Brian's Blog

I was sitting here wondering - "What do 1st time homebuyers need to Know about the Mortgage Loan Process?"

So here you go - My 15 Step List in Chronological Order to Home Ownership: 

1. GET PRE-APPROVED. Not just prequalified. Pre-Approved means that the Loan Officer has pulled your Credit, taken a complete apllication, received your Income Documents and Down Payment verification, has had you sign the Disclosures for your loan, and the Underwriter has Approved all of it in order to give you a Pre-Approval so that only having the House approved by Satisfactory Appraisal, Marketable Title, Inspections per the Contarct completed, and obtaining your HomeOwner's Insurance are the only Condidtions left before you receive the Clear To Close.
   
2. Choose Loan Options - An experienced Loan Officer will give you a Comparison of  Loan Options at this point. These options will include documenting how much $ You will bring to Closing if You or the Seller pay for Closing Costs and Pre-Paids, Options with and without Mortgage Insurance, Options to have and Adjustable Rate Mortgage or a Fixed rate Mortgage, and so on. With your Loan Officer's help, you choose the Option that best suits your family's needs.
3. Pre-Approval Letter - This letter is what Loan Officers give to the Realtor of your choice to explain what you have been Approved for (which Option you chose). It includes what the loan program allows - Such as: the type of home (Single Family Home, Duplex, Triplex, Quadraplex, Log Cabin, Mobile Home, ect.), the Maximum Sales Price, how much the Seller is allowed to pay toward Closing Costs and Pre-paids, and any special house requirements for that loan program (some programs require thicker insulation, maximum acres attached to the home, minimum # of bedrooms,  ect.) so that the Realtor can help you write the best possible Offer to Purchase in your favor within the limits of your mortgage program.
4. Do Not Change Anything about Your Credit - I know what you are thinking - "I'm pre-approved so I can do anything I want now!" Actually, No you can't. What if it takes you more than a month to find your home and then another month to Close? Some mortgage programs will allow the Credit Report to be used for only 30 - 60 days. If you have bought a new car, added any new credit, or even ran up your Credit card balances - you could self-destruct your Pre-Approval when they pull your Credit report again
5. Do Not Change Anything about Your Finances- Do not change jobs, move down payment money around in your bank accounts, or Close Bank, 401k, or Retirement Accounts that we are using as Reserves - changing these things could make the process longer or even kill the loan.
6. Look for your Home - This is the fun part!! Tell your Realtor exactly that type of home and features you are looking for in your new home and hop into their Realtor-mobile with listings that fit your description of your 1st Home.
7. Writing the Offer - When you find the home you want - Follow you Realtor's advice when writing the offer - Your Realtor is the EXPERT AT THIS!! With your Pre-Approval letter in hand, your Realtor will write the best Offer to Purchase in your favor - being sure to include everything that the Seller can pay for within the limits of your Mortgage program (see #3). You will probably receive and write counteroffers back and forth between you and the Seller before you both agree and Execute the Contract. Don't be disappointed that the Seller did not accept your first offer - this is the way both sides come to an agreement of Contract.
8. Accepted Contract  of Sale - Once you have an Accepted Contract of Sale signed by all parties, your Realtor will send a copy to the Loan Officer so that He or She can review and order the Appraisal - since the Appraiser needs the Contact of Sale to complete the Report. Usually the Realtor will order the Inspection Letters per the Contract of Sale(Home Inspection, Pest Inspections, Heat and Air Inspections, ect)  Review steps #4 and #5.
9. Appraisal Received -Once the Appraisal is received - the Loan Officer reveiws it for a number of key factors - but none as important as the Appraised value of the Home. If the Appraised value is the same or higher than the Contract Sales price then we continue to step #10. If the Appraised Value is lower than the Contract Sales Price - then you go back to step #7 and renegotiate the Sales price on the Contact down to the Appraised Value (which may result in the Seller no longer being able to pay Closing Costs and Pre-paids). If the renegotiation results in the Contract Sales Price being equal to or less than the Appraised Value then we proceed to step #10. Review steps #4 and #5
   
10. Title Report is ordered - In South Carolina this is ordered from the Real Estate Attorney you chose when you signed your Disclosures in step #1. The reason we wait until now to order Title is - if anything on step 9 fell thru and we ordered the Title at the same time as the Appraisal - you could owe fees to an Attorney and not be able to Close the Loan. This Title report, first of all, verifies if the Seller is the only legal owner of the property by going back 50 -60 years in courthouse records to document when the property transferred ownership and if it was done properly. 2nd, the Title report will verify the property lines recorded at the courthouse and will let us know if we need a new survey or if the survey of record will suffice.
11. Conditions Obtained - At this point, your Loan Officer or his Processor will receive a list of remaining requirements the Underwriter has sent after he has reviewed all the information from the previous steps. Most of the time, the Processor can obtain what is needed on her own; however, some of these Conditions(or Requirements) may require you to supply more documentation to the Loan Officer. Please obtain this documentation as soon as possible to ensure that your loan Closes on time! Review steps #4 &#5
    
12. Final Conditions Sent to Underwriter - Your Loan Officer and Processor will send all of the remaining Conditions at one time to the Underwriter so that we will receive a Clear to Close on your file.
13. Clear to Close means that the file is leaving the Underwriter's desk and going to the Closing Department. Here the file is reviewed for accuracy, verifications are made that you- 1) still work at the same job - 2)Still have the same amount of money in the bank - 3) your credit has not changed if the first Credit Report has expired - (See steps #4 & #5) and the package is prepared for email or overnight to the Attorney's office for the Closing Date.
14. Package Received at Attorney's Office and the HUD is prepared - which is the Settlement Statement of your Loan documenting who is paying the Closing Costs, Pre-paids, Inspection fees, Realtor Commisions, and last-but-not-least how much Money you are bringing to the Closing Table. The HUD is sent to you and the Seller to prepare you for the Closing Date and your Loan Officer and Realtor check it for accuracy. This is the point in time where I call my Client (Homebuyer) and I go over everything there is to know about the loan -Rate, Term, loan amount, Money to bring to closing, mortgage insurance (if applicable), pre-payment penalty (if applicable), how much the Seller is paying towardthe Closing Costs, ect.  Now, Mr. & Mrs. Homebuyer, you are reminded of everything you had agreed to weeks before - so there is no confusion at the Closing allowing you to sign the paperwork Stress Free!
15. Closing Day is Finally Here!! That's right - the day is finally here! You have set up the time for the moving truck and you brought anything your Loan Officer or Realtor told you to bring  -Especially the Down payment and any Closing Costs you agreed to on the Contract of Sale. You get to the Closing table - everyone is happy and you sign the paperwork. The Realtor hands you the keys to your new home and you are Officially a HOMEOWNER!!