Purchasing a new home, whether it is your first home or not, can be an overwhelming experience! Here is my guide to help you through the process.
Two important things that are required of you to make the loan process go smoothly are (1) your attention to details and (2) being timely with your responses! When you are providing information or answering questions be thorough and complete. Timely responses are crucial and any delays could impact closing your loan.
Be organized with your documents. Below is a list of the most commonly required documents. Gather all the documents early in the process and have it provided upfront. This is necessary to prevent any delays.
Get pre-qualified/pre-approved for a loan. Pre-qualification is a lender’s estimate of how much you could be eligible to borrow. You may be asked to supply information about your income, savings, assets, and debt. At this time lenders review this information and decide how much you might be able to borrow. Being pre-qualified does not mean you will get the loan. But consider making a pre-qualification request to help you determine a price range that is right for you. Knowing what you can afford will make this process less stressful, helps you narrow down your choice of homes, and puts you in stronger position as you present a contract to purchase a home. A pre-qualification is a “quick, high-level” estimate that can be completed in just a few minutes. Being pre-approved shows the real estate professional and home sellers that you are serious about buying a home, that your credit is good, and that you are working with a lender or lenders who will provide you with a loan.
Completing the Application. On-line applications are done most frequently but they are also completed over the phone or in person as well. Basically, you need to supply information about who you are, where you work, your finances and the house you’re buying. Use this checklist of the items you will need:
-Photo I.D. and social security card, copy of divorce decree if applicable
-Last two pay stubs
-Proof of other income
-Last two tax returns (W-2’s)
-Employment history (two years), including addresses and contact information
-Assets- All pages of most recent 2 months statements for all accounts-checking, savings, stocks, IRA, 401K, etc
-Previous lenders or landlords (past two years)
-Your monthly household budget (for your reference)
-Other assets (life insurance, property, etc.)
-Source of down payment
-If funds to close will come from the sale of your home, copy of HUD-1 from the sale and the deposit slip showing the proceeds deposited into the bank account
-Home owners insurance Agent’s name, address, number for the subject property
-If you are renting provide your landlords name, phone number, and address. 12 months proof of rent will be necessary (cancelled checks, etc)
Loan Approval. Once the application has been submitted and signed, the next step is to review and verify the information. This includes a review of your credit, employment history, asset accounts, and the appraisal of the home you are purchasing. Remember, changes to your credit reports and credit scores can derail the process at any time. The lender may check your credit just hours before your loan is finalized. (Do not go out and buy furniture or a car at this point!!!) Once you actually apply for a home loan, your mortgage application will be submitted and sent along to a loan underwriter, who will determine if you qualify for the mortgage. “No lender funds or closes on a loan without the approval of an underwriter”. Sometimes their job is to simply check over your figures, make sure all the paperwork is in order and give their approval. Other times, they must look over all of the paperwork and make a sound decision based on their experience and good judgment. “It is the job of underwriters to make sure all of these factors meet particular loan guidelines. They make sure that all of the tax, title, insurance and closing documentation is in place. The underwriters also review the appraisal to make sure it is accurate and thoroughly completed, so that the home is truly worth at least the purchase price”. The underwriter has final approval and final responsibility for your loan.
Settlement or Closing. Once the loan is approved you will be ready to go. At the closing you will sign the final purchase and loan documents and pay any closing costs with certified funds or a cashier’s check. Then the keys are given over! CONGRATULATIONS!