Let’s take a stroll through the homebuying process. At first, it may seem confusing, particularly if you’ve never purchased a home before. But for those of us in the business, it's a straightforward path with clear milestones.
Are you ready to explore the homebuying process? Let’s break it down!
Pre-qualification involves a review of your finances to determine how much you may qualify to borrow for your home purchase. We can make this quick assessment verbally, without verifying your income, assets and credit. While a pre-qualification is helpful, it’s important to complete the next step before serious house hunting.
Like a regular mortgage application, a pre-approval requires documentation to verify your income, assets, and credit, including bank statements, pay stubs and federal tax returns. A pre-approval is far more valuable than a simple pre-qualification because it:
All in all, getting an upfront loan approval will help you beat out the competition, negotiate with power and let you know how much you can afford.
This is where the fun begins! Looking at homes and imagining them as your own can be an exciting process.
It can be challenging, too, when another buyer falls in love with the same house! Being prepared with a pre-approval will enable you to focus on homes you can comfortably afford and act quickly when you’re ready to make an offer.
It helps to be sure of the type of home, neighborhood and amenities or features you want so you can act quickly when you know you’ve found the right house, especially in competitive markets.
PRO TIP: Shop by monthly payment instead of price. Your monthly payment will typically include taxes, insurance, and other costs, like homeowners’ association, condominium, or co-op fees. Those costs can vary from house to house. The payment will determine your final loan approval, so it’s the most important factor to consider.
It’s always a good idea to arrange a home inspection by a licensed engineer or inspector on any property you’re seriously considering or are placing under contract. An experienced inspector can identify and discuss potential hazards or conditions that may not be otherwise apparent. Click here to learn about Home Inspections and what you should expect from one.
It’s your choice to complete the inspection before you make an offer or as a contingency of your contract. In either case, if any significant issues are discovered, the cost of and/or responsibility for repairs can be negotiated accordingly.
Even if no issues are discovered, it’s well worth the cost of an inspection to be reasonably well assured you won’t have unexpected repairs soon after purchasing your home.
The Purchase and Sales Agreement or Sales Contract is the legally binding document that stipulates the price, terms, and conditions of the transaction between the buyer and seller.
Depending on the region, either a real estate agent or an attorney will draft the agreement. Review it to ensure proper contingencies of the sale are listed, such as your right to an inspection and a financing clause. If you’re uncertain about the contract terms or your obligations, it’s a good idea to have it reviewed by your attorney before signing.
Finalizing your loan application becomes relatively easy after you’ve gone through the pre-approval process because you have already submitted the necessary financial documents pertaining to income and savings. Depending on how much time has passed since your pre-approval, you may simply need to provide your most recent pay stubs and bank statements.
The property appraisal assures the lender that the property value is sufficient to be used as collateral for the loan.
The appraiser researches comparable, recently-sold properties to support the price agreed upon in your Sales Contract. The appraiser will also look for any obvious structural or conditional issues that may impact the health and safety of occupants or the marketability of the home.
Final loan approval will make two primary assurances:
The underwriter will review the contract, appraisal, title work, etc., before issuing the final loan approval.
The lender must receive a binder evidencing your homeowners insurance coverage and showing the cost. It’s best to arrange for insurance well before closing to prevent delays. In some cases, choosing your insurance agent and knowing the cost of insurance is required prior to the final loan approval.
After giving final approval, the lender prepares the official documents and disclosures to be signed at your final closing and settlement. Among these is the Closing Disclosure, which you will receive at least 3 days before your closing date. It will list all charges and expenses, so you’ll know your exact loan costs and cash requirements prior to closing.
The closing is where you sign the documents and gain ownership of your home. Closings can occur in a few ways:
Either way, after the closing occurs, the home will be yours!
Congratulations! The day you’ve waited for is here – move-in day! As you’re packing, remember to arrange for the utilities to be transferred into your name and turned on so your house will be ready to become the place you want to be – your new home!
If you have questions or would like to take a step today, please reach out. The team at Emerald Home Loans is happy to help!