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Mortgage Loan Process - The Steps to Buying a Home
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Buying a home, especially if you are a buying a home for the first time, is a big deal. It is a time of excitement and nervousness. Being a homeowner also brings with it a new level of responsibility and security all wrapped up together. There are no secrets to the process that you need to go through to get a home.
Below you will find a comprehensive list of things to do and consider as you venture into homeownership. Print this out, title it: The Steps to Buying My New Home, and keep it with you to track your progress.
Feel free to modify this list with things other people tell you. There is no exact perfect way to buy a home. Yet, there is a common way to do it. Everyone who has gone through the process will probably have some tip for you. Don't be afraid to borrow their tips to go with this checklist.
Get Pre-Qualified, Get Credit Report, Find a Mortgage Company
- Get Your Credit Report and Credit Scores - this will cost you some money, but it is necessary. Check your report for errors, incorrect data, accuracy etc. You want your scores to be greater than 620. If not, start working on improving your credit scores. Remember: higher scores - lower monthly payments.
- Gather your financial information - 30 days of pay stubs, 2 months of bank statements, last quarterly IRA and 401K statements, last year's W2's. Review Additional Information on Cash, Savings, Retirement Accounts etc. and Proving Income.
- Research Loan Programs, FHA Home Loan Options, First Time Home Buyer Programs
- Find a Mortgage Company or Lender to work with - list of questions to ask Loan Officer
- With your lender, determine the price range of homes that you qualify for. You will need your credit report and your financial information to complete this.
- Determine your monthly payment comfort level. If less than payment for the price range that you qualify for recalculate the home price range that fits your comfort level.
- Now, Get pre-approved - this means give your lender your financial documents like your pay stubs, W2's, bank statements etc. so they can get your loan preliminarily approved. You get the full approval once the home appraisal and sales contract are reviewed by the underwriter.
- Determine where you want to live, and what kind of house suits your needs.
- Additional considerations to help you think about the mortgage program that best fits your needs.
Shop For A Home To Buy - Find a Real Estate Agent
- Find a Real Estate Agent - ask for referrals, do a search online.
- Start your home search based on the price range you qualify for, and the location and home features that you want. The agent should set you up on some sort of automated email system that will send you new listings every day. Also, check out PropertyNut.com.
- Ask the Real Estate Agent for a sample contract for you to read and ask questions about. You want to have an understanding of what's in the contract before you write the real one.
- Once you have homes picked out to visit, go visit them. Take notes about each home you visit. Trust us on this; you won't remember the specifics otherwise once you visited more than about 5 homes.
- When done looking at homes - you'll know when this is as you will have some homes that you want to revisit - schedule time to take second looks. This time take more detailed notes. Home characteristics to consider.
Submit Purchase Contract On A Home
- If you find a home that you want to purchase, let your agent know and sit down with your agent to write up a sales contract offer. Make sure that you know what you are offering. Make sure that your agent knows your negotiating hot buttons like seller paid assistance, or credit for new carpeting etc.
- If your offer is accepted, make sure that the appropriate inspections are scheduled and completed. If you can, attend the home inspection. You will want to speak with the home inspector while they are there. The home inspection is very important as it tells you what, if anything, is structurally wrong with the house - including all of the appliances, the AC unit and heating unit etc.
Get A Home Inspection Before You Buy A Home
- If you are happy with the home inspection then make sure that your property appraisal or property valuation is scheduled and completed. Expect to pay the appraiser at the time of the appraisal.
- If you are not happy with the home inspection you probably have several courses of action: get out of the sales contract and move onto another house, and negotiate with the seller if there are things that they can fix so the property meets your approval.
Get Loan Approval From Mortgage Lender
- Narrow down the type of loan that you want from the mortgage company.
- If you haven't already, sign a full loan application from your loan officer and gather any additional documents you might need to get your loan approved.
- If you haven't already, provide your loan officer with 30 days worth of pay stubs, your last two months of bank statements, your last quarterly statements from your IRA/401K's if applicable, W2's, maybe your tax returns, and any other information your loan officer might ask for.
- Make sure that you know who is going to be issuing your title policy. Much to contrary believe, it is actually your right to pick who does your title. Most of the time however, the real estate agent has a title company that they work a lot with who can issue you your title. The real estate agent order the title policy most of the time - but it gets issued to the mortgage lender who gives you your loan.
Purchase Home Owners Insurance Policy
- Investigate and purchase homeowners insurance. The effective date of your policy should be set up for the day that you get your mortgage. Make sure that you get a couple of quotes as there are going to be differences in what you are charged. Give the contact information for the insurance company that you choose to your loan officer. They will need it.
- If necessary you will have to purchase flood insurance. It is a good idea to find out during the sales contract phase whether the home is in a flood zone or not. Flood insurance is much more expensive than regular home insurance.
Be Patient and Keep Focused on Your Settlement Date
- You will get asked for all kinds of seemingly little stuff as you get your loan approved. Keep an open mind and be patient.
- Talk to your Loan Officer and Real Estate Agent to make sure everything is on track to settle on time about 1 week in advance.
- Just before you go to closing you need to do a walk through. This is a very important step so do not miss it.
- If you have to bring money to your settlement, make sure that you have it in the form of a cashier's check, a bank check, or a wire. Check with your loan officer on this one.
Go To Settlement, Get Your Mortgage, Get Your Keys
- Go to settlement, sign your documents, hand over your money if you had to... get your keys, garage door openers, any appliance warranties etc.
If you follow these steps as a guide, you should not come across too many mysteries or surprises in your home buying experience. Good Luck and Happy House Hunting.
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