Take a tour of the process from start to finish, know what to expect so that you can be best prepared for each step.
[note color=”#FF9900″]Before
[spoiler style=”2″ title=”Gathering Documentation”]Being organized and having quick access to the required documentation, can make the difference between having a trouble-free process or a frustrating experience. As such, its a good idea to start gathering your documentation ASAP. As a minimum you will need the items below; they are essential for completing your pre-qualification.
- Paystubs – most recent past 30 days
- Bank Statements – most recent past 2 months
- W2/1099’s and Income Tax Returns (Federal ONLY)
Depending on the type of loan, you may need these items.
- Contact information for your landlord
- Contact information for your employer’s Human Resources or Personnel Dept.
Click here to download a convenient Needs List
[/spoiler] [spoiler style=”2″ title=”Getting Your Questions Answered”]Buying a home is likely to be the most expensive purchase that you will ever make. As such, you shouldn’t be shy about asking questions. In short, you’ll want to ask enough questions – whatever it takes – until you feel comfortable about the process. This is the time where you want to break out the notepad and list all of the things that are on your mind. As your trusted advisor, making sure that you are comfortable through all aspects of the transaction is my most important goal. There really is no such thing as a dumb question. If it’s important to you, please be sure to ask.
[/spoiler] [spoiler style=”2″ title=”Understanding Monthly Costs & Cash to Close”] [tabs style=”1″] [tab title=”Narrative Description”]UNDER CONSTRUCTIONPI vs PITI – need to consider the total costs.
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[tab title=”Video”]Video Here… more info… [/tab]
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During
[spoiler style=”2″ title=”Now That Your Offer Has Been Accepted”]It doesn’t take long. After the short elation of getting your offer accepted, the gravity of the biggest financial commitment of your life becomes very real. This is the part of the process where everything seems to happen all at once and you have to quickly get all of “your ducks in a row”. Additionally, you will become emotionally vested in the positive outcome of the experience and it might cause a lot of stress. This is the part where you will need to trust your advisors, your realtor and lender, to guide you through the journey.
STEP-BY-STEP…
[tabs style=”1″] [tab title=”Contract”] Review the contract and all counteroffers with your realtor and lender and make sure you understand it. Take note of the key dates on the contract. This is a legal, binding agreement and you will want to make sure that you do your part.[/tab] [tab title=”Upfront Fees”] You will be required to pay Upfront Fees for the physical inspection and the appraisal , which are usually part of the contract requirements. These services are performed by 3rd party vendors who perform services for a fee. Fees paid are non-refundable. [/tab] [tab title=”Insurance”] In the same way that you cannot drive your new car off the lot without auto insurance, you cannot close on your home purchase, unless you can provide proof that your home is insured. If you are buying a Single Family Residence (1-4 units) your insurance provider will need to provide a quote and a commitment to insure your home. If you are purchasing a condominium or townhouse, the structure is insured by a blanket policy, where the premium is included in your HOA dues. However, the lender may still require that you get special contents coverage (HO-6) to insure the interior of your particular unit.
[/tab] [/tabs] [/spoiler] [spoiler style=”2″ title=”Performing Inspections and Appraisal”]
Physical Inspection
- Your realtor will refer you to some preferred inspectors, however, you are also free to choose a vendor on your own. The fee ranges from $175 – $350 and the fee is typically collected at the time that the inspections is performed. It is important that you are present at this inspection, so that the inspector can share his findings with you in real-time.
Appraisal
- This is a valuation report provided by a vendor that the lender selects. An appraiser will inspect your property and compare its value to other similar homes that have recently sold in the neighborhood. You need not be present at this inspection. The appraisal fee ranges from $450 – $650 and the fee is typically paid by the borrower with a debit or credit card.
On the loan side, we begin processing your loan paperwork right away. The typical purchase contract allows 17 days for us to get your formal loan approval. It seems like a long time, but the process can easily be delayed if we don’t work expeditiously. This is the point in the process where the loan officer and his staff needs your assistance the most. You will want to be sure to provide any requested information as quickly as possible – and – its important that you be available to meet with your loan officer (in-person) to sign any required paperwork.
During this phase of the process, your Loan Processor is coordinating with the escrow officer, the title officer, both real estate agents and lender personnel. We may also need to be in touch with you employer. The objective of all of our efforts during this 17 day period is Loan Approval. Then upon underwriters review, the lender provides a Conditional Loan Approval.
[/spoiler] [spoiler style=”2″ title=”Locking Your Interest Rate”] [tabs style=”1″] [tab title=”Overview”] The interest rate that you get on your mortgage is not something that is “set in stone” the moment that you start your home search. In fact, it changes on a daily basis (sometimes hourly basis) until you decide to “lock in” the rate that suits your budget and needs. If it was entirely up to you, you would, of course take the lowest rates available at the lowest cost. However, its not that simple. The interest rates vary widely based on the following criteria:- Credit Score
- Amount of your down payment
- Type of loan – Conventional, VA, FHA
- Whether or not mortgage insurance is required
- The type the mortgage insurance that you decide to get – if needed
- The bond market (stock market for bonds)
- How far in advance you’d like to lock-in your interest rate.
After we decide on the type of loan that works best for your situation, we’ll need to decide on the best combination of interest rate and fee. A lower interest rate, has a higher fee and a higher interest rate has a lower fee. The fee that is charged is called a point. One point is 1% of the loan amount. The dollar amount (cost) can be calculated by multiplying the loan amount by 0.01.
Example:
For a $200,000 loan at a cost of 1 point , the fee is $2,000.
For a $300,000 loan, a fee of 1 point equals $3,000.
You can adjust your interest rate up or down by deciding to pay more or less in points. As a rule of thumb, you can adjust your interest rate up or down by 0.25% or 1/4% by increasing or decreasing the fee by 1 point or 1%. See the example below.
|
Rate |
Fee (points) |
|
5.25% |
0 points |
|
5.00% |
1 points |
|
4.75% |
2 points |
However, there are times when we might decide to wait. As a mortgage professional I am well versed in the factors that influence interest rates. In addition, I consult with professional bond traders on a daily basis to better understand the current rates and trends. If we are fairly certain that the interest rate will trend lower during a 10 day time frame, we might decide to “float” your interest rate instead of “locking” it. This is something that I would allow a client to do when I’m confident that they fully understand the consequences of floating. Basically, it means that we might benefit from a lower rate or fee… but we might also have to accept a higher rate and fee.
[/tab] [/tabs] [/spoiler] [spoiler style=”2″ title=”Clearing Conditions”]After your complete loan package is submitted, an underwriter reviews it and gives their “stamp of approval”. Although this is a moment of celebration, we still have a few steps to go before we can fund your loan and close your close your escrow. The “stamp of approval” is always a conditional approval that lists conditions that we must satisfy before a full approval will be issued. This phase of the process is called the “Clearing Conditions” phase. During this part of the process we may need to contact you to request updated information or to get clarification on some items that were not clear to the underwriter.
[/spoiler] [/note] [note color=”#FF9900″]At the Close
[spoiler style=”2″ title=”Planning your closing”]As much as we would like to plan everything in advance, this is not always possible in a real estate transaction. It’s estimated that there are over 50 people who are involved in getting your loan to funding, so that there are a lot of things that can go wrong. There are also delays caused by totally unpredictable events as well, so that it is difficult to plan an exact closing date.
However, as you get nearer to the date specified on your purchase agreement, (about 7-10 days before your closing) dates will begin to firm up. This is the point in time where you can start to pack your belongings and and give your landlord a more definitive move out date.
This is also the time to firm up dates with professional movers and/or helpers.
[/spoiler] [spoiler style=”2″ title=”How to handle Cash to Close”]“Cash to close” is the defined as the balance of funds that you will need to bring to the closing table when you sign your loan documents. Cash to close includes the balance of your down payment and closing costs – what’s left to pay after your earnest money deposit and any seller concessions have been accounted for.
PLEASE NOTE THAT YOUR CASH TO CLOSE FUNDS MUST BE IN THE FORM OF “GOOD FUNDS”. Good funds are defined as 1) cashier’s check or 2) wired funds.
In order to avoid delays at the last minute it is STRONGLY recommended that you NOT transfer funds from one account to another – even from checking to savings or vice-versa. Lenders treat a bank statement as if it were frozen in time and they expect the bank balance to remain the same. Understanding this nuance is critically important to you. It means that we have to be very careful to make sure that the amount of a check does not exceed the amount on the bank statement that has been provided. As an example, if you deliver a check to escrow in the amount of $20,000 and your bank statement for that account says that you only had $15,000 in it, the transaction will be considered invalid and additional documentation will be required. This is critically important.
[/spoiler] [spoiler style=”2″ title=”Signing your Loan Documents”]Generating a set of loan papers for you to sign has been the main objective of your team from Day 1 until now. When the lender prints your loan documents, it really does mean that we have crossed our “T’s” and dotted our “I’s”. We’re all set, ready to go.
After the escrow officer receives your loan papers, she will use the lender’s figures to prepare an Estimated Closing Statement. It will be similar to estimates that you have seen at the beginning of the process, but it will be much more accurate. The final figure at the bottom of your Estimated Closing Statement will be your actual “cash to close”; the amount of money that you will need to bring in to complete your transaction.
Escrow will forward the estimate to you and ask you to secure the cash to close funds and bring them to your document signing appointment.
The actual process of signing your loan documents takes about one hour. It may be inconvenient for you take time off of work for this appointment during regular business hours, but it is important that do so. You will want to treat this appointment just like an urgent doctor’s appointment. You will want to make time for things like this that are important to you. Please be sure to tell your employer in advance that you will be taking time off and ask if they can be flexible with the timing as you may not have a firm date/time in advance.
[/spoiler] [spoiler style=”2″ title=”Funding and Recording”]The funding of your loan and the recording of your name to the deed mark the “end of the beginning” of your life in your new home. It’s exciting to think about the many wonderful years and pleasant memories that you will create in your new home. It’s really over at this point in time. Your realtor will meet with you to give you the keys to your new home and the celebrations will begin !
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