First Time Basics
So you want to buy a home but you find yourself asking, where do I even start? That's a great question. Buying a home can be a complicated process, but there is no reason you should feel overwhelmed. Everybody starts at square one. Just by asking these questions, you've given yourself a head start. Finding out how the process works and where you stand will let us create a plan to get you from where you are now to where you want to be!
Let's start off by examining the mortgage process, as it takes place in several different stages. First, it requires figuring out what kind of mortgage is best for you and your financial situation. Next, determine how much house you can afford and start the house hunting process. For that latter part you'll need an experienced Realtor. Finally, you have to submit all your documentation to your lender and determine what else is necessary to get to the deal closed.
Below we have broken down this process into sections allowing you to jump ahead or take the information piece by piece. You can also find more tips and advice on our Lending Life blog at blog.ranlife.com.
Determining The Right Mortgage For You.
There are several types of mortgages but the most common are fixed-rate mortgages. Fixed-rate meaning that your interest rate is fixed for the life of the loan and will not fluctuate over time.
Fixed rate mortgages come with the option to choose your loan term. Your term is essentially how long you will have to pay your mortgage off. The most affordable option is a 30 year term, however, 20 and even 15-year terms are available as well.
You'll want to think about your financial goals while choosing your loan term. With a 15-year mortgage, you will end up paying much less interest than if you had gone with a 30-year mortgage. However with a 15-year, your monthly payment will also be higher. Your loan officer should be able to provide insight on what might be a good choice for you, but this really comes down to your short and long term financial goals and what you feel comfortable with.
This is the fun part of buying a home! Before you even know it, you'll be walking into homes while instantly envisioning your life unfold.
Start by researching local Realtors in your area and make sure to pick someone you can trust. Often times your loan officer will have suggestions of reliable Realtors that they know or have worked with in the past.
Once you pick out an agent it's time to decide what qualities and characteristics you want out of your new home. Do you want it to be a new build or prebuilt home? What cities or neighborhoods interest you? Do you want to take near by schools into consideration? And how long is the commute going to be to work? Every individual and family has their own priorities when it comes to buying and choosing the right home. Make sure you are going to be truly happy with whatever home you decide to purchase.
Once you have found the home of your dreams and have determined that it is in your price range, work with your Realtor on submitting an offer. Once that offer is accepted, you are well on your way to finishing up the loan process.
How Much House Can You Afford?
At this point, if you are serious about buying a home and want to know exactly how much you are allowed to purchase, you need to speak with a loan officer and get a loan pre-approval. Most Realtors that you work with will want to see your preapproval before taking you out to view homes. If there are any hiccups in your application process or concerns that might disqualify you from obtaining the home loan, it's better to know right away so you have time to address the issue.
The loan qualification process involves a few measures; credit worthiness, job stability, and your debt to income (DTI) ratio. Red flags in any one of these areas can harm your chances of qualifying for the loan.
Once you fill out the loan application and submit your income documents, your loan officer will pass along that information to our setup department that will then determine what your max purchase price and monthly mortgage payment will be. From here, you simply give your pre-approval letter to your Realtor and can start shopping for homes.
Finalizing the Deal
You're under contract, congratulations! These next steps will outline your responsibilities and what you should expect throughout this process. It is RANLife's goal to effectively complete each step and get you the keys to your new home! In order to facilitate this you should be familiar with the following to ensure a successful loan closing:
GOLDEN RULE #1 - Don't change your financial situation or credit score.
- DO NOT start any new loans, don't consolidate loans right before closing, don't co-sign for anything, don't get a car lease, don't apply for new credit cards etc. A no-score credit report is pulled right before closing and they will check to see if any new debts have been created.
- DO NOT make any late payments, do not increase your credit card balances or any other thing that would lower your credit score.
- DO NOT change jobs, don't switch positions from a W2'd position to full commission based income, don't quit your job and start your own business in the middle of the loan process etc.
- You were approved under your current situation. If your credit, debt, hours scheduled or income changes during the loan process, that could affect your approval and may change the outcome of your home loan. Consult your loan officer if something arises and please inform them of any changes in your job immediately. This includes going from full time to maternity pay.
Now, it's time to get started:
- Provide a copy of your real estate contract ASAP to your loan officer. Time is of the essence. Getting the earliest start possible to process your loan will ensure we meet your deadlines. If you're buying at the very top of your pre-approved range, we should review the amount of property taxes you would pay with the selected property. This will ensure that your payment is not pushed over your limit. You should also inform us of any HOA fee's as these are typically not included in pre-approvals.
- Schedule your home inspection ASAP. Inspections are not required but are highly recommended. The inspection should be completed within 3 days of getting under contract. Once you get satisfactory results, inform us that you're ready to proceed for the appraisal. If things didn't turn out so well, let us know what you wish to do. We can renegotiate some repairs if needed or worst case, cancel the contract. If it's a bank owned home, your agent should make sure the utilities are on so that a thorough check can be completed and an appraiser will not need to revisit the property.
- Appraisal. We must ensure the home value equals the purchase price. The appraiser will also note if the home meets the standard safety guidelines for your loan program and will note any repairs needed prior to closing. This is done by a third party and they are paid up front. Appraisers are selected at random and must be ordered through the Lender. A typical cost of an appraisal is 400.00 paid via credit card. We collect for this upon getting under contract to schedule the appraisal the day after your inspection. This will take roughly 1 to 1.5 weeks to complete.
- Provide all information requested....ASAP. There are multiple documents that may be needed throughout the process. Please Fax or email all information and documents to your loan officer as they request. Time is of the essence and any delay on your end can and mostly likely will delay the closing. Just prep yourself that multiple requests will be issued. Processors review files and underwriters will also request additional information. Every case is different with the specifics required. But remember, it's just part of the standard loan process.
- Lock or float your loan rate. Typically this is done after the inspections have gone well and you know you're moving forward. Call your loan officer when you are ready to lock your rate. There is no crystal ball and ultimately it's up to you doing decide if you want to lock in or not. We're here to help and discuss your rate options with you.
- Select your homeowner's insurance policy. The insurance agent of your choice will need a copy of the appraisal to give you an exact quote. Once you have the appraisal report, and you have selected a homeowner's insurance company, please give their contact info to your loan officer. The policy must cover the loan amount and can have no more than a 5000.00 deductible.
- Ensure closing funds are available at least one week prior to closing. Funds from stocks, bonds, etc...Should be available in your account one week prior to your scheduled closing date. Lack of verifiable funds can delay your closing. Speak to your loan officer about where your down payment money is coming from. They can tell you the proper requirements and structure needed. Not all sources of money are acceptable. You cannot take out a loan for a down payment. Gifts can only be given from family members, etc. When applicable, gifted funds should be documented with acceptable gift letters and proof of funds from both the person giving the gift and the receiver of the gift.
- Schedule your closing appointment. After your loan is complete, coordinate a time and date with your real estate agent and your loan officer and we will schedule an appointment with the title company. You should not schedule a closing prior to your full loan approval.
Closing. You're finally ready to sign!
- Take your driver's license - When signing, you will need government issued, photo ID with you. The most common form is your driver's license. Make sure its current as an expired license is not acceptable. State issued, photo ID is acceptable and also a valid passport.
- Take the funds to close - Although you will know the rough amount due at closing, the exact figure will be provided by the title company typically the day of closing or 24 hours in advance. They do the final adjustment to any amount collected for taxes. When we have the final figure, you must provide the funds in the form of a cashier's check, bank check, money order or wire. All checks are made out to the title company. If your cash to close is $10,000 or more, then you MUST send a wire. Wire instructions will be provided. Personal checks or cash are not acceptable funds.
- Funding and completion - In most states, the money for your loan is wired from RANLife to your title company prior to the signing. This results in an immediate funding. In the states of AZ, CA, ID, LO, NV, NM, TX, WA and WI, the funding is typically 24 hours later. If your purchasing in one of the above states, the signed loan documents are reviewed after signing and the money is wired to the title company the following day (wire cutoff times are typically 1:00 PM).
After all docs are signed and the money has been distributed - The title company will take the deed to the county courthouse and officially record the property in your name! Then you're a homeowner and you will receive the keys from your realtor.
It's that easy! Now don't be scared because RANLife will be there to help you every step of the way.