Now that you’ve decided you want to purchase a new home, it’s important to know what to expect throughout the loan process. With the right knowledge, the road to home ownership is just ahead. Most Real Estate Agents will not work with you in finding a property until you have been pre-approved for your financing. This is so that the sellers know when you visit their home, your serious and you have the ability to purchase if you fall in love with their home.
Check Your Credit
Before you even think about applying for a mortgage, it’s important to know where you stand from the lender’s point of view. Checking your credit report is a good idea for many reasons, but it’s an essential step in your journey toward buying a home.
Every 12 months, you can request a free copy of your credit file from each of the three major credit reporting agencies – Equifax, TransUnion and Experian. Look for inaccuracies, outdated information or anything that requires your attention. If you spot anything, file a dispute right away to get the information corrected. A free credit report does not include your FICO score, which is available from the credit bureaus for a small fee. Most lenders use this number in determining your interest rates and creditworthiness, so it may be a good idea to check it out for yourself first.
Choose A Home
Some lenders may will offer a pre-approval, but others require that you have a specific home chosen before they will discuss loan options. Therefore, the next step may be to obtaining a home loan pre-approval is to first select a home or area that you like. Some sellers may require you to provide an earnest money deposit, which secures the home while you obtain financing and have the necessary inspections completed in order to finalize the purchase. If you do this, make sure your offer is contingent upon financing. That way, if the bank doesn’t approve you, your allowed to walk away.
Gather Your Documentation
Once you are ready to actually start the full loan process, you will be asked to provide more documentation and/or information relating to your current financial status, employment, assets (including both real and personal property) and liabilities. Before meeting with your lender, make sure to have your current paystubs, bank statements, tax returns for the two years preceding your application and information relating to any debts that you currently owe. If you are self-employed, you will also be asked to provide a year-to-date profit/loss statement, which is also known as an income statement.
Meet With Your Lender
Now that you have your documentation together, it’s time to meet with your lender. At this point, you will complete a mortgage application and submit it for approval. Depending on the lender, it may take anywhere from several hours to several days before learning whether or not you are approved. In most cases, however, a lender can provide you with an answer within 24 hours, especially when you’ve already done the pre-approval process.
Last Minute Details
If your loan is approved, it’s time to move forward to the next step in the mortgage process. Your lender will order an appraisal, title search and inspection to be completed on the property. This is just as much for your own protection as it is for the lender because it may reveal hidden problems within the property that were not previously disclosed. The inspection and appraisal can take up to 30 days, at which point the results will be forwarded to the lender. If all goes well, you will close on the loan and get ready to move into your new home.