The Home Loan Process

Home Loans The Home Loan Process

How The Home Loan Process Works

Your loan officer is here every step of the way!

When you make the decision to purchase a home, it’s the first in a long line of other decisions to be made throughout the process. At the beginning, it helps to clearly define what is best for your unique situation. Highlighting what may be a deal breaker from the beginning can help save you time and even money in the long run. Typically the old saying “location, location, location” reigns supreme, but here are some other things to consider:

  • How big is your family? Will you have any other family or extended family members living with you?
  • Which neighborhoods are you willing to consider? Do you need to be close to work, family, amenities, etc?
  • Are schools a factor?
  • Do you prefer a single-family home, a multi-family home, a home with an in-law apartment, or a condo?
  • Are you willing to be a landlord and have tenants that can help pay the mortgage?
  • Based on your current income and assets, what kind of home can you afford?
  • What is your current credit score?

In a perfect world, you’d find your dream home, in your neighborhood of choice, at a price you can afford, however, realistically most people will have to make some compromises. It may help to make a list of all the features you want from your home and then assign them a priority. Do you need 3 bedrooms? More than 1 bath? A garage? Outdoor space? Write down everything you want and then decide what is a deal breaker and what you are willing to compromise on. For instance, determine whether the house or the neighborhood matters more to you, or whether you’re willing to make a longer commute in order to own a home with more land. Use this as a guide when you start to look at houses.

It’s important to know what your current credit score is and what is reporting to your credit report. By law, you can get a free credit report from Annualcreditreport.com once per year. You can also contact the three national credit reporting agencies – Equifax, Experian, and TransUnion – and request a copy from each. The three agencies are independent of each other and the information may differ on all three reports. In addition, you may not know which agency your lender will use to check your credit, so it’s best to verify that all three have correct information about your credit history. If there are any red flags, or incorrect, inconsistent or derogatory information, it’s best to know ahead of time and correct it before going into the mortgage process.

The Road to Homeownership

Determine what you can afford and are willing to pay

Your lender will take into account your income, debt, down payment amount, and credit score, among other things. Lenders set limits on your DTI (debt to income ratio), which means that your monthly costs cannot exceed a percentage of your income. However, this may be different from what you are comfortable with actually paying. Determine what makes the most sense for your monthly budget based on all of your income and expenses, and then work backwards from there. You can also use our online calculator to get an idea of what your payment might be.

Save for a Down Payment

Most mortgages require a down payment, and although there are programs that require little to no down payment, it’s still a good practice to begin saving right away. An ideal down payment is 20% or more. It’s also a good idea to keep those funds separate from any other funds so that you are not tempted to spend them before they are needed. We also suggest putting aside some liquid cash for any moving expenses or out-of-pocket expenses that may come up throughout the process.

Tip: It’s worth it to do a quick search to see if there are any home buyer assistance programs available to you. There are more than 2,400 of these type of programs in the United States and they offer down payment help in the form of grants, low interest or deferred loans, forgivable loans, help with closing costs, and more.

Get Pre-Approved for a Mortgage with one of our experienced Loan Officers

Once you determine what you can comfortably afford, call us or apply online to get pre-approved for the right loan product. Your loan officer will discuss your current and future financial situation and goals, review some documentation, pull your credit report and determine what you will qualify for. This will give you a good idea of where to start in your home search.

Consider working with a REALTOR®/Real Estate Agent

Consider using a REALTOR® or Real Estate Agent to assist you as a buyer’s agent in your home search. Although both must be licensed to sell real estate and complete continuing education courses annually, there are some differences. A REALTOR® is affiliated with the National Association of REALTORS® (NAR) and the local REALTOR® Board. They must adhere to NAR’s 17-article Code of Ethics and it’s various Standards of Practice, which is strictly enforced by the local board. Whichever you choose, the agent will have access to the most up-to-date information on the market and is often an expert in negotiation. You will work closely with your agent, so make sure to choose someone who is experienced and that you can trust and get along with. You may even interview several candidates until you find the best one for you. The right agent should be highly skilled, motivated, and knowledgeable about the area while keeping your best interests first. They are there to help you make the best decision possible and get you into the best home possible.

It’s important to note that you do not pay a buyer’s agent. Once they find you a home, they are offered a “co-broker” compensation that is already set by the seller’s agent. You don’t pay anything out of pocket for their services.

Go out and see homes - and make the most of open houses and showings

Utilize the list you made earlier that outlines what you really want and what you can compromise on when viewing potential homes. Your agent can alert you to open houses and set up showings for any properties you are considering. When you’re touring homes during open houses or private showings, it’s easy to get distracted by things that are either really appealing or really appalling. Pay close attention to the home’s overall condition, and be aware of any smells, stains or items in disrepair. Ask a lot of questions about the home, such as when it was built, when items were last replaced and how old key systems are - like the heating system, roof and windows. If other potential buyers are viewing the home at the same time as you, don’t hesitate to schedule a second or third visit to get a closer look and ask questions privately. You may have to see quite a few houses before you find “the one,” but remember to have fun throughout the process!

Make an offer

When you get pre-approved and follow all of the do’s and don’ts after receiving that pre-approval, you will have the ability to make a strong offer. Your agent will work with you to create the best offer possible based on their expertise, the condition of home and their knowledge of the current market conditions. An offer can also include contingencies and requirements such as a home inspection, and your agent will help you through this process. Once that is submitted, comes the worst part - waiting! You may get a simple yes or no, or you may get a counteroffer. Either way, your agent will work with you to negotiate the best possible deal. If you get a no, it’s time to keep looking, but if you get a yes, it’s time to celebrate!

Sign the purchase and sales agreement, then secure your financing

Once your offer is accepted, your agent will draft a Purchase and Sales agreement to be signed by all parties involved. Once you sign this, call your loan officer! The loan officer will need a formal application and updated and/or additional information from you to continue the mortgage process. They will also “lock” your rate, which means that it will be guaranteed not to change, even if the market fluctuates. At South County Mortgage, we average 30 days from application to closing, but in certain scenarios it can take longer. A rate lock ensures nothing will change while your loan is being processed. This is a good time to ask any questions you might have to ensure a great experience!

Receiving Your Loan Estimate

A Loan Estimate is a three-page form that you receive after applying for a mortgage. The lender must provide you a Loan Estimate within three business days of receiving your application. The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future. When you receive a Loan Estimate, the lender has not yet approved or denied your loan application. The Loan Estimate shows you the loan terms the lender is prepared to offer. If you decide to move forward, the lender will likely ask you for additional documentation or “conditions.”

Home Inspection, Appraisal, Insurance, and Utilities

Once your offer is accepted, it’s highly recommended, and very common, to schedule a home inspection with a licensed and experienced inspector, especially if this was a contingency of your offer. The inspector will thoroughly check the home for any defects, and this can be another point of negotiation. If any issues are found, you can choose to have your agent renegotiate the contract to have them fixed. We highly suggest being present for this, as this is the most time you’ll get to spend in the new home until closing. Bring a tape measure and notebook so you can start planning where you will place your furniture. Plus, if you have any questions for the inspector, this is a great time to learn as much as you can about the home.

There will also be an appraisal of the home by a licensed appraiser. This is to determine the market value of the home. Lenders always require a home appraisal before they’ll issue a mortgage because they want to protect their investment. If the market value of a property is lower than the sales price and if the buyer defaults on the mortgage, the lender won’t be able to sell the property for enough money to cover the loan.

Call your preferred insurance agent or company and let them know that you are buying a new home. While homeowner’s insurance is required by all lenders, it’s also a critical part of protecting your investment. You’ll also want to call the utility companies to give them your move-in date and establish service.

Closing Day!

Now is the real time to celebrate! Closing day means you have cleared all the conditions set by the lender (also called “clear to close”) and they have issued a final approval on your loan. Hooray! You’re about to cross the finish line! It is highly recommended that you visit the house for a “final walk-through” with your agent - this is your last chance to view the house and make sure that everything you contracted for is still there and in working order. You will then go to a closing, or settlement, where a lawyer or closing agent will be present, along with lots and lots of papers for you to sign and read. This can sometimes seem overwhelming or exhausting, but it’s a necessary last step in the process. Once you sign and understand everything, you get the keys and can move in! Congratulations, #HappyHomeowner!

Tip: Once you’re settled in, get to know your neighbors and explore your new neighborhood. You may find (or your neighbors may recommend) local restaurants, parks, and community resources that you weren’t aware of!

If you’re happy with the experience you had with your agent, loan officer, attorney, insurance agent, movers, and anyone else involved in the process, be sure to leave them positive reviews online and recommend them to your friends and family. That’s the best compliment you can give!

SOUTH COUNTY MORTGAGE

With over 20 years of experience, we ensure you get the best service you deserve.

(401) 583-4150