The Mortgage Process Explained
The home loan process can be extremely intimidating, especially for first time home buyers. It is not as simple as a credit check and signing on the dotted line. There is an entire series of actions that must take place to obtain a mortgage and it doesn’t happen overnight. In fact, obtaining a home loan can take a few months. So, how and when do you start?
Where to Start
It is best to begin the home loan process before you even start to look at houses for sale. It is no use wasting time at open houses and private showings if there is no way you can afford the mortgage. Start by getting a credit check. Your credit rating will determine the amount you can borrow and what the fees will be. You will also want to determine a budget. What kind of down payment can you afford? What about monthly payments? And don’t forget about closing costs, taxes, and insurance.
Once you have determined your budget, get prequalified. Contact various lenders and shop around for the best rate. When you have determined which lender you will work with on the home loan process, get a pre-approval letter. This will spell out your estimated interest rate and how much you can borrow. It shows sellers you are good to go and can give you a leg up on other home buyers when the time comes to put in an offer.
Find a Home
Now is when you can start touring houses to find the perfect fit. You may already have a home in mind or you’ll look at several. Remember to stay in the price range determined by your pre approval.
Once you have found the perfect place, make an offer and start negotiating. Remember, your first offer may not be accepted. Your offer will include a desired closing time frame and conditions that allow the purchase to be cancelled. A purchase agreement will be signed after both parties agree. This step of the home loan process usually takes several weeks.
Secure Your Mortgage
Now it is time to get your loan. But that is easier said than done. You may choose to get loan estimates from multiple lenders. These estimates will include the loan type, terms, interest rate, loan amount, and down payment. But, remember, you can only get an estimate by filling out an official loan application. When you have determined which loan you will go with, you will move forward with your application with an “intent to proceed.”
Before the home loan process is finalized, you will need to get the home inspected. This will ensure you are getting what you are paying for. The home inspector will search the home top to bottom to see if there are any hidden issues that may be costly to repair that could affect the home’s value and subsequently the selling price. The inspector will prepare a list of issues and repairs that need to be made.
Next comes the appraisal. An appraiser will look at the home and compare it to other homes in the area. The value of the home will be based on this. You cannot get a loan if the appraisal is lower than the asking price. If this happens, you may wish to renegotiate the price with the seller or walk away from the deal.
Now, it is finally time to seal the deal. Your lender will verify the details of your income, assets, debt, and the new home value. You’ll be provided with a closing disclosure that spells out the terms your loan and what you are to pay at closing. You will schedule an appointment for your closing to sign the final sale contract. You will need to bring your ID and the money to pay the closing costs if they aren’t rolled into your mortgage loan.
The home loan process may seem like a lot, but a great lender will walk you through it step by step. You’ll want to choose a mortgage company that takes its time with clients to make sure they understand what is happening and alleviate common anxiety that comes with purchasing a home. Amberwood Mortgage is that company. We will help you select the loan that is right for you. Contact us today to schedule an appointment and begin looking for your new home sooner than you think.