August 25th, 2014 5:59 AM by Jackie A. Graves, President
Once you’ve made an offer for a home and the
sellers have accepted it, you may feel you can relax and just get ready to pack up and move.
However, until you get to the settlement date
and have the keys to your new home in hand, you will need to stay vigilant about finances
and keep in close communication with your real estate agent, the title company
and—most of all—your lender: your home loan may still need attention.
From Pre-approval to Final Approval of the
When you consulted a lender and obtained a pre-approval
letter for a home loan, you may have thought your loan application was
complete—but now that you have a contract, the real application must be
Hopefully, your lender already went through
the step of obtaining documentation from you—of your income and assets, bank
statements and W2s, and an authorization to request your federal income tax
returns. If not, you will need to gather all
your financial documents now and provide them as soon as possible to
Even if your pre-approval included full
documentation, you’re likely to need to give a lender updated paperwork such as
your latest pay stubs, particularly if your pre-approval was several months
The second part of your loan application
depends on an appraisal of the property you are buying. Every lender needs an
appraisal to understand the underlying value of the property, which is
collateral for your mortgage. It’s up to you to pay for the appraisal but the
lender will choose the appraiser.
If the appraisal meets or exceeds the price
you have offered for the home, that piece of your loan application is complete;
but if the appraisal comes in too low, you will only be allowed to borrow up to
the maximum of the appraised value—minus your down payment.
In other words, if the appraiser says the
house you want to buy is worth $200,000 and you intend to make a down payment
of 10%, the lender will only approve a maximum loan of $180,000. If you and the
seller have agreed on a higher price for the home, such as $215,000, you will
either need to renegotiate the offer or come up with the extra cash to make up
Follow Your Lender’s Lead
During the interim period between the signing
of the contract and settlement date, you will have several responsibilities to
make sure your mortgage is in place when you are ready to close.
to all lender requests: Lenders often need more information from you while your home loan is
being processed. Even if it seems excessive, make sure you provide everything
needed in a timely fashion.
Keep track of
all deposits and withdrawals: If you have any unusual deposits other than
your paycheck, you will need to provide a paper trail of where the money came
from, so it’s best to avoid any major financial moves at this point. If you
must move money around for your home purchase, keep excellent records and be
ready to provide them to your lender.
credit profile: Don’t apply for new credit, spend anything on your credit cards or
close any credit accounts—because any one of these moves could hurt your credit
score or change your debt-to-income ratio. Wait until after the closing to make
any purchases for your new place.
with everyone: Your real estate agent, your title company and your lender should be
busy behind the scenes getting ready for settlement day, so you should stay in
touch with them often to see if everything is on track—and if they need
anything from you.
Following these simple steps makes it much
more likely that your loan will be ready when you are ready to pick up your
By: Michele Lerner | To view the original
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