THE BUYING PROCESS
Buying a home is exciting. However, it can also be intimidating and a little stressful not knowing what to expect. Below is a little more information on the process so you know what to expect. See diagram below showing the steps of the home buying process.
Want to know how much money you need before looking for your next home? Below is a timeline and layout of costs incurred by the buyer when purchasing a home.
FINANCING YOUR HOME PURCHASE
If you need to obtain a home loan (mortgage) to complete the purchase, I will assist you in the process.
• Being pre-approved can put you in a stronger negotiating position and can save time in the loan approval process.
• I can put you in touch with experienced home mortgage consultants through our relationship with [your preferred lender]
• Various financing options may be available to you, including
- Fixed rate mortgage
- Adjustable rate mortgage (ARM)
- Government-assisted (FHA or VA) financing
- Seller-assisted financing
• You can expect the lender to ask for standard information regarding your income, expenses and obligations
LOAN APPLICATION CHECKLIST
The following information is typically needed when applying for a mortgage.
Purchase contract and property information
Employment history and income
Liabilities and debts
THE LOAN PROCESS…Getting From Contract to Close
Here is a brief overview of what you can expect to experience throughout the loan process.
1. Loan Disclosures and Loan Estimate
After you have a contract in place, a detailed loan disclosure package will be
securely emailed to you for review. This loan disclosure package will break out all the fine-print details of the mortgage you selected. It will show if you have a fixed rate or adjustable-rate mortgage. It also breaks down all of the costs and down payment associated with your mortgage program. Once you have reviewed, signed dated, and returned your loan disclosures, your file will go into processing.
2. What is Processing and how long does it usually take?
It’s the step before your file is underwritten. Your assigned processor will go over your entire file and prepare it for underwriting. They will prepare every aspect of your file, from verifying employment to working with the title company and prepare you for closing. They will follow up on any additional documents still pending on the file. All of our loan processing is done here at our office.
Processors order many different documents from multiple third -party entities. These can include tax transcripts from the IRS, title work, homeowners insurance, verifications of employment, verifications of rent and other credit items. Most files will remain in the “processing stage” for a week while waiting on these third-party items. Once your file is fully processed it is ready for underwriting.
3. What is underwriting and how long will it take?
Underwriting is the process where in-house mortgage underwriters review
income, assets, credit documents, title work, appraisal, and other items to issue an underwriting conditional loan approval. A team is dedicated to review all of your personal information during the qualification stage so that underwriting will be a smooth process for you.
Underwriting is usually 2 days or less. Upon completion, underwriters typically request additional items called “conditions”. As a result of the underwriting review, most files have additional items that need to be collected. Your loan processor will contact you and go over any items that the underwriter requests. If and when the processor requests additional documents from you. Try to return your conditions as soon as possible.
4. “Clear to close”, what does this mean?
Upon receipt of all items needed to clear the remaining loan conditions, the file is returned to underwriting. Once underwriting clears all of the conditions on loan, a “clear to close” is issued. This means the loan is fully approved and ready for closing. At that time, we will send your closing documents over to your Title Company. This usually happens a few days before closing.
5. Closing Documents
Once your file is clear to close, an in-house attorney will get the Title Company to
generate your formal closing documents. These will include final versions of the upfront loan disclosures and additional documents relating to the mortgage and property. The buyer, and the seller will have documents which must be signed.
6. Closing Disclosure
This disclosure gives all the final details of the loan including cash to close and monthly payment. This document will be sent at least three days prior to your loan closing via email. It is typically requested that you bring a cashier’s check made to the title company or a wire for the total amount needed to close.
Your realtor will work with you and the Title Company to set a date and confirm location. Closing can typically take anywhere from 45 minutes to two hours and involve signing all closing documents.
Once the Title Company has received signed documents from both the buyer and seller these are sent to attorneys for review. Once the last person signs, funding occurs generally within an hour. You are now officially a homeowner!
4 BASIC HOME LOAN TYPES
FHA – Federal Housing Authority
Minimum Credit Score 600
Maximum Seller Contribution is 6% of Sales Price
25-30 day standard loan processing turnaround 21 days or less if borrower is pre-qualified
90%-75% financing allows up to a 6% seller contribution
Less than 75% financing allows up to a 9% seller contribution
Investor Purchase = Limited to 2% Seller Contribution
Minimum Credit Score: 620
25 – 30 day standard loan processing turn times, 21 days or less if borrower is already pre-qualified
USDA – United State Department of Agriculture
Subject to Income and Property Requirements
Longer processing and underwriting turn times: 35-45 days
USDA Status Hotline Number: 254-742-9781
VA – Veteran Affairs
Seller must pay $1800 in closing costs for fees that the veteran is not allowed to pay. Seller may pay an additional 4% in seller contributions over and above the $1800
Minimum credit score 620
Requires Termite Inspection
VA Funding Fee is financed into the loan (unless disabled)
UNDERSTANDING ESTIMATED MONTHLY PAYMENTS
Principal and Interest – The monthly mortgage payment which includes the interest accrued during the prior month plus the scheduled principal.
Generally, mortgage interest paid is a federal income tax deduction. (Check with a CPA). A savings at tax time!
Property Taxes – Are specific to the subject property. We have estimated property taxes based on your target purchase location. Once you have a specific home we can update the numbers to the exact property taxes.
Tax rates vary depending on the city, county, and school district.
Generally, property taxes are a federal income tax deduction. (Check with a CPA). A savings at tax time!
Homeowners Insurance – Also referred to as Hazard Insurance. This insurance protects you. The property owner, against damage to your home.
The final cost of the insurance policy is determined by the insurance company selected. Some factors that affect the costs are age of the home, claims history (on the subject home and on the applicant), age of the roof, property location, and the applicant’s credit history.
Mortgage Insurance (MI) – MI or PMI is an insurance policy to protect the lender in the event that a borrower does not make their loan payments and defaults on the loan.
The cost of Mortgage Insurance decreases as your down payment increases. If you put down 20% of the purchase price (or more), you don’t have to pay mortgage insurance.
Options include monthly insurance, one time paid at closing, or selecting a slightly higher interest rate in return for no monthly Ml, among others.
FHA loans require MI regardless of down payment in most cases; VA loans do not ever require MI
Home Owners Association Dues (HOA Dues) – A charge from the community the home is located in. These funds are used for everything from maintenance of the community common areas to managing the neighborhood.
These fees are paid separate from your mortgage but must be included in your debt-to-income ratio for qualification.
MY COMMITMENT TO YOU
My promise and goal is to make the experience of buying a home so seamless that you really cannot imagine it being any better. My systems and everything that I do are designed around delivering on this promise. I am 110% focused on what it is you want and need in buying a home.
My personal commitment to you is to:
Listen and understand your wants and needs.
Walk you though the buying process with as much communication, detail and explanation as possible.
Serve and represent you in the best way possible.
And ALWAYS have your best interest at heart!
Now of course I am human and there might be challenges. Just know that my goal is to make this experience as easy and enjoyable as possible for you and your family.