
Your lender will provide you with the Loan Estimate within 3 business days of submitting a full mortgage loan application.
The Loan Estimate has important information about your loan, such as an estimate of your interest rate, monthly payment amount, and total closing costs for the loan.
To learn more about the Loan Estimate Form and become familiar with the definitions of important terms used, check out the CFPB’s Loan Estimate Explainer.
Keep in mind that the Loan Estimate is only an estimate.
At closing, you will receive a Closing Disclosure that will list the actual charges you will pay.
THE HOUSE HUNT
Step 5: Hire a Realtor®
Technically as a home buyer, you don’t need the representation of a real estate agent to complete the homebuying process.
BUT, we always recommend ALL prospective homebuyers do their due diligence and hire a reputable Realtor® to represent their best interest moving forward. A buyers’ agent is a real estate professional that has the fiduciary duty to act exclusively on your behalf, and in your best interest, throughout the entire purchasing process.
An agent will also be able to provide you with valuable information about homes and neighborhoods that aren’t easily accessible online. Best of all… it’s FREE to you!
If you need help finding a trustworthy Realtor® to represent you, you can always ask your lender to recommend a list of respectable agents.
Step 6: Find a Home
The easiest way to find your new home is by setting up an MLS search with your Realtor®
Benefits of MLS searches:
Can be set up to run automatically and emailed up to 5x/daily
Allows you to communicate directly with your realtor about each property
Search filters can be set within the MLS to narrow down your results by the following: areas, zip codes, cities, subdivisions, streets, school districts, prices and much more!
Has all the information you would need to buy a home in one place
A major benefit of using the MLS to find a home is that it ALWAYS has the most recent listings and updates on the market.
Keep in mind, if you search on Zillow or RedFin, there’s a chance it may be outdated and no longer available.
If you find a home on third party sites like Zillow, make sure you send your agent the link of the listing so they can make sure it’s still listed on the MLS.
Step 7: Negotiating and Having an Offer Accepted
Now that you’ve visited a handful of open houses and found a few places you’re interested in, you’re ready to submit an offer.
It may take some time to negotiate and have an offer accepted.
Once you’ve negotiated a price you’re willing to pay for a home and the seller accepts your offer, your realtor will create a purchase contract with all of the offer details.
They will forward this to the sellers for them to sign if they accept your offer.
If the seller agrees to include any fixtures or appliances with the sale of the home, make sure to have them included in the purchase contract.
Do not rely on their verbal commitment and don’t assume anything will be left behind if it isn’t in the contract.
BUT WAIT! Before you get too excited that your offer is accepted we have to clear a few contingencies first! (If there are any).
COMMON CONTINGENCIES INCLUDED IN A PURCHASE CONTRACT
After your offer is accepted, your lender will order an appraisal from a third party appraisal company, and you must pay the appraisal fee upfront. The appraisal will ensure all parties in the transaction that you are paying a fair price for the house.
An appraisal contingency is included in a contract to protect you in case the appraised value of the home comes back less than the agreed purchase price. In this case, you have a specified number of days to terminate the contract, proceed with the purchase or renegotiate with the seller to reduce the price to the appraisal value.
Financing (aka "Mortgage") Contingency
This gives you time to apply for and obtain financing to buy a home. This is important because it protects you in case you are unable to obtain financing by allowing you to back out of the contract and get your earnest money back.
You will have until a specified date to obtain financing for the home purchase. You will also have until this date to terminate the contract or request an extension (must be in writing and signed by the seller).
Within a few days of your offer being accepted, your realtor will help you arrange an inspection on the home.
The home inspection contingency will protect you by allowing a specified amount of time after the inspection to renegotiate or withdraw your offer and if there are significant damages to the home, without legal penalty.
There will be a final walk through before you close on the purchase where you will have a chance to confirm that repairs were made by the seller if they agreed to fix any damages found from the inspection.
Once you make an offer that is accepted by the seller, it’s time to secure your financing.
Step 8: Reviewing the Closing Disclosure
Your lender will provide you with a Closing Disclosure, which is a form that is required by law for your protection.
You will be provided with the Closing Disclosure at least 3 business days prior to your closing date.
The Closing Disclosure has important details about the loan program you selected is designed to help you understand all the costs incurred in the transaction along with the date of the closing.
If the information on the Closing Disclosure is inaccurate or the figures aren’t the same figures you expected to see, ask your Lender for an explanation why.
To learn more about the Closing Disclosure Form and become more familiar with the definitions of important terms used, check out the CFPB’s Closing Disclosure Explainer.
Step 9: Closing Costs
The closing costs will all be included in the Closing Disclosure.
All the costs you will pay at closing, minus the lender credit, are disclosed as Total Closing Costs (Borrower-Paid) on the Closing Disclosure.
Fees that may be charged at closing that you CAN shop for:
1. Attorney Fee
2. Title insurance & title service fee
3. Homeowners Insurance
Fees that may be charged at closing that you CANNOT shop for:
1. Origination Charges
2. Appraisal Fees
3. Credit Report Fee
4. Government Funding Fee
5. Mortgage Insurance Fees
6. City/County Transfer Tax Fee
**Keep in mind that the services you can and cannot shop for may vary from lender to lender.**
Step 10: Closing on Your Home Purchase
Once all your loan approval contingencies are met, your lender will contact you to authorize your scheduling of a closing date. At the closing, you will sign the final documents and pay the costs and fees required to legally transfer the property to you.
Documents Requiring Signature at Closing
This indicates that you accepted the loan terms offered by your lender and agree to repay the amount borrowed, plus the stated interest.
Mortgage of Deed of Trust
This is a security instrument that will require your signature at closing, which pledges your home as collateral for the loan.
Deed (for Sellers)
Once your lender transfers the money to the seller of the home on your behalf, the seller will sign a deed which transfers ownership of the property to you.
Affidavits and Declarations
These are legally binding documents which spell out the financial obligation you are taking on and outlines your rights as a homeowner. Be sure to read the documents carefully and ask questions if you don’t understand something from any of these documents.
Step 11: Transferring of Funds
When all final closing documents have been signed, your lender’s closing agent will review and approve the funding of your loan.
Congratulations, you are now a homeowner!
NOT SURE WHICH PROGRAM
IS RIGHT FOR YOU?