July 28th, 2019 9:43 AM by Jackie A. Graves, President
you’ve decided to buy a new home — congratulations!
probably feeling a lot of emotions right now. Elation. Anxiety. And possibly
confusion. You may wonder what’s going to happen next. Or worry that if you
forget to send a document or make a call, you’ll derail the process.
First of all,
relax. Most likely, you’re surrounded by professionals who’ve been through this
before. But just in case you’re looking for backup, we’ve assembled the steps
you can typically expect and what you’ll need to do. Whether you’re at the
start of this journey, or nearing its end, we hope this guide will help you
feel ready and at ease.
haven’t done so already, contact a lender for a pre-approval. You can even start the process online
by finding a local lender on Zillow.
pre-approval is a letter from a lender that indicates you can qualify for a
loan of a certain amount. It shows your agent and sellers that you’re a serious
buyer and can be advantageous in hot markets where sellers may be considering
you, the lender will ask some questions and pull your credit report. Your
credit report shows your credit accounts, payment history, and your credit
score. Lenders use this information to determine how much credit you can
qualify for. Knowing this amount will save you time since you’ll be able to
focus on homes in your price range.
pre-approval in hand, it’s time to visit properties that fit your criteria
(e.g., house size, lot size, location). Your agent can help you understand
which homes are likely to be good matches and schedule showings.
When you find
THE ONE, your agent can help you structure an offer.
Your offer will detail how much you plan to put down in earnest money with your
offer, your down payment,
and how much you plan to finance. The earnest money deposit is typically 1% to
2% of the sales price. The funds are released from escrow and applied to your
down payment at closing.
can include contingencies (conditions) such as the timing of home inspections
or having the seller pay to refinish the wood floors.
If your offer
is accepted, it becomes a binding agreement for both you and the seller, so be
sure you read it carefully.
time to actually apply for your mortgage. You can use any lender for this step.
In other words, you are not obligated to use the lender that pre-approved you.
It’s also a good idea to get quotes from multiple lenders. You can use Zillow to
request multiple quotes, anonymously.
ask about your employment, income, assets, and debt. Be prepared to provide
current bank statements (checking and savings accounts) and your W-2s going
back several years. You should also be ready to explain any discrepancies in
your credit history such as late bill payments, being turned over to a
collection agency, or a bankruptcy. It’s a good idea to have dates, amounts,
and causes ready if you think these situations will come up.
There may be
several types of mortgages that
fit your situation. These could be fixed or adjustable rate mortgages,
conventional or government issued (VA, FHA, USDA). If you are applying for a VA
loan, you will need proof of your military service. The lender should explain
the best fit for you, and provide you with a Loan Estimate, which outlines the
terms of your loan, with estimated closing costs, interest rate, and monthly
payments (principal, interest, taxes, and insurance).
include settlement fees (the cost of doing the loan) plus any prepaid expenses
(put in an escrow account) for homeowners insurance, mortgage insurance, and
By law, you
must receive Loan Estimates within three days of your application.
decide to move forward with a loan, a lot will start to happen behind the
scenes in the lender shop. The loan processors who work for the lender will
gather documentation about you and the property to assemble a “loan package”
for the underwriter.
are the key decision-makers when it comes to approving your loan. They will
double check the accuracy of the documentation in your file and match your
eligibility and the property type against the loan product you have applied
has been reviewed, the underwriter is the one who will approve or reject the
loan. They also may approve your loan with certain conditions, such as asking
for an explanation about late payments or collections in your credit history.
notifies you once you’re approved and sends your loan file to the title company
(or an attorney) for the actual close of your loan. It will be a lot of
paperwork, but fear not! One of the most important documents, the Closing
Disclosure, should look familiar. It is the finalized version of your Loan
Estimate, confirming the cost of your loan.
Disclosure should closely match your Loan Estimate. By law, you have the right
to review the Closing Disclosure three days prior to the close.
there…but there is one last thing. You will need to do a final walk through of
the property 24 hours prior to the close to make sure any contractual repairs
were completed and the home is vacant and ready for you to move in.
Now all that
stands between you and homeownership is signing your paperwork at the close. Be
sure to bring two forms of identification to the close and be prepared to spend
at least two hours. Most of all, don’t rush and don’t be afraid to ask
questions if you don’t understand something.
for your review will include:
the Closing Disclosure (which
should have been provided to you three days before the close)
the Promissory Note (showing
the loan amount and terms of the loan)
the Deed of Trust (which
secures the note and gives the lender a claim against the home if you fail to
live up to make your payments)
Certificate of Occupancy
(which, if the house is newly constructed, you’ll need to move in)
You also may
need a cashier’s check if your closing costs are not rolled into the loan
amount. And a checkbook will come in handy for any small differences in the
estimated balance owed and the final amount.
everything is signed, you’re done! The title company completes the recording
and funding of your loan. Congratulations! You now own your new home.
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