Making the decision to buy a home is an exciting one, especially if it’s the first home you’ll ever own. But just because it’s exciting doesn’t mean it’s not stressful. After all, it’s one of the most important and fulfilling investments an individual or family will make in their lifetime. Knowing the steps that it takes to obtain a mortgage can limit stress and put your mind at ease as you to focus on the most important thing – buying the perfect home for you!
Step 1: Know your buying power
Once you’ve decided that you want to buy a home, your first step is determining your price range. Having a solid grasp on both the down payment and the monthly loan payments that you can comfortably afford can provide some serious value to your home search. Who wants to waste their time looking at homes that they can’t qualify for anyway? Plus, in today’s home buying market, most sellers won’t accept your offer without an accompanying pre-qualification letter. So regardless of which lender you end up choosing, our experienced mortgage team at Home Loans is happy to help you determine what would fit best in your budget and assist you with the pre-qualification process. Start working towards your new home today by completing our free online application here.
Step 2: Determine the best loan program for you
The many home loan options out there can be daunting, especially for first time home buyers. From traditional conventional, jumbo, USDA, VA or FHA loans to 30 year and 15 year fixed terms to hybrid loans such as a 5/1 ARM or 3/1 ARM, the options can appear seemingly endless. With all the options available, you need expert advice to help you choose the right home loan for your situation. Once you fill out our free online application, you will be given the option to navigate various loan options customized to fit your specific financial needs. If you have any questions before, during or after filling out your application, please don’t hesitate to reach out to one of our Mortgage Advisors at 626-840-8343.
Step 3: Contact a real estate agent and start searching
Now that you’ve been properly prepped for the type of home you can afford and the loan program that works best for you, here comes the fun part. Reach out to a real estate agent to view homes for sale in the areas you’d like to live. Once you find a home you like, you can work with your agent to draw up an offer and complete the purchase agreement that will be submitted to the seller expressing your interest in the property. After submitting your offer, you may face a scenario that could include a negotiation with the seller on sales price and/or terms of the agreement such as the amount of seller contributions towards closing costs, the length of the desired inspection period, the amount of money to be placed in escrow, etc. Real estate agents exist to help explain, simplify and manage many of the moving pieces involved in the home buying process. If you’d feel more comfortable with a warm introduction, we’re happy to provide several recommendations from our vast realtor network of experienced, dependable agents.
Step 4: Review your application and update your file
Once you’ve arrived at a final, signed purchase contract with the seller, it’s time to revisit your mortgage application. Depending on how much time has passed during your home search, you may need to provide some updated information and updated documentation to make sure your file is up to date. If you’re working with Home Loans, you can either reach out to us at 626-840-8343, contact the Mortgage Advisor who completed your pre-qualification or revisit your application at /Apply to update your file. Once your file is up to date, your Mortgage Advisor will review the details of your loan program. He or she will assess any changes that could have taken place to your financial status during your home search, confirm your available interest rate and cover the closing costs that will be associated with closing your loan such as title fees, attorney fees, loan origination fees, etc. Our advisors love the opportunity to personally review all aspects of your customized loan program with you, but if you’re one of those people who enjoys learning on your own, please note that our online application, includes all sorts of helpful information designed to answer many, if not all, of the questions you might have related to your loan.
Step 5: Lock your mortgage interest rate and submit your documents
After you’ve completed reviewing and updating your file, you’ll have the option to lock the interest rate associated with your loan. Rates are always susceptible to fluctuation, so if you would like to be on the safe side then you should lock yours as soon as you can. You’re always welcome to perform your own research or consult your Mortgage Advisor to get his or her take on the direction of mortgage rates, but if you don’t decide to lock in your rate and they increase, you’ll likely wind up having to make larger monthly payments than you initially bargained for. Whether you decide to lock your rate right away or hold off, you will be provided with a list of required documents that will need to be provided to your lender. If you’re working with Home Loans, all of these documents can be uploaded at /Apply, submitted through the Home Loans mobile app or signed electronically. There are some lenders out there who might require them to be printed, signed and scanned back, faxed or sent via email. Regardless of which lender you choose, it is imperative to return these documents as soon as possible to ensure your loan is approved and closed quickly. Many buyers underestimate how important it is to return any documents requested by their lender in short order, so make sure you submit yours in a timely manner, generally within a day or two, so you don’t end up missing your closing date. And if you end up choosing the wrong lender who can’t get your loan closed on time, many purchase and sale contracts contain clauses that allow for various grace periods for extending the closing date several days out without putting your earnest money at risk. This clause is dependent on making sure the blame can be placed on the lender in delaying the mortgage process though, so if it’s your fault the documents weren’t submitted on time then you might end up without a home or your earnest money.
Step 6: Home inspection and appraisal
As soon as you have a purchase and sale contract that has been signed by both you and the seller, it is advisable to schedule a home inspection with a professional who will walk you through the property to look for any red flags such as structural damages, appliances that may not be working properly or other items that may need to be fixed. It is a small investment to make for some major peace of mind, and you certainly don’t want to close on a home that has some sort of hidden issue that could cause some big problems down the road. Your contract will include a period of time known as the Inspection Period, or Due Diligence Period, that will allow you to conduct any inspections you deem necessary and negotiate with the seller to fix any issues discovered with the property before putting your earnest money deposit at risk. Once that period expires, the seller will be able to walk away with your deposit in hand if you decide not to purchase the property, so make sure you consult your real estate agent and/or lender for any additional tests you might want to have completed before allowing this deadline to pass. In addition to the Inspection Period, your purchase and sale agreement will outline additional contingency deadlines such as the appraisal contingency and the financing contingency. Both of these contingencies act as further protection over your earnest money in the event that either causes a problem in your ability to close on the home. You will need your loan to be processed and reviewed with confirmation of your conditional approval before the financing contingency expires. While this is underway, you should contact your lender to assist in scheduling an appraisal appointment with the seller’s agent to confirm the value of the home. Unlike a home inspection, the appraisal is a requirement to determine that the home is worth what you are paying for it, and if it comes in below the agreed upon purchase price it could have a material effect on the size of the loan you’re eligible for on the property. Keep in mind while you’re monitoring your appraisal contingency deadline that an appraisal can take anywhere from 5 to 10 days to be completed and will also require a couple additional days upon receipt to be reviewed by your lender to confirm accuracy.
Step 7: Mortgage approval, signing, and closing
At Home Loans, we possess our 15 Day Process to close. This means that once we have all of the initial required documents, your file will go through our processing department and underwriting department for a conditional approval within 10 days. After a couple more days are required to satisfy any conditions that arise during the conditional approval process, the file will be resubmitted to the underwriting department for final approval. Once approved, we will provide a notification of your file being cleared to close and prepare home loan documents for you to sign. All in all, our loan manufacturing process will take no longer than 15 days to get you ready to close your home. Keep in mind that ever since the TILA-RESPA Integrated Disclosure rule, or TRID, was implemented in the fall of 2015, mortgage loans have averaged anywhere from 35 to 45 days to close across the industry. This is important to know when determining the timing of various deadlines on your purchase and sale agreement in conjunction with your selection of a lender. Regardless of which lender you choose, remember to initiate a wire a few days before your scheduled closing or bring a cashier’s check to the closing table for the full amount of what your lender has indicated you will need in your closing disclosure. Although it doesn’t happen very often, things can always change slightly, so remember to bring your checkbook to closing just in case you need to cover any additional minor costs. You will more than likely sign your loan documents at the escrow or title office, and closing will generally take an hour or two. If everything looks good, your loan will fund after you complete your signing, the property will be deeded over to you and you will get the keys to your new home!