Buying a New Home? Understand the Mortgage Process Before You Start
Housing prices closed out 2019 up 7.8 percent over the previous year as home sales rose across nearly every region. Simultaneously, the number of available homes tumbled over 8 percent, creating a competitive environment for home buyers.
If you’re looking to purchase a home, it’s important to have your ducks in a row to seize upon available opportunities. That means understanding the mortgage process and what you’ll need to do to get into the home of your dreams.
Mortgage Basics - Start Well before You Intend to Buy
You may be able to envision the home of your dreams, but can you afford it? By some reports, 71 percent of Americans don’t think that they can afford the purchase price of a home. Amid low interest rates and a booming economy, home prices are rising, making it difficult for many individuals to envision owning their own home.
That’s why your first step when thinking about buying a house, should be to find a trusted loan officer. A qualified individual can help you assess your financial situation and determine what’s affordable. They can also help you find special incentives or products that could make buying a home a reality for you.
Too often, potential home buyers only look up rates online and use digital calculators to help them determine their monthly mortgage payment. While these tools are great as a guideline, they don’t take into account your individual situation and any special rates or programs for which you may qualify. A seasoned loan officer, on the other hand, will take a vested interest in you personally and work to find you the right combination of financing to fit your needs.
To find the right loan officer, focus on seeking someone who takes an interest in you as an individual, has access to a full range of loan products and financing, and is willing to walk you through the process step-by-step. No matter how many questions you may have, your loan officer should be willing to take the time to make you feel comfortable about securing financing as well as making a buying decision.
Understanding the Mortgage Process
Once you find the perfect partner in a qualified loan officer, you will be able to start the prequalification process. Depending upon where you live, this process can take an hour to a few days.
Ideally, you’ll bring the necessary documents to the first meeting with your loan officer. Many people are unprepared for the depth of scrutiny required to obtain a mortgage and fail to bring the breadth of information they need. Having the following documents in hand when you meet with your loan officer can help to ensure a speedy turnaround on your application:
- Tax returns from the past two years
- Pay stubs from the past 30 days or W-2 forms to provide proof of employment
- Bank statements from the past 60-90 days
- Proof of down payment
If all documents are in place, you could receive a prequalification letter the same day. In some locations, however, sellers and agents require a full pre-approval, which means your application will need to undergo the underwriting process and could take a little longer.
Sometimes, a deeper inspection will reveal issues that need to be resolved. By seeking prequalification before you begin shopping for a new home and working with a competent loan officer, you might be able to work through these issues. At a minimum, a good loan officer can give you tips to repair your credit and get on track for home ownership.
I’ve Put in an Offer, Now What?
Having an offer accepted on a new home is an exciting time. It can also be a stressful experience. If you’ve put the time in up front to find the perfect loan officer, much of the headache associated with purchasing your home will be reduced.
Once your offer is accepted and you notify your loan officer, they will begin the financing process on your behalf. This will include ordering a home appraisal to make sure that the buying price and what you plan to finance is in line with the value of the property.
A good lender will also guide you through the process and alert you to the steps that you need to take personally. For example, you will want to schedule a home inspection to ensure there are no liabilities associated with the property, and secure homeowners insurance. A final walk through of the property should also be arranged before the closing.
The loan closing process itself can take 45 days or more, but the right loan officer will keep you in the loop during that time, offering regular and frequent updates.
As the closing day approaches, your loan officer will schedule the final meeting, advise you on how to handle your down payment, and answer any questions you may have. He or she should also be present at the closing to make sure that things are finalized according to plan and your expectations.
Congratulations! You Are a Homeowner
Once you’ve received the keys to your new home, count on your loan officer to stay in touch. He or she is a great resource if you have questions about your loan, including payments in escrow.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.