What to expect when you buy a home- Who is doing what and what do I need to do?
Congratulations! You have decided to either purchase your first home or move out of your old one and start fresh in a new one. Either way, the process of buying a home may seem overwhelming. You read everything you can and ask every question you can come up with, but the more you ask, the more complicated things seem to be. Rest assured, we are here to help make sense of the process and walk you through it step by step. Purchasing a home requires a number of people working together on their respective functions. While it doesn’t require tons of labor, it does require everyone working on the deal to communicate to get it closed.
The process of purchasing or selling a home or other property usually begins with a realtor. Because realtors have access to market information including prices of other comparable properties and the time it takes other properties to sell, they are the people on whom you rely the most. Realtors are also the people who coordinate with title companies, the seller or the seller’s agent, and the loan officer. They are responsible for looking out for your best interests in the overall process and advise you if any issues arise.
The title company is the next step. Once you have a signed contract, either you or the seller’s real estate agent brings the executed contract to the title company. The purpose of the title company is two-fold: (a) to ensure the person who is on the contract is the legal owner and to make sure that all mortgages or encumbrances on the property are legally released before you buy it; and (b) to be a neutral, independent escrow agent and hold all of the documents and money on your behalf until it’s time to put them together and close the transaction. Most of the time, the title company function occurs in the background, and you are only alerted if there is an issue. However, if an issue does arise, your agent will work with you and the seller to solve the issue or address the remedies you may have.
Loan officers and processors are responsible for getting you and your house qualified to the lender. The first part of this process is getting your information to show the lender that you have the wherewithal or means to repay the loan. This process begins with you completing a Form 1003-Uniform Residential Loan Application which asks questions about your employment, income, assets and previous residences to submit to their underwriters to make sure you are qualified. To substantiate the answers on the Form 1003, the loan processor will ask you to submit paystubs, past tax returns, and bank statements to prove that what you claimed is accurate. The next step is to run your credit to determine what the score is. Because the credit score is the driving factor of the rate that the lender will offer you, having the highest credit score is imperative to getting the best interest rate available to you.
Once the loan processor has all of the required information, he or she will lock the interest rate and begin the diligence on the home or property itself. To achieve this, the lender will order an appraisal, an independent appraiser will go to the home or property, and the independent appraiser will provide the lender with an estimated value of the home. Notably, the appraisal is the only up-front cost to the consumer (which usually ranges from $400-700 depending on the size and location of the property), and the appraisal is the most time-consuming part of the process as lenders have no control over the timing or appraisal company used per the federal housing laws. Assuming the appraisal comes back to the lender at or above the purchase price, the lender then sends the title company the documents necessary to close on the loan and all parties come to the closing table at the title company.
Closing is one of the most confusing parts of the process to most consumers. This is where the breakdown of the costs is presented, where both the buyer and the seller receive all of the discounts and credits made throughout the purchase, and where all of the professionals who worked on the deal get paid. At closing, the buyer will sign the note to promise to pay the lender back and the mortgage that comes with that note. At the same time, the seller will sign the deed to the property over to the buyer. Once that is achieved, the buyer tenders their share of the purchase price which is combined with the money the lender sent the title company, the title company pays the seller, and the transaction is “closed”.
The first step to purchasing a home is completing the application. Call us to get you started! The next step is to gather and submit the following documents for us to analyze and input to get your loan moving forward and closed:
- Valid ID and Social Security Card
- 2015 and 2014 Tax Returns, all pages
- 2015 and 2014 W2’s/1099’s
- 30 days most recent consecutive pay stubs
- 60 days most recent bank statements, all pages. Even those intentionally left blank.
Once this is done, a member of our team will be in touch with you shortly to remind you to get this information to us.
We are very glad that you have chosen us to help you with your home loan, and we are here for you every step of the way. However, your cooperation and experience in getting the application and the requested documents is vital to our closing your loan on time. We look forward to getting your loan closed!