Purchase
A Purchase Loan Explained
Whether you are purchasing your first or your fourth home the purchase of a home is a big decision. during the purchase process the emotions and anxiety that surround the process can be overwhelming. I am here to help. Here is a step by step list of the actions surrounding the home purchase process. I feel the better educated you are on the process the less stress and anxiety will be created.
1. Loan Search − Put yourself in the hands of an experienced mortgage professional, someone who will help you to determine which financing options best suit your needs today and in the future.
2. Pre-approval/ pre-qualified- Getting pre approved for a mortgage loan so you will know in advance exactly how much house you are comfortable purchasing. Completing this step will also increase your negotiating power with home sellers since you will be viewed as a "cash buyer". There is a big difference between being pre-approved and pre-qualified. A pre-qualification is a letter from a lender basically stating they spoke with you and you are qualified. A pre-approval is achieved after a lender reviews your income/asset information and has submitted a loan application and received an approval waiting for an address. This is what I recommend. Knowing you are approved and what your payments will be alleviates stress and anxiety.
3. Loan Application − Obtain a need list from the lender of the information required for the loan application. It is crucial to supply the lender with as much information as possible, as accurately as possible. That information will be relied upon to make a determination regarding your qualification. If the information is inaccurate it can lead to difficulties closing the loan.
4. Documentation − This is all of your information. The common information required includes current pay stubs, two years most recent tax returns, and account statements verifying the source of the down payment, funds to close and reserves.
5. The House Hunt − Begin shopping for a house. If you would like to work with a local Real Estate agent I can refer you to a professional in your area. When you identify the home you would like to purchase, the terms of the sale will be negotiated. This negotiation will include the sales price, any seller credits, and what will be included with the house.
6. Open Escrow – Once each party has agreed to the terms of sale, the escrow will be opened. Escrow is the neutral third party that makes sure all terms of the contract are satisfied. Usually as a home buyer you will be required to have a good faith deposit when escrow is opened. The amount of the deposit varies and can be negotiated as a term of the sale.
7. Appraisal − The lender will require an appraisal on all home sales. This will establish the true market value of that particular home at the time of purchase.
8. Title Search − The title search will reveal any liens against the property. The title company insures you against any liens that could attach to the property that belong to the previous owners. It also confirms that all liens are cleared before the transaction is completed.
9. Termite Inspection − In California it is customary that every home before it is sold has a termite inspection. This inspection will check the home for any termite activity and water damage. If problems are found, repairs may be necessary.
10. Processor's Review − We will package all of your pertinent information and send it to the lender for their review.
11. Underwriter's Review − Once the lender receives the file is it sent to the underwriter for final review. The underwriter checks each part of the application to make sure it meets all of the investors guidelines. After their review, the underwriter makes the final decision regarding whether a loan is approved.
12. Approval, Denial or Counter Offer − Loans can be approved, denied, or a counter offer made. If it is approved we will move forward and prepare the loan documents for you to sign. If it is denied the loan did not meet the investor guidelines. In this case we can restructure the loan or send it to a different lender for review. The last option is a counter offer. This means the lender will change part of the loan requirements to meet the guidelines. They may ask the borrowers to put more money down to improve the debt−to−income ratio or the borrower may need a bigger down payment if the property appraises for less than the purchase price. There are many options for counter offers. We will guide you through the process and make sure the loan will still fit your needs.
13. Mortgage Insurance − Many lenders require private mortgage insurance when borrowers put down less than 20 percent on a loan. This is an insurance policy the borrower pays for that protects the lender in case of default. Once you reach a 20 percent equity position in the home this insurance can be removed.
14. Insurance − Fire and hazard insurance is required by all lenders as a requirement for the loan. This insurance will pay to replace the home in the event of a fire. Flood insurance will also be required if the property is located in a FEMA flood zone.
15. Signing − During this step, final loan and escrow documents are signed by the borrowers.
16. Funding − Once all of the lenders conditions are met, the lender will fund the loan. This is when the lender sends a wire or check for the amount of the loan to the title company.
17. Loan Closing − Documents transferring title will now be officially recorded by the County Recorder. Now the transaction is finally complete.
18. Congratulations, you are now a homeowner!
If you'd like to learn more, please give me a call. I'd be happy to speak with you!
