19 Steps for the Typical Home Loan Process
19 Steps for the Typcial Home Loan Process
1. Pre-qualification If you're not already pre-approved for a mortgage before looking for a new home, do not worry. There is a pre-qualification process that can help give you an idea of how much you can afford. This process is based on your income, credit history, and debt. When going through the process be sure to provide an accurate credit history because neglecting to mention credit problems in the past or outstanding loans will create a false pre-qualification estimate.
2. Pre-Approval This step is similar to the previous stage. The difference is your income, credit history, and debt are all verified. After this verification you are actually approved for a loan under specific terms and conditions and up to a specific amount. After you become pre-approved you can search for a home with a set budget in mind.
3. Finding the Perfect Home Now that you know your budget, start the search for your perfect home! Ask your real estate agent for listings within your specifications. A daily search will optimize your chance to find your dream home.
4. Purchase and Sale Agreement The terms of sale are negotiated once you find that perfect home. Some of the details in the terms of sale are move-in date, sale price, and repair requests. This offer is presented to the sellers by your agent. The offer also typically includes your pre-qualification or pre-approval letter which can help tilt the sale in your favor in a competitive market.
5. Loan Application If and when the seller accepts your offer, you will need to complete a loan application. If you have already been pre-approved than you have already filled out a loan application.
6. Necessary Documentation To support the loan application you will need to submit some supporting paperwork. Some of the paperwork will include pay stubs, tax returns, and account statements. This is to verify the source of the down payments, funds to close, and reserves. If you have already been pre-approved than this step has already been completed.
7. Appraisal For all home sales an appraisal must take place. If the sale price and the appraised value of the home are different, the sale could be jeopardized. This happens rarely.
8. Search for Title For a title transfer to take place, a search for liens against the property must be conducted. A lien might have been placed on a property to ensure payment of outstanding debts by the owner.
9. Property Inspection Inspection of the property for any potential safety hazards or termite and water damage may be conducted before the finalizing of the sale. Any problems may need to be repaired before going further.
10. Processor's Review A loan processor will package all pertinent information to be sent to the underwriter, including any explanations needed.
11. Underwriter's Review The underwriter will make a final decision to approve a loan or not based on the information put together by the loan representative and the processor. Lenders ideal borrower will make payments on time and a property that will cover the cost of investment if a buyer defaults.
12. Mortgage Insurance When a down payment is less than 20% of sale price most lenders will require borrowers to carry Private Mortgage Insurance. A mortgage insurance company may still deny coverage even when a loan meets lender requirements.
13. Final Loan Approval If your credit and debt-to-income is in good standing, your loan approval will be approved with little or no problem. If the debt-to-income ratio is high, you may need to put more money towards the down payment. In some cases, repairs or improvements may be required. You may also need to put more money towards the down payment if the property appraises for less than the purchase price to cover the difference. In some instances, other conditions must be met before the final loan approval and loan documents are issued.
14. Insurance Lenders will require home owners to acquire fire and hazard insurance on the replacement value of the structure. If the home is in a flood zone, than flood insurance will be required. In earthquake prone areas, earthquake insurance may be required by the lenders on certain structures.
15. Signing Final loan and escrow documents are signed by both you, the buyer and the seller.
16. Funding The title company will receive a wire or check for the amount of the loan.
17. Close of Escrow Documents transferring title are recorded with the County Recorder.
18. Confirmation of Recording Once documents are transferred, the title company will authorize the escrow company to draft a check to the seller.
19. Home Ownership You are now the owners of your perfect home! You can now move in enjoy your new home. For safety it is recommended that you replace all locks.
Posted at 09:24PM Jan 06, 2012 by Kristin Corsette in General |
