Everyone attacks buying a home differently. Some people prefer visualizing their home a certain way, others prefer a more practical approach. When you finally decide on the perfect home for you, the significant work comes. For first-time homebuyers, it can be a confusing process. Your loan officer can help you through the process, but the more you know, the smoother the process will go.
Before we list the steps, know that this isn’t a comprehensive list and won’t cover every situation, because everyone’s loan process is different. The list is meant to give you a general idea of what to expect. Talk to your loan officer for any questions you have.
Pre-qualification is the first step in the loan process. It isn’t necessary to get pre-qualified to start looking for a home, but if you do, you will have an advantage when it comes to making an offer and making the loan process move smoother. In a pre-qualification, your lender checks your credit, your employment, your income, and debt-to-income ratio. Once a lender has calculated all the factors, they will send you a letter that shows the top level for which you qualify.
Submit Your Application
Once you make an offer on a home, the next step in the loan process is filling out the application. The application is an extensive look at all your assets, credit, and debt-to-income ratio that gives the lender the best look at your financial story. It is a lender’s chance to see if you are a good candidate according to the qualifications they set for a loan.
Order a Home Inspection
Now that the paperwork is in the hands of your lender, the next step is to order a home inspection. A good loan officer or real estate agent will recommend several reputable home inspectors for you. A home inspection is your best chance to find out any flaws that you are uncomfortable with. They can also suggest any items you should fix.
Once you’ve had your home inspection and are satisfied with the results, the next step is purchasing homeowner’s insurance. The insurance is a required step before a lender will approve your loan.
The next step is an appraisal. A lender will call an appraiser and schedule them to visit the home. They will look at the house and get a pretty specific value of the home. They report that to the lender so the lender knows how much they will lend to you. If the appraisal is higher than the amount the buyer offered, no further work is necessary. If it is below, the buyer and seller will need to negotiate several options that work for both sides.
Around the same time as the appraisal, your lender will request a title search from your title company. They want to make sure there are no liens on the property that will slow up or end the process.
Credit rates are constantly changing and even a small percentage of a point can be thousands of dollars over the life of a loan. If you have a fixed rate loan, you will want to get the rate at the lowest possible time of the loan. If you haven’t locked in by now, it is best to do so as quickly as possible. You are required to lock in 10 days before a loan will close.
Once the home inspection, appraisal, title search, and the rate lock are in place, the loan officer sends all the information to an underwriter. An underwriter will review the paperwork and documentation and make sure no missing details or paperwork needs to be submitted. If an underwriter needs more information, then they will suspend the loan until they get more information. When they are satisfied with the data, they will approve the loan.
Closing disclosures is a document that gives the buyer all the details about the loan, including the interest rate, monthly payments, fees associated with the loan and other terms and conditions. Closing Disclosures must be submitted to the buyer at least three days before closing to allow the buyer time to view the final terms and understand the importance of the documents.
At closing, you should bring the following documents to the signing: Funds to pay for your down payment and closing costs (either a cashier’s check or wire documentations), identification and proof of insurance. The title company will go over all the terms and answers any questions. There will be a lot of signatures, but all of them are necessary and you can ask the title representative any questions you might have. Once you sign everything, you can now get the keys to your new home.
As you know, a home is a big purchase and with that, comes a lot of steps. If you do it the right way and work closely with your agent and loan officer, the proceedings will go much faster.