The Home Buying ProcessWondering what to expect when buying a home? Here's a step-by-step rundown of the process.
- Pre-approval • An analysis of your credit report, income and assets • Stay within your comfort zone
- Work with a professional real estate agent to find the right home.
- Find the right home, make a bid, negotiate the price • Bid is accompanied by a good faith deposit • Clarify the commitment and closing date, negotiate purchase details
- Attorney review
- Apply for your mortgage • Most clients start the application process at the end of attorney review • You decide what type of mortgage is best for you: Fixed, ARM, or Interest-only
- Home inspection • Verify the home is in good condition. Inspection is conducted directly after attorney review.
- Initial deposit is given
- Mortgage commitment is issued • Completed after the home is appraised and the underwriter has reviewed your documents
- Title-work is started by your attorney • Once complete, title work is reviewed by your lender • If your closing is taking place quickly, title will be ordered after attorney review
- Your closing is scheduled • Your attorney will tell you how much certified funds to bring to your closing
- Receive the keys to your new home at closing • You will do a final walkthrough of your new property prior to the closing
The 10 Best Ways to Improve Your Mortgage Experience
- If you're not familiar with your mortgage retailer, take the time to check them out. Not all states require licensing of mortgage brokers. Check with the State Banking Department where your loan will be originated.
- If it sounds too good to be true, it probably is. Be wary of deals that are way below the other offerings in your market, or promises that can't possibly be met ("We close in 24 hours!") Don't be surprised if the advertised deals don't apply to your situation; they may be available only to the absolute best, top-shelf borrowers. The law only requires that the deal listed be available - not available to everyone.
- Research, research, research. Call lots of outlets. Get rates, points, fees and commitment periods for offers that are as similar as possible. Some of the lowest rates offered have no lock-in available, or can be obtained only if you close ASAP, so make sure that all quotes have the same terms, if possible. That way you'll soon be able to judge for yourself what deals are good or bad.
- Ask questions, get answers. Lenders sometimes talk a blue streak and expect that you understand. If you don't get it, say so. Make them explain (to your satisfaction) or take your business to someone who will.
- Get it in writing, on company letterhead, and signed. This pertains to everything you negotiate in your deal, but especially any lock-in agreement. More misunderstandings and disputes are related to lock-ins than any other item. Under the law, verbal agreements aren't worth the paper they're not printed on.
- Sign nothing you don't understand, and understand everything you sign, even if you need to get outside help. If legalese or contract language is difficult for you, hire a lawyer to help manage your transaction. Consider the few hundred dollars you spend to be very inexpensive insurance.
- Ask your mortgage professional how much experience they have with situations similar to yours. How long has the company been in business? How long have your broker and loan processor been in the business? More experience can mean a smoother transaction, especially if the market gets rough- and it can help to know your loan processor.
- If you're coming in "blind" with no referrals from friends or relatives, ask for a few references you can contact- and follow up on them. Of course, they'll probably be the most satisfied clients the firm has worked for, but it's a place
- Make sure your "no points" loan is really "no points." There are actually two kinds of points: Discount points (which lower the interest rate) and percentage-based origination fees, which cover some of the cost of getting you the mortgage, including commissions. If your "no points" loan has a one percent origination fee, it's actually a one-point loan. Compare it against other one-point loans for accuracy.
- Ask about prepayment penalties or early termination fees. Some of the lowest rates in the market, especially for ARMs, are available only on loans that carry hefty fees if the loan is refinanced in the first three to five years. If you don't ask whether any apply to your loan, you could find a costly "zinger" down the road.
Checklist for Loan ProcessingBelow is a checklist of documents that will be required for your loan application:
- Copy of one month's recent and consecutive pay stubs for all borrowers
- Copy of last two years of W-2 statements for all borrowers
- Copy of last two years of personal tax returns (1040s)- ALL pages and ALL schedules are required (only applicable for borrowers who are self-employed or who have bonus/commission income that exceeds 25% of their overall income)
- Two months of asset account statements- ALL pages and ALL accounts (savings, brokerage, 401 K, etc.)
- Copy of fully executed contract of sale for property purchasing (and property selling, if applicable)
- Copy of photo identification, such as a valid driver's license or passport
- You own additional properties
- You have had credit issues in the past
- You are receiving gift funds to use as a down payment on your purchase transaction
- You are a permanent resident alien, or are in the U.S. on a work visa
- You receive or are required to pay alimony or child support
- You receive social security, pension benefits or disability income