The very first step to buying a home is to apply for a home loan from a lender, like me! Before you even start looking for homes, you need to know if you can qualify to buy a home and how much house payment you can afford. Looking for a home before you have your financing in place is kind of like going to a restaurant without your wallet. You would be able to look at all the yummy food to eat on the menu but not be able to order it. In fact, the waiter might not even give you the menu if they know you don’t have any money. Similarly, some real estate agents won’t be willing to show you homes to buy if you aren’t pre-approved for a home loan. Applications can be taken on line, over the phone or in person. You will need to provide your income verification (paystubs, tax returns, W2’s). It is an easy process, so give me a call or apply now!
Having a “Pre-Approval Letter” is essential before you begin looking for a home or make an offer on a home. Depending on the complexity of your credit, income, down payment, etc., getting pre-approved can be as quick as submitting your application and talking to the lender the same day, or it might take a few days to gather more information. Being pre-approved means the lender has reviewed your credit, income and down payment requirements and told you the maximum purchase for which you qualify. It also informs you as a buyer the amount of your payment for the purchase price of the home for which you are shopping.
Look For A Home
Now that you have the Pre-Approval Letter in hand, you can begin to look at the menu. This is the fun part! Find a real estate agent and he/she will show you homes in your price range. The agent should also ask you what kind of home you are looking for – what area of town, how many bedrooms, garage or no garage, basement or no basement, etc. The agent will take you to the homes so you can walk through them and compare. Finding a home that is “your home” is a very personal thing. Make sure the home you find gives you that warm, fuzzy feeling and make sure you don’t settle on a home that isn’t what you want. No home is perfect and you might have to sacrifice some amenities you want, but you also don’t want buyer’s remorse on a purchase this large. There are always homes for sale and new homes come up for sale every day. So take your time if you have the luxury to do so.
Make An Offer On A Home
You have found the home of your dreams and are ready to buy it! With the agent you will determine how much you will offer to purchase the home. You may also ask the seller for them to repair certain items or ask them to pay your closing costs. This is a very valuable part of working with a good real estate agent as he/she will advise you in these areas and negotiate the best deal for you. To make the offer, you will also have to pay what is called earnest money. Earnest money is an amount of money, usually about $500 or $1,000, you provide to show the seller you are serious about buying the home. The money will be credited to you as part of your down payment if the offer is accepted, or it will be refunded to you if the offer is declined. If your offer is accepted by the seller, you are now what is called “under contract” and the real loan process begins.
Processing Your Loan
The real estate agent will provide the accepted contract to your lender. At this point the lender (I hope this is me!) will need to meet with you again to go over the final numbers with the exact purchase price amount, the exact property taxes on that home, the fees that either you or the seller will pay, and also have you sign the preliminary disclosures. The lender will also let you know what other items you need to provide, such as bank statements, divorce decrees, a copy of the earnest money check, etc. The appraisal and the title commitment report will be ordered at this point. You may also have decided to have a home inspection done to look for any major repairs that you could not find. Do this the same week your offer is accepted. It is also very important to get any of the items your lender has requested back to him/her as quickly as possible.
Once the lender has all the verification items, the appraisal, the title commitment, everything needed in the loan file, the file will be given to a person called the Underwriter. The Underwriter is the person that double-checks everything in the file. Is the income calculated correctly? Is the down payment documented sufficiently? Are there any errors or questions on the appraisal? If he/she sees we need more items from you, the lender will call you to gather those items. This process usually happens about a week before your scheduled closing date. Don’t panic if your lender calls you for more information at this point – it is part of the normal process!
Close on Your New Home!
Once the loan has final approval, the lender will send the closing documents to the title company. Your real estate agent will schedule an appointment with the title company for you to close on your loan, meaning to go and sign all the documents. This usually takes about an hour. Your real estate agent and your lender will also attend the loan closing with you to make sure and answer any last minute questions and assure a smooth process. Congratulations – you are a homeowner!