The process of buying a home is, well, just that, a process (and explaining a process is not exciting so this will be the most boring page of my site – I hope). Typically the buyer contemplates buying a home for a bit before he or she starts the actual process. Once that decision to purchase a home has been made, let’s take a look at what I think should happen to help make the process as smooth as possible.
The Pre-approval: As soon after a buyer has made the decision to buy a home, they should contact a fantastic mortgage loan officer (ME!!) to apply for a mortgage. During this part of the process, I will analyze the income, employment history, assets, and credit to see if the potential buyer can be approved for a mortgage and, if so, how much of a home they can afford to purchase. The documentation needed for this is a completed loan application (you can fill one out online at www.jedwunderli.com), the most recent two years of tax returns (all schedules / pages) and W-2s, 1099s, etc., pay stubs covering the most recent 30 days, and accounts statements for the last 2 months – checking, savings, money market, IRA, 401K, etc. Once I have all of the documentation, I will review it to see if it meets the guidelines of the loan being applied for and if it does, I can issue a pre-approval letter.
Shopping for a home: Now that you have a pre-approval and you know the price of the home you qualify for, it’s time to go shopping. This is where a great Realtor comes in. A great Realtor will help you navigate this part of the process by understanding your needs and wants and showing you homes that s/he thinks are a good match. Once you find a home that you would like to purchase, the Realtor will help you write an offer on the house.
The price and terms of the offer will depend on the market in general and the neighborhood and property itself, more specifically. In a seller’s market, it is not likely that you will get either a discounted price or money to help pay for closing costs from the seller as part of the contract, although I have been surprised on occasion. Conversely, in a buyer’s market, you may be able to get either a reduction in price or a credit towards closing costs. Part of this also depends on how the home has been priced by the seller and listing agent – if it’s priced appropriately, then the asking price might be what’s reasonable to begin with. The Realtor will research the surrounding area to see what comparable homes have recently sold for. The buyer and Realtor will then discuss what the terms of the offer should be and then submit the offer along with the pre-approval letter (so the seller knows that you are qualified to purchase the home – s/he risks losing valuable time if s/he takes the home off the market by accepting an offer only to not have the transaction close because the buyer wasn’t truly qualified to begin with).
Once the seller has approved the offer (there may be counter-offers and addendum which are all fairly normal) and it has been signed by all parties, the Realtor will send us the contract and we begin the loan process.
The Loan Process: After we receive the contract, we prepare loan disclosures as required by law. We issue them electronically and the borrower signs them electronically. When we get them back, we register the loan (this is when we can also lock the loan if the buyer wants), order the appraisal, and do some other administrative things like ordering verifications of employment and assets along with ordering the tax transcripts. After this part of the process is complete, the loan processor compiles all the documentation as it is received and after she has the documentation required for an initial underwriting approval, she submits the loan. When we get the appraisal back, we check it to see if the value came in at or above the purchase price. We also check to see if the appraiser noted any deferred maintenance that will require repairs along with the condition of the property. If everything is fine with the appraisal, we will submit it along with any other conditions the underwriter requires in the initial approval. After the underwriter signs off on the appraisal and any final conditions, s/he will issue a final approval / clear to close.
At this point the loan will be transferred to the doc department where we will issue the closing disclosure (CD) after we get an estimated settlement statement from the title company for the borrower to sign. With the signed CD back, we can finish preparing loan documents that we will email to title for the closing. The buyer will then go to title to sign all loan documents along with others required by the title company (we wire the money for funding at this time as well). Title will return all original documents to us, except the deed – we get a copy of that and title keeps the original to record at the county recorders office when the loan has been authorized to disburse. We review the signed documents to make sure that everything is in proper order and that we have all conditions from title. Once everything has been cleared, we authorize disbursement of the loan funds and title can record the deed and keys can be released to the buyer.
This is the typical process; sometimes there are some variations depending on a number of different things. If I handle your loan, I will let you know as early in the process as I can if there will be any variances in how your loan process should go. A normal loan without any big issues should close in about 3-4 weeks after we get the signed contract. On occasion, when everything falls into place with the appraiser and title company, and the file is clean, we can close in 2-3 weeks. In all cases, you will be updated at all of the major milestones of the loan process, as will your Realtor. The listing agent will also be kept in the loop as well.