On your path to homeownership there are many steps, understanding what is involved in each can help you with the process. Here are ten steps with a brief explanation for each one.
1) Pre-approval - The most important step in the home buying process. In this step you find out what will be the total cash required for closing, what your maximum purchase price is and what your comfort level may be for a mortgage payment. This step will also provide you with the various mortgage options available to you, to meet your needs. Be prepared to provide income, asset information as well as employment history. During this stage a credit report is typically ran for review. Once the mortgage loan originator has provided mortgage counseling, a pre-approval letter will be issued to your real estate agent. This documentation is to show a seller your qualifications upon the presentation and negotiation of a purchase contract.
2) Purchase Contract - Your agent will review the legal contract and point out its many features to protect both you (the buyer) and the seller in a real estate transaction. You will decide on various inspections as well as target dates for contingencies and closing.
3) Accepted Purchase Contract - Once you (the buyer) and the seller have agreed on the terms and conditions of the contract, it will be reviewed and approved by the real estate attorney, of your choosing. The real estate agent will then set up any inspections to be completed.
4) Mortgage Application Process - Be prepared to provide the following documentation for your meeting with your mortgage loan originator; pay stubs within the last 30 days, past 2 years of W-2’s, last 2 months of consecutive bank statements with all pages for all accounts (Checking, Savings, 401K) and name, address and phone numbers to verify employment. (Copy of the purchase contract, for buy and sell if applicable)
5) Mortgage Process Begins - Your mortgage loan originator will order the exhibits required for underwriting. An appraisal will be ordered to determine fair market value. Employment and assets are verified to determine sufficient funds to close. This may take anywhere from 2-3 weeks.
6) Underwriting - This is the process in which the final approval is issued from the authorized underwriter. This is a system to check your file for compliance review against the guidelines of the mortgage program being applied for. Upon completion, the underwriter will sign their name to the file attesting approval.
7) Mortgage Commitment - Upon approval, you will be issued a mortgage commitment. This document is the promise from the bank to lend to you. Review the terms and conditions of this document to ensure your understanding of any conditions necessary to be provided prior to the scheduling of your closing. A copy of this document is also forwarded to your attorney so that they can prepare for your closing.
8) Clear to Close - This process consists of a couple of variables. Your attorney is preparing the necessary searches and updates to be provided from the seller in regards to the legal description and the boundaries of the property. The legal paperwork is a very important step to ensure that you receive a clear title upon the sale and transfer of your new home. In order to move your file to the closing department, the lender will require all requested conditions on your commitment letter be satisfied prior to closing.
9) Closing - The final and most exciting step in the home buying process! Your attorney will schedule your closing date. This date may vary slightly from the date on your initial purchase contract. Please view that initial date as a target date. Your attorney will review all closing documents with you as you sign for ownership of your new home!
10) Moving – Planning your move is important, but you should understand it is difficult to determine the specific date to schedule your move. Communication with your professional team will help you determine your final dates.