There’s various processes one goes through when buying a home.
One of those is understanding the financing process. Here is the process broken down from the beginning of the transaction to owning a home.
GETTING PRE-QUALIFIED
Once you have an idea of the type and size home you want and the area you’d like to look in, you should be pre-qualified by a Lender. By doing this before looking for a home, you’ll save yourself time, energy and frustration because pre-qualification can:
Determine How Much You Can Afford
Pre-qualification helps you avoid buying less home than you can afford or being disappointed if you don’t qualify for as much as you had hoped.
Show What Your Total Investment Will Be
You’ll know approximately how much money you’ll need for a down payment and closing costs.
Inform You Of Your Monthly Payments
You’ll have a close estimate of your monthly principal, interest, taxes and insurance (PIT).
Identity the Loan Programs You Can Qualify For
With the wide variety of loan programs available, it is important to know which types you qualify for the loan.
Strengthen Your Offer
Sellers are more inclined to accept realistic offer when they know that you have taken the time to be interviewed by a Lender and can probably qualify for the loan.
At this point, your Lender can also help you determine alternatives and strategies that could help you buy the home of your dreams. Some examples include:
- Special first — time homebuyer program.
- Co-mortgage financing
- Debt consolidation counseling
In order to be pre-qualified, the Lender will need to know the following:
- Your employment history and income
- Your monthly debts and obligations
- The amount and source of cash available for down payment and closing costs
When you are pre-qualified by a Mortgage Company, you’ll receive a free pre-qualification certificate to give your Realtor. The seller may be more likely to accept your offer because you have been qualified to buy their home.
THE LOAN PROCESS
Step 1 – The Loan Application
The key to the loan process going smoothly is the initial interview. At this time, the Lender obtains all the pertinent documentation so unnecessary problems and delays may be avoided. The Realtor opens escrow with the title company at this time as well.
Step 2 – Ordering Documentation
Within 24 hours of application, the Lender requests a credit report, an appraisal on the new property, verifications of employment and funds to close, mortgage or landlord ratings; a preliminary report and any other necessary supporting documentation.
Step 3 – Awaiting Documentation
Within 1-to-2 weeks, the Lender begins to receive the supporting documentation. As it comes in, the Lender checks for any problems that might arise and requests any additional items needed.
Step 4 – Loan Submission
Once all the necessary documentation is in, the loan processor assembles the loan package and submits it to the underwriter for approval.
Step 5 – Loan Approval
Loan approval generally takes 1-to-3 days. All parties are notified of the approval and any loan conditions which must be cleared before the loan can close. The loan approval is the beginning of the closing process.
Step 6 – Documents are Drawn
Within 1-to-3 days after loan approval, the loan documents (including the note and deed of trust) are completed and sent to the escrow holder. The escrow officer will make an appointment for the borrowers to sign the final documents. At this time, the borrowers are told how much money they will need to bring in to close the loan.
Payment must usually be made be a cashiers check.
Step 7 – Funding
Once all parties have signed the loan documents, they are returned to the Lender who reviews the package. If all forms have been properly executed, a check is issued to fund the loan.
Step 8 – Recordation
Upon receipt of the loan funds, the title company will record the legal documents necessary to transfer the property into the Buyer’s name. At the same time, the deed of trust is recorded to show the new loan on the property. Escrow is now officially closed and you now own your home. Please consult your Mortgage Consultant for more detailed information regarding your loan.
CLOSING COSTS
Below is an overview of the types of closing costs you may incur on your loan. Some are one-time fees while others recur over the life of the loan. When you apply for your loan, you will receive a Good Faith Estimate of settlement charges and a booklet explaining these costs in detail.
Loan Origination Fee
This fee covers the Lender’s administrative costs in processing the loan. It is a one-time fee and is generally expressed as a percentage of the loan amount.
Loan Discount
Often called “points”, a loan discount is a one-time charge used to adjust the yield on the loan to what market conditions demand. One point is equal to 1% of the loan amount.
Appraisal Fee
This is a one-time fee that pays for an appraisal, a statement of property value required on most loans. The appraisal is made by an independent appraiser.
Credit Report Fee
This one-time fee covers the cost of the credit report which is processed by an independent credit reporting agency.
Title Insurance Fees
There are two title policies; a Buyer’s title policy (which protects the new homeowner) and a Lender’s title policy (which protects the Lender against loss due to a defect in the title). These are both one-time fees.
Miscellaneous Title Charges
The title company may charge fees for a title search, title examination, document preparation, notary fees, recording fees and a settlement or closing fee. These are all one-time charges.
Document Preparation Fee
There may be a separate, one-time fee that covers preparation of the final legal papers, including the note and deed of trust.
Prepaid Interest
Depending on the day of the month your loan closes, this charge may vary from a full month to just a few days interest. If your loan closes at the beginning of the month, you will probably have to pay the maximum amount. If your loan closes near the end of the month, you will only have to pay a few days interest. Your first payment will usually be 30 days after the date pre-paid interest is paid through.
Mortgage Insurance MI Premium
Depending on the amount of your down payment, you may be required to pay a fee for mortgage insurance (which protects the Lender against loss due to foreclosure). You may also be required to put a certain amount for MI into a special reserve account (called an impound account) held by the Lender.
Taxes and Hazard Insurance
Based on the month you close, property taxes will be prorated between you and the Seller. You will also need to pay an entire years hazard insurance premium upfront (Homeowner’s Insurance). In addition, you may be required to put a certain amount for taxes and insurance into a special reserve account (impound account) held by the Lender.
(Information provided by Title365)
If you’re interested in selling your home in the Inland Empire, I’m offering a FREE Market Evaluation where I would be able to tell you what your home is worth and suggest a listing price.
Visit MyCityHouseValues.info to get started!
Thank you and have a great day!
Noe Rodriguez
Montelongo Realty
(909) 483-2696 / noe9595@gmail.com
Website: HS-90.com
Facebook.com/HouseSoldin90Days
Cal BRE#01394343
• Check stairs for loose boards, ripped carpeting, and missing or loose handrails and guards
• Use cleaning solution to remove oil stains from the floor
• Be sure all lights are turned on to make the house bright. Open all drapes, blinds, etc.
Buying a home can be complicated, but it helps to be prepared for the process in advance. Before starting to seriously shop for a home, consider the following one-year timeline that’ll help you arrange your finances. The more time you give yourself for this process, the better.
Research Homeownership Costs
2 Months Out
Get Homeowners Insurance
Noe Rodriguez - Realtor | House Sold in 90 Days 