Finding a house is one thing you know how to do. Searching the home listings one by one, noting the master bathroom and that view from the breakfast nook that you've just gotta have. The funding part of the home buying process is one you'd probably rather avoid, though.
That's where we come in. We're here to make the home loan process less scary.
takes less than two weeks
Before you start saving the links to all of your favorite home listings, you should figure out your budget. Shop around for a mortgage by finding a few lenders and comparing their interest rates. Once you find one that you like, they'll pre-approve you for a loan and lock you into that interest rate for 60-90 days.
That pre-approval letter is your ticket to making a solid offer on a house. It's different than simply getting prequalified, as pre-qualification is only based off of the information you provide to your lender. The pre-approval letter is the lender saying that they have reviewed your credit report, income statements, and debt-to-income ratio, and based on those documents you are eligible for a home loan worth $XXX, XXX amount.
average of 30-60 days
One you've got that pre-approval letter in hand, it's time to start the house hunt. Before you dive in, however, take the time and make a list of things you've got to have in a house, and things that are negotiable. While you're optimistic now, remember that no house is absolutely perfect and making these decisions upfront will save you time, energy, and money in the long run.
After you make your list, we recommend choosing a local real estate expert to help you in your search. This is an important step because they have access to a large database of homes and are able to narrow down their search to fit your criteria.
Remember that even though you're approved for a certain amount, you'll still need to save money to cover the closing costs and down payment, as well as have some money on hand for the earnest money.
If your home search runs over the pre-approval period set up by your lender, you'll need to return to get another letter. Using the same lender will cut back on the amount of time it'll take to get another pre-approval letter, though.
Making An Offer
takes a few days to a few weeks
You've done it! You've found the home that you want and you make an offer. During this phase, it's easy to get caught up in the negotiations and forget your budget.
If you started saving a while ago, it's possible that you have a good chunk of money set aside for a home. Remember that some of that money has got to go toward the down payment and closing costs. As you're negotiating, don't get so carried away that you negotiate your down payment away with your mortgage.
Purchasing the House
Once your offer gets accepted, a chain of events are triggered.
Your lender will take a deeper look into your finances and credit scores, and help you go through your loan options to filter out the best loan programs for you. You'll then need to start your mortgage application. Thus begins your mortgage loan process.
During the loan application process and depending on the loan program you go with, your lender will need specific documentation. This documentation includes bank statements, income reports, credit reports, and other various documents.
Once your loan application is done, your lender gives you a loan estimate.
The loan estimate is your lenders estimation of the closing costs based on your loan amount, title insurance, and down payment. The loan estimate also includes things such as:
- The term of your loan
- Number of monthly payments
- Monthly payment amount
- Late payment fees
- Total loan amount (principal + interest over life of the loan)
Once you receive your loan estimate, your lender will give you a commitment letter outlining all of the charges, interest rates, and terms that you'll need, and make a promise to fill the loan based on their documents.
takes up to seven days
The next step in the loan process is the home appraisal.
Your lender sends out a third-party appraiser to look at the condition of the home and compare it to other homes like it in the area to ascertain the value. If the value of the home is more than or equal to the offer price, the sale moves forward.
If the appraisal comes back as less than the offer price, you will either renegotiate the price or find a new home.
four days to four weeks
Once the appraisal checks out, your lender creates a file with all of your information in it and sends it off to underwriting. This is where your information really undergoes some scrutiny. They'll dive into your financials and ask questions on anything they turn over that doesn't quite add up. You may need to submit a letter or two clarifying financials before the purchase price is verified and your loan is approved.
You can make this part run smoothly by being quick to submit clarification as needed and by being as cooperative as possible. It's not the most comfortable thing to have someone go through your financial history, but your cooperation goes a long way in reducing the amount of stress and wait time.
Once the loan is approved, your lender or real estate lawyer orders your title insurance. At this point, you'll have the option of getting a home inspection and either fulfilling or waiving your contingencies. Once all contingencies are met, your lender schedules your closing.
Now it's time to get your homeowner's insurance. Because you are using someone else's money to buy your house, they'll want verification that the home is safe against theft and natural disasters. After that, your lender releases the borrowed funds and you hand over a certified check with the down payment and closing costs over to your lender.
Then, you'll spend a few hours signing a bunch of documents with a notary and voila! The house is officially yours. Pour the bubbly and celebrate your new home!
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