A one on one personalized pre-approval with a trusted trusted mortgage advisor before you start the home buying process is the key to a successful home purchase experience. This prep work will address all of your concerns upfront, as well as uncover any potential challenges that may complicate your new home purchase. By doing this prior to signing a purchase contract on a home, you can eliminate most of the obstacles to borrowing without jeopardizing the actual purchase transaction.
During the loan pre-approval process, you will need to verify certain information about yourself and complete a mortgage application. This information will include: residency history, work history, income and assets for down payment. In addition to this you will need to provide your personal information so your credit profile can be accessed directly from the credit bureaus.
By following the pre-approval process step by step, it gives you a clear idea of what sales price you can afford, specifically a monthly payment you are comfortable with. Second, it strengthens your offer to the seller when it comes time to submit your offer. Lastly by getting pre-approved upfront when you find your dream home you can submit your offer and put yourself in a position to have a successful home purchase experience.
There are many loan programs available from first-time buyer programs like VA, FHA or USDA to traditional programs like conventional and jumbo loans. Some of these programs offer 100% financing with no mortgage insurance while others require down payments of 3.5%, 5%, even 20% down.
With all the options available, you need expert advice to help you choose the right loan for your unique situation. Your trusted mortgage advisor will be able to come up with several loan options based on your needs, what you qualify for, and what you feel comfortable paying for your new mortgage.
This is where the fun really starts. Once you've been pre-approved by your lender and have an idea of what price range you qualify for, you are ready to start your home search. At this stage, it's a good idea to find a real estate agent you feel comfortable working with. They will work with you to find the right home, for the right price based on your pre-approval.
Quick Note: If you would like a referral for a good local real estate agent to work with be sure to ask your trusted mortgage advisor for a recommendation.
When you find a home you like, your real estate agent will submit a purchase contract on your behalf. Earnest money is always included as part of your offer, this is money held in escrow to confirm the sales contract. At this stage, your offer will get accepted or the seller's agent will come back with a counter offer. When your offer is accepted, the due-diligence period begins which is a series of timelines for mortgage loan approval, appraisal, inspections and other requirements which would be spelled out in the terms of the contract. This is a critical point in the process since if you don't meet the due diligence period laid out in the contract you could lose your earnest money. That is why getting pre-approved upfront is so important.
Once your real estate agent provides your trusted mortgage advisor with a fully executed sales contract the processing and underwriting period begins. This involves the processor, underwriter, lender, appraiser, title company, insurance agent, real estate agents, etc. At this point you're income, assets and all 3rd party items are verified. The processor will then assemble all this information and then submit your loan file to the underwriter for approval. Your home loan will then get approved with conditions. Additional information will then be requested from you to satisfy any underwriter requests. Be sure to provide everything requested in a timely manner to be able meet your due diligence timelines. When all conditions are met, you will receive your final approval. At this stage, your loan documents are drawn up and forwarded to the real estate attorney to prepare for closing.
Closing is the last step in the home buying process. The closing will take place at the attorney's office previously determined on your sales contract. Before closing, your trusted mortgage advisor will review the HUD settlement statement with you that covers the funds needed at closing, closing instructions and other final details. During the closing you will be reviewing and signing several loan papers. The closing agent will explain each document clearly and will be available to answer any questions you have. Once signing is complete the lender will wire the funds needed and you will be given the keys to your new home. This is the point where you become obligated on your new mortgage, the seller receives their funds and you change from home buyer to homeowner.