Buying a Home
Regardless of whether you’re a first-time homebuyer or a home buying veteran who has purchased multiple homes, the process of getting a mortgage loan is pretty standard. While there are many steps from the start until the finish, if you take the time to prepare yourself before you start looking for a home, your home buying experience should be a rewarding one.
We’ve created an overview of what to expect as a homebuyer and how you can be ready to take advantage of the best opportunities. If you have questions during the process, please feel free to contact one of our mortgage professionals.
1. Getting Pre-Approved
Getting pre-approved for a loan is the best way to determine what type of home or property is within your price range. Knowing this helps your real estate agent determine which properties to show you, and it helps you make the best use of your time. A pre-qualification is based on income and debt information provided verbally to a mortgage professional, and is not a commitment to borrow or lend money.
Getting pre-approved for a loan represents a commitment from a lender that they will grant you a mortgage loan. Receiving a pre-approval letter involves the verification of your financial position including credit, income, assets and liabilities. Taking this step can help facilitate the purchasing process by reducing the length of time it takes to close the transaction, and has the potential benefit of putting you in a stronger negotiating position with the seller.
A variety of loans are available, so it’s important to select one that’s perfectly tailored to your circumstances and goals. Following is a brief overview of mortgage loan types. To learn more about each of these options, visit the Learning Center on our website or contact an Integrity Home Mortgage professional.
2. Loan Processing and Underwriting
Loan processing and underwriting is a team effort, and we will keep you up to date during every step of the process. The following is an overview of what to expect when your loan is being processed and underwritten.
Once your loan application has been completed, your loan originator will work with a dedicated loan processor who organizes all of the paperwork into one file. Your loan processor will make sure that the required documentation is in good order. If there are any missing documents, or any other information needs to be verified, your loan processor will contact you so everything can proceed smoothly.
You decide when to lock in your interest rate. This “rate lock” is an interest rate guarantee the lender makes to you for an agreed-upon time in order to protect you against interest rate fluctuations.
A real estate appraisal will be ordered when the home or property will be used as collateral for a loan. This professional written analysis of the fair market value of the home or property provides an estimate of the likely price the asset would bring if sold in a competitive real estate market.
A home inspection is recommended to evaluate the general quality of the home, such as its structural condition and remaining life of major components including the roof, plumbing, heating and electrical wiring. The buyer can often use the inspector’s findings to negotiate the final purchase price or other terms with the seller.
A title report is ordered. This important review of the property deed and other government records is done by a professional title company to determine whether the seller has a legitimate saleable interest in the property. It also summarizes whether any restrictions or allowances pertain to the use of the land, outlines the status of property taxes and other public or private assessments, and identifies whether any judgments or liens exist on the property that must be satisfied before the home or property can be sold.
Underwriting is initiated when the loan processor has verified that all paperwork has been completed. The team’s underwriter checks to make sure that the facts in the applicant’s loan file correspond with the guidelines of the loan being offered. The underwriter also reviews details such as income, credit score, source of down payment and the appraised value of the home or property. If any information is missing, the underwriter may conditionally approve the loan with the stipulation that the information must be attained and approved before the loan can be funded.
The loan processor resumes oversight of the loan file to track the receipt and condition of any pending documents, and works with the title company to get all of the paperwork in order for the loan settlement.
Certain types of insurance will be required. Title insurance is needed to protect the lender’s financial interest in the property if there are defects in property title, liens or other matters. Homeowners insurance is necessary to cover physical damage to the property. Depending on the home’s location, the buyer may also need to secure flood and/or earthquake insurance. If the down payment is less than 20% of the purchase price or appraised value, private mortgage insurance (PMI) may be required.
3. Loan Closing
When the loan is approved by the underwriter and all final documentation has been secured, the loan is ready to close.
The loan money is placed in an escrow account by the lender so that it is available for the settlement. An escrow account is a special third-party account that holds money safely while the title is being transferred from the seller to the buyer.
A Closing Disclosure of settlement costs is provided by the lender to the borrower to make sure there is full understanding of the various settlement costs associated with the loan. Closing costs often include such items as loan origination fees, credit reports, appraisal fees, inspection fees, title insurance, prepaid tax and insurance payments, discount points and recording fees.
At the time of settlement the title company presents all of the loan closing documents for the borrowers to sign, which is often done in the presence of a notary public. If a down payment or closing cost payment is required, the buyer will bring a cashier’s check. This settlement process, called closing, is the final step before the transfer of money and keys occurs. The loan will normally close shortly after the loan documents have been signed. When this happens, you officially own your new home or property.
At Integrity Home Mortgage, we are dedicated to responsible lending. We can help you secure a loan that’s perfectly tailored to your circumstances, and we’ll make sure you have a positive experience every step of the way.