Home Loan Process

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HOME LOAN PROCESS

Handouts for home buyers

The following 19 topics or steps are the typical home loan process. Please make a sure you do the first step first and then go to 2nd step and so on.

(1) PRE-QUALIFICATION

Ideally, you should get pre-approved for a mortgage before looking for a home. Otherwise, a pre-qualification is the next best option. It estimates how much you can afford based on debt, income, and credit. Be sure to provide your entire credit history. Neglecting to mention outstanding loans or previous credit problems will create false calculations.

(2) PRE-APPROVAL

Pre-approval is similar to pre-qualification, except your debt, income, and credit are verified and you are actually approved for a loan up to a certain amount and under specified term and conditions. Becoming pre-approved allows you to search for the home you can afford.

(3) THE HUNT

Now that you know how much home you can afford, start shopping. Ask your real estate agent to search the MLS (Multiple Listing Service) daily for homes that meet your requirements.

(4) PURCHASE & SALE AGREEMENT

Once you find the right home, you can make an offer on it and negotiate the terms of the sale. Your real estate agent will present your offer to sellers. Your pre-qualification or pre-approval letter with the copy of your deposit check are typically submitted with the offer (since it can tilt the sale in your favor especially in a competitive market.

(5) LOAN APPLICATION

Once the seller accepts your offer, you will need to secure a mortgage. Unless you have been pre-approved, you must complete a loan application.

(6) DOCUMENTATION

Paperwork supporting the application must be submitted, including w-2's, pay stubs, last 2 years tax returns, and account statements (verifying the source of the down payments, funds to close, and reserves). If you have been pre-approved, this step already has been completed.

(7) APPRAISAL

Appraisals are required on all home sales. This step jeopardizes a sale if a big discrepancy exists between sale price & appraised value )but this rarely occurs).

(8) TITLE SEARCH

A search for liens against the property will be conducted. A lien may have been placed on a property to ensure the payment of outstanding debts by the owner. All liens must be cleared before a title transfer can take place.

(9) TERMITE INSPECTION

Most purchase loans require an inspection of the property for termite and water damage as well as potential safety hazards. Some problems may need to be repaired before finalizing the sale.

(10) PROCESSOR'S REVIEW

A loan processor will package all pertinent information to be sent to the underwriter, including any explanations needed (such as reasons for derogatory credit).

(11) UNDERWRITER'S REVIEW

Based on information put together by the loan company & processor, underwriters make the final decision to approve a loan. Lenders want borrowers who will make payments on time and properties that cover the cost of investment if a buyer defaults.

(12) MORTGAGE INSURANCE

Most lenders require PMI (Private Mortgage Insurance) when a down payment is less than 20% of sale price. Even when a loan meets lender requirements, a mortgage insurance company may still deny coverage.

(13) FINAL LOAN APPROVAL

When credit & debt-to-income is good, loans are typically approved. However, you may need to put more money down to improve the debt-to-income ratio. Also, if the property appraises for less than the purchase price, you may need to either increase your down payment to cover the difference or adjust the sale price to the appraised value. In some cases, repairs or improvements may be required. There may also be other conditions to meet before the final loan approval and loan documents are issued.

(14) HOME INSURANCE

Lenders require fire and hazard insurance on the structural replacement value. Flood insurance will also be required if the property is located in a flood zone. In some areas, lenders require earthquake insurance on certain types of structures.

(15) SIGNING

Final loan and escrow documents are signed by you (the buyer) and the seller.

(16) FUNDING

A wire or check for the amount of the loan will be sent to the title company.

(17) CLOSE OF ESCROW/CLOSING

Documents that transfer title are recorded with the County Recorder.

(18) CONFIRMATION OF RECORDING

The title company will authorize the escrow company) or closing agent) to draft a check to the seller.

(19) MOVE IN

Now you can move in to your new home. Be sure to replace all locks for safety. 

GOOD LUCK

Please call me anytime if you have any question (909) 754-4947.