September 28th, 2019 12:47 PM by Jackie A. Graves
First time home buyers who dip their newbie toes in the mortgage
waters might soon find out there’s a lot more to know than originally thought.
It is a brand new world with lots of new terms, people and businesses and it
can be a bit overwhelming at first. Heck, even seasoned buyers can find the
mortgage process quite a bit to handle sometimes. But for first timers, knowing
ahead of time what to expect and when to expect it will make the process a
Here’s what to do financially when you’ve decided to stop
renting and start owning.
You’re still sort of in the exploratory phase but you’re still
committed on buying your first home. Yet buying a home isn’t something you
should do on your own, especially as it relates to financing. Know this,
though- most every traditional mortgage company offers the same suite of home
loan options. Mortgage lenders spend a lot of time and effort on marketing and
loan officers live and die from referrals but both will try and differentiate
themselves from everyone else. Typically the primary differences are experience
in the industry and stellar customer service.
Now it’s time to get some referrals for financing. You can get
them from your selected real estate agent, friends and family or your financial
planner or CPA if you have one. Once you make your choice about where you’re
going to get your first mortgage, you’ll then speak with your loan officer over
the phone or at the place of business. This is the prequalification stage.
After a relatively brief conversation about your income, current debt and
employment, the loan officer will research current mortgage rates and provide
you with an amount you can comfortably qualify for as well as a list of loans that
meet your needs.
It’s getting closer. But now it’s time to submit a loan
application to your loan officer. Most often this is done online but your loan
officer might offer to come to your home or place of business and take the loan
application face to face. You’ll sign a list of documents, most importantly
your loan application and authorization forms allowing the lender to inquire
about your employment and credit history. Your loan officer will electronically
submit your application to an automated underwriting system which will, within
a matter of moments, provide a list of items needed to get your loan to the
full approval state. You will then have a preapproval letter in hand. It’s time
to submit copies of your pay check stubs, bank statements and tax returns if
Your loan officer told you not to make any sudden changes about
your work, employment or make any relatively large purchases. Don’t go buy a
car while your loan is in process, for example. You have your preapproval letter
in hand so it’s time to get serious about finding your first home. This, of
course, is done with your real estate agent. And I can’t stress this enough- do
NOT try and look for a home and negotiate with the sellers about the price.
Professional real estate agents are pros at negotiations and you’re already out
of your league. Let your agent do the heavy lifting by finding some housing
options in the areas you’d like to live. And, surprise, a buyer’s agent doesn’t
cost you a dime.
By now you’ve likely looked at your fair share of homes and you
may very well be in a position to make an offer. You should always keep in
close contact with your loan officer as well. Interest rates move over time and
it’s possible that rates have gone up which effectively lowers the amount you
can qualify for. Conversely, rates may have gone down and your buying power
received a boost.
You’ve found a home. Wheels begin to spin rather quickly after
the contract has been signed. Your lender will need an appraisal and many
lenders ask for money to pay for an appraisal upfront. Your loan will be
reviewed one more time and any expired documentation will need to be updated.
Credit documents such as a credit report, pay stubs and bank statements need to
be no more than 30 days old when it’s time to fund the mortgage. Once your loan
has received full approval and you’ve met all your loan conditions, loan papers
are orders. At your closing, you will sign a host of closing documents and have
your down payment (if needed) and closing cost money wired to the settlement
agent. After signing, the lender does one more review of your file, making sure
all the documents have been properly signed. You’re now a first time home
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