Buying a home is for most people the most important purchase and most challenging project. The above diagram demonstrates at a glance the three different phases involved.
FIND YOUR HOME
1 - Define what you and your family want and do not. This is your most important success criteria. It's the only way to know you found it!
2 - Take inventory of your resources: Current and future income, assets, liabilities, skills, and people.
3 - Define your timeline. What are the driving forces behind your move? New Job? House up for sale?
With these three activities you will be able to create a plan that you can share with a Loan Officer who can help you determine how big of loan you can afford.
4 - Apply for a loan. The output of a loan application are: Pre-Approval Letter, Truth in Lending Disclosures, and Good Faith Estimates. Applying and getting pre-approved for a loan gives more certainty to your next move: House shopping!
5 - Find a home. The internet has made it easy to start this task, but eventually, you will need the services of a professional Real Estate Agent. Realtors are more in tune with the market and, sometimes, they have access to inventory not yet listed. Once you know what you want and how much you can afford, your realtor can set up email notifications of properties that meet your criteria the moment they are listed in the Multiple Listing Service. This part of the process is great during buyer's market, meaning there are more sellers than buyers, and more challenging during seller's market where the demand exceeds supply of homes. Your realtor will be happy to show you whatever you need to see until you find the property you wish to pursue. Or Reevaluate your goals.
6 - Make an offer. This can be complicated and stressful. Your real estate agent will help you with all the forms and required disclosures. Your offer will be either rejected, countered, or accepted. Your agent will make recommendations on how best to address your next move, but ultimately, you are responsible for your choice to pursue or move on. Your agent will submit your offer with earnest money to seller's agent who in turn will open escrow (a neutral third party who will handle additional disclosures, title insurance, facilitate signing documents, and recordings).
FINANCING YOUR HOME
7 - The application is the beginning of the loan process and either occurs before or after you have found a property you want to buy or have determined that you wish to refinance the loan on your existing home. It is a lot easier if you do it before you start looking for a home. You complete a mortgage application for a particular loan program and supply all of the required documentation for processing. Various fees and down payment options are discussed at this time. The loan officer will deliver a Good Faith Estimate (GFE) and a Truth-In-Lending Disclosure (TIL) within three days that itemize the rates and estimated costs for obtaining the loan.
8 - Loan Processing. The loan processor makes sure the loan package is complete an accurate, and then submits it to the lender underwriter: Employment verification, credit report reviews, late payments, collection, judgements, are carefully evaluated, and if necessary may require you to write explanations. Additionally, the processor also reviews the appraisal, and checks for property issues that may affect the final loan approval.
9 - UNDERWRITING. The lender's underwriter is responsible for determining whether the application package prepared by the processor meets all the lender's criteria. If more information is needed, the loan is put into "suspense" and you will be contacted to supply more documentation.
If the underwriter approves the loan, the lender issues a conditional commitment to lend, orders title insurance, works with you to clear all conditions to its commitment to lend, and then schedules a closing time. Conditions to the lender's commitment may include issues with credit, income, or the property that may arise during the processing and underwriting process.
10 - Loan Funding. Funding for your loan will occur after all conditions are cleared and the lender issues a full loan approval. At the closing, the lender "funds" the loan with a cashier's check, draft or wire to the closing agent, who disburses funds, in exchange for the title transfer to the property. This is the point at which you finish the loan process and actually refinance or buy the house, subject to the lender's loan. Closings occur at different places in different states. For instance, some states require that the closing take place at a closing attorney's office, while others use a title or escrow company. You may also be able to close at your home.
Please note that the financing and closing phases will take anywhere between 21 to 45 days.
Copyright © Eduardo Ramirez Mortgage Loan Officer NMLS 1086161 CalBRE 01393110. All rights reserved.
* Interest rates information is not an advertisement to extend consumer credit as defined by Section 226.2 of Regulation Z. This is not an offer to enter into an agreement regarding interest rates. The rates quoted do not include discount points, origination points, or loan level risk based price adjustments. Rates and terms are subject to change without notice.
Offered loan products may vary by state. There is no guarantee that all borrowers will qualify. Restrictions may apply. This is not a commitment to lend. Terms, conditions and programs are subject to change without notice. Eduardo Ramirez, Loan Officer, is not acting on behalf of or at the direction of HUD/FHA or any government agency. All rights reserved.