October 29th, 2019 8:00 AM by Jackie A. Graves
Okay, you’ve got a
signed contract in your hands. You applied for a preapproval several weeks ago
and began shopping for a home. Your loan officer pulled a credit report and
asked for documents providing evidence of enough cash to close. This amount
includes not just your down payment, but also closing costs. While you shopped
for a home, your lender simply waited for you to find a home to buy. You
did, you have the contract, and the wheels begin to spin.
At this stage, it
might seem a little quiet on your end. You’ve supplied all the requested
documentation and you might think very little is going on but in reality that’s
not the case at all. The very first thing you should do is order a property
inspection. While your mortgage company doesn’t require one, it’s important
that you do. Your real estate agent will provide you with a list of inspection
companies for you to call. From light switches to sink disposals to hot water
heaters, the inspector makes sure everything is in working order. Small items
such as a light bulb that needs changing is something for you to note but the
lender won’t mind. Cracks in the foundation, however, will give a lender pause.
So much so that the loan cannot be approved. Once you’re satisfied with the
inspection, the lender will then move forward.
The appraisal is
ordered and depending upon local market conditions you should receive a copy of
the appraisal within a week. An appraisal can be in the form of an Automated
Valuation Model, or AVM, or it can be a full appraisal where the appraiser
literally visits the property, takes pictures and researches recent sales in
the area of similar homes. Your loan officer will give you an idea of this
timeline. A title report is ordered, and escrow is opened. The title
report will show if there are any outstanding liens against the property as
well as show a chain of ownership.
After a week or two,
your loan is submitted to the underwriter. The underwriter is the individual
within the mortgage company that makes sure the loan package submitted meets
all the approval guidelines for the selected loan program. Again, depending
upon volume, you should have your approval within a few days. It doesn’t take
very long for an underwriter to actually approve the loan, but it might take
some time for your file to be reviewed. An underwriter might have 25 or so
active files at any one time.
When your loan is
fully approved, your loan papers will be ordered and delivered to your
settlement agent. The settlement date is listed on the first page of your sales
contract and while most closings do take place on that date, it’s always better
to sign your papers a day or two ahead of your final funding. This is in case
there are some issues that might come up as you approach your closing. Giving
yourself a few extra days to address any issues is always a good idea. If
possible, that is. Once both buyers and sellers have signed and the documents
delivered back to the lender, the paperwork is reviewed. When the lender has
determined the documents have been properly signed, the lender releases the
funds for the loan.
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