I Want to Buy a Home, Now What?
THE HOME LOAN PROCESS
Not sure how much home you qualify for? The Gr8loans Team can help you determine approximately how much money you will be eligible to borrow before applying for a home loan. Pre-qualifications are evaluations of your credit that let you know how much you can afford. We offer those at no cost to you and without any obligation to do business with us.
HOME BUYER EDUCATION
The first step is to arm you self with knowledge. In the words of Francis Bacon, "Knowledge is power!" It is no different for today's home buyers than it was for Sir Francis. There ae many potential pitfalls when it comes to buying a home. The best ways to protect yourself include take a class to arm yourself with basic knowledge of homes and home buying. The next is to surround yourself with proven real estate and mortgage professionals. There are many free or very low cost classes and programs that can prepare you for home ownership. Here are a few that could help you make a mistake that could cost you tens of thousands of dollars. Here are links to a few:
FINDING THE RIGHT HOME LOAN
The second step in the mortgage loan process is finding the right home loan. Your home loan will either be a fixed-rate mortgage or an adjustable-rate mortgage (ARM). We'll help you determine which home loan might work for you based on three factors:
- How long you plan to keep your home
- How much you need to borrow
- How much financial risk you're willing to accept
HOME MORTGAGE LOAN PRODUCTS OFFERED BY the Gr8loans team and BOE Mortgage:
- Fixed-rate loan terms
- Adjustable-rate loan terms
- Jumbo adjustable-rate loan terms
- Interest-only home loan products
- First-time homebuyer home loan programs
- We offer FHA, VA, USDA and Conventional home loans
MORTGAGE LOANS AND DOWN PAYMENTS
The next step is determining your down payment, which depends on the amount of cash immediately available to you. Minimum down payment requirements vary from loan program to program ranging from $0 to as much as you want to use for down payment. The amount of your loan compared to the value of your property is known as the loan-to-value ratio, or LTV. For a refinance transaction, you can calculate the LTV by dividing the loan amount by the appraised value. For the purchase of a new home, this calculation is slightly different. LTV is calculated by dividing the loan amount by the lesser of the appraised value or purchase price.
The bigger your down payment, the lower your LTV. A low LTV not only gives you a better chance of a home loan approval, but also a lower interest rate in many cases. The lower your interest rate the lower your monthly mortgage payment. Use our phone app loan calculator to explore the impact of various down payment amounts on your mortgage loan payment.
APPLYING FOR A HOME LOAN
Applying for a mortgage is easy. You can apply online, over the phone, by mail, or if feasible, in person. The application will ask for personal, property, employment, income, asset, and liability information. If you are comfortable with doing your application from the comfort of your home at a time convenient for you, you can apply 24/7/365 online with our secure mortgage loan application found at www.gr8loans.us.
LOCKING IN MORTGAGE RATES
Mortgage rates are tied to movements in the financial markets, which are subject to change daily (even throughout the day). This means we cannot guarantee what mortgage rates will be at any given time. When you apply for a mortgage, you will need to choose to either float or lock in an interest rate. Your interest rate may be locked in at the current prevailing rate at any point in the loan process.
WORKING WITH REAL ESTATE PRIFESSIONALS
You can avoid problems and avoid overpaying for a home by choosing a real estate agent who is working for you as opposed to the seller of a property. These real estate agents are referred to as buyer’s agents. If you wish we can provide names of several competent agents for you to interview as you make your selection of representative.
You may want a home inspection by a qualified professional. The home inspection is not an appraisal. It's an evaluation of the general quality of the home that investigates the structural condition of the house and the life expectancy of the major systems, such as plumbing, heating, electrical, etc. The inspection should tell you whether your new home is free from obvious, and in some cases, hidden problems that can cause significant emotional and financial stress both now and in the future. By making a home inspection a contingency in the purchase contract, you'll have a set amount of time to inspect the home once your offer is accepted. You also can use the inspection checklist as a basis for negotiating the final price.
Once you have filed a complete loan application, including a purchase contract in the case of a purchase loan, we will provide you an estimate of your loan costs including all of your closing costs and an estimate of the cash you will need to close, if any. Once you have reviewed and signed your loan estimate, the processing and underwriting of your loan will begin.
CONDITIONAL APPROVAL OF YOUR MORTGAGE LOAN
Your personal income and asset information will be collected. Your credit and employment will be verified. This underwriting of your loan may begin before or after you find the property you wish to purchase. When underwriting is completed, a conditional approval will be issued identifying specific requirements that must be met before a final approval is issued and your loan is cleared to close.
PRIVATE MORTGAGE LOAN INSURANCE
If you make less than a 20% down payment, a form of insurance is required to obtain on your mortgage. This is private mortgage insurance (PMI). The premiums for this insurance is generally included in your monthly payments. The greater your down payment, the cheaper your mortgage insurance. This PMI is issued to insure the mortgage lender against losses if you should default on your loan.
Once you have submitted the necessary documents, we will send your loan file to our underwriters and request approval to close your loan. After an underwriter reviews and accepts all documents and information, you are ready to close on your mortgage loan. At that point you will be sent an initial “closing disclosure.” Your loan can close on the third business day after you accept this closing disclosure (CD.)
To get a home loan, a title insurance company will need to research the deed to the property you are purchasing to confirm that there are no liens against it and the seller can deed the property into your name. This is a one-time expense to guarantee that the seller legally owns the property and that there are no outstanding legal or financial claims against it that could compromise your ownership of the property. Most often insurance policies are issued at closing that protect the lender or owner or both against undiscovered issues and certain other title defects that could cause future problems for the lender or borrower or both. You are free to choose your own title insurance company. We work with several excellent title insurance companies and will select one if you do not specify a preference.
Insuring your home against disaster and liability is not optional. You are required to be insured against unexpected hazards (such as fire) and personal liability claims (injury to others while on your property). Prepayment of the first year's homeowner's insurance will be part of your closing costs, while your ongoing insurance premiums will become part of your monthly mortgage loan payment. You are free to pick your own insurance company so long as the company you choose has a rating acceptable to your lender. You will also have some latitude as to optional insurance and the amount of your policy deductibles. The cost of your insurance will be included in your monthly payment.
The title insurance company will ensure that the taxes are current on your new property as of your closing. Most of the time your property taxes will be included in your monthly payments. In some cases, only when you make a down payment of 20% or more, you may be able to arrange to pay your taxes and insurance outside of your mortgage payments.
MORTGAGE LOAN CLOSING COSTS
Closing costs typically range between two and five percent of the purchase price of the home. Certain loans may offer very low or no closing costs. These mostly one-time fees typically include the following:
- Title Examination fee
- Title insurance
- Closing transaction fee
- Loan origination fee
- Discount points
- Recording fee
- Underwriting fee
- Processing fee
- Recording fees
Another important part of the mortgage loan closing is the prepayment of expenses involved in owning a home. These expenses include property taxes, homeowner's insurance premiums, association dues (if applicable), and pro-rated interest. The lender collects these funds to ensure your taxes and insurance are paid on time.
MORTGAGE LOAN CLOSING
This is the final step in the home buying process. A date, time and place convenient to you and any other parties involved, such as Realtors, will be coordinated by the settlement agent (title company or attorney) and the sellers, if applicable, to close on your home mortgage loan.
The closing can take place virtually anywhere with enough notice. At0 the loan closing, you will need a valid photo ID, bring a bank check for the amount of cash required to close which must be payable to the settlement agent.
In most cases, the total amount of funds that you will need will be provided to you day before the closing in the form of a settlement statement. You should review this form with both your Realtor and your loan officer.
The settlement statement is a key part of the closing and details the different fees and charges associated with the mortgage loan. The HUD statement will be included in the final closing documents. Once these documents are signed, you will receive a copy of each one.
With most loans, the first payment will be due the first day of the second month after your closing. For example, if you close on December 15th, your first payment will likely be due on February 1st.
Protect your credit rating and improve your credit scores by ensuring your payments are made on or before they are due. If you run into financial problems call the loan company to see what can be done ahead time averting a financial disaster. Your closing package also includes a list of housing counselors who can help. If you did not get such a list, contact your loan officer who can provide one.