GET PREQUALIFIED BEFORE YOU LOOK FOR A HOME. Serious homebuyers need to start the process in a lender's office, not at an open house. By doing this, you can find out how much house you can buy, your credit score, options on loan programs, current interest rate, and possible monthly payments. It gives proof to real estate agents and sellers that you’re both willing and able to buy a home. This will make a strong impression on them that you’re a serious buyer. It determines the upfront costs that come with the purchase of your new home. Once you decide to buy, it is very important that you don’t make changes in your financial situation that could negatively impact the prequalification. Discuss any possible changes with me. Getting pre-approved by a reliable lender before starting the mortgage process can help identify potential underwriting conditions earlier in the process.
SHOP FOR A HOME. Find the right real estate agent - look for an advocate, not a best friend. Choose what neighborhood that is right for you and/or your family. Decide what features are important to you in a home. Make an offer.
COMPLETE A LOAN APPLICATION. Documents for income and assets will be needed at application. The following are some of them:
Copies of W-2’s for the previous two years.
Copies of previous two years of federal tax returns and schedules. 1099’s or K1 forms.
Paycheck stubs for last 30 consecutive days.
Employment history for the last two years. Address any gaps. If you were a student and graduated with a degree in the field you are working in, this may be used toward the two years.
Documents from social security/retirement/disability benefits such as copies of bank statements, award letters, evidence that it will continue for at least three years, etc.
Proof of assets for down payment and/or closing costs such as checking and/or saving accounts, retirement and other investment statements for most recent two months.
Residency history for the last two years.
Photo ID and social security card for applicants.
AFTER APPLYING FOR A LOAN. It is very important not to do the following:
Don’t Change Jobs or the Way You Are Paid at Your Job. I must be able to track the source and amount of your annual income. If at all possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.
Don’t Deposit Cash into Your Bank Accounts. I need to source your deposits, and cash is generally an unacceptable source. Before you deposit any amount of cash into your accounts, discuss with me first.
Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with it, including new monthly obligations. Higher debt to income ratios can make you unqualified to buy a home.
Don’t Co-Sign Other Loans for Anyone. When you co-sign, you are obligated. I will have to count the payments against you which will effect debt to income ratios.
Don’t Change Bank Accounts. I need to source and track assets. Transferring any money will need to be discussed first.
Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
Don’t Close Any Credit Accounts. Many clients erroneously believe that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants in your score.
SATISFY THE UNDERWRITER’S CONDITIONS. In many cases, a mortgage pre-approval application comes back from an underwriter as “approved with conditions.” To turn an “approved with conditions” decision into a fully approved loan is to meet (or eliminate) those conditions, whatever they are. The conditions often include requests for alternative and supplementary documentation, explanation and/or correction, and verifications and attestations.
CLEAR TO CLOSE. After the loan is in “final approval” from the underwriter and closing documents are prepared, we will send you a Closing Disclosure before closing. Once you sign the closing disclosure, there’s a three-day waiting period before can sign the mortgage loan documents. At closing, some of steps involved are:
Sign legal documents. This falls into two categories: the agreement between you and your lender regarding the terms and conditions of the mortgage, and the agreement between you and the seller transferring ownership of the property. Be sure to read all documents carefully before signing them, and do not sign forms with blank lines or spaces.
Pay closing costs and escrow items. There are numerous fees associated with getting a mortgage and transferring property ownership. You might also be able to wrap the closing fees into the loan balance.
Most of time, closings require the borrower(s) to bring money. The funds must be a cashier’s check made out to the escrow company or they wire transfer funds to the banking institution. Once you’ve reviewed and signed all closing documents, the house keys are yours and you will officially be a new homeowner.