Although this isn't your first home purchase, the home buying process is constantly changing. Our goal as the #1 Mortgage Lender is to make your dream of home ownership a reality as quickly and trouble-free as possible. So we're providing all the information you need to be an educated buyer and borrower.
Before you start house hunting, you'll need to understand what price range you can afford. A commonly used guideline is 2.5 times your yearly gross income (income before taxes) plus the amount of your down payment.
To afford a new home, many times a homeowner must first sell their existing home. When this is not possible, there is the option of obtaining a Bridge Loan. If the existing home is local, the lender can combine the money owed on the existing home with the amount required to purchase the new home. This creates one larger, temporary Bridge Loan. Once the existing home is sold, the homeowner will apply the proceeds to the Bridge Loan and the bank will release the mortgage on the original home. The homeowner then has two options. The bank can reduce the loan payment to a more appropriate amount based on the lower mortgage loan. Or, the customer can refinance to a shorter term or different product that may be more beneficial such as a Conforming Mortgage which traditionally provides a better rate. (There are fees associated with refinancing.)
The following calculation can be used as a guideline for determine how much you can afford to borrow. Your monthly gross income (income before taxes) and your debt load are used to determine how much you can borrow. Your loan payment plus your monthly debt (not including your household expenses such as heat and electric) should not exceed 30% of your monthly gross income. Use our handy calculator to help you determine your maximum monthly loan payment.
A wide variety of home loans and financing options are available for the permanent mortgage. Some choices are yours to make; others are based on specific circumstances such as:
The Pre-Approval step allows you to validate your ability to borrow and provides an estimate of your maximum loan amount. During the pre-approval process, a credit check will be performed. A letter can be printed by you and provided to the Realtor to assure them that your bank has tentatively approved you for this loan amount. Many Realtors require this pre-approval letter so they can be sure the homes they show are in your price range and that time is not spent showing homes if you cannot get the loan.
Buying a home is an exciting time. To get started and make it easier, start by thinking about those features that are must haves – number of bedrooms, number of bathrooms, garage, etc. Then list what you absolutely do not want. Finally, list the things that would be nice to have but something you would be willing to give up for the right house or the right price. Now you're ready to go shopping!
For your convenience, we've gathered the names, contact information and websites of realtors in our local area. You can simply click on their website to learn more about them and view the homes they have listed.
So you've been preapproved, found your house and you're ready for the next step - getting your mortgage. You can apply for your mortgage loan by contacting a lender or you can apply on-line. A lender will contact you if you apply on-line. You will be asked to provide a list of information to your lender so they can proceed with your loan review and approval:
You may be provided with the opportunity to "lock in" a rate, which ensures you receive the rate that is quoted to you at the time of commitment (which is when you are informed of the approval of your loan). This is often a good option if you feel rates may go up.
Within 3 days of application, you will be provided with several documents:
Once you have a signed sales agreement, the appraisal will be ordered by the bank. The appraisal is an evaluation of the property's value and is completed prior to the final loan approval to ensure the loan amount is consistent with the value of the property. The appraiser visits the house and evaluates the site, structure and physical condition of the property. The final appraisal amount also includes an evaluation of recent selling prices of similar homes in the area (often referred to as "comparables"). The process can take up to two weeks.
An inspection may be required as a result of something found during the appraisal process. It may also be requested by you, the buyer, to uncover hidden problems or to identify items that you may want the seller to repair before the final contract is signed.
The title search is a step to uncover any possible problems with the legal ownership of the property such as a lien, an unknown heir or faulty land survey. Arrangements for the title search are made by the bank. A one-time fee is paid at closing.
Upon receipt of a satisfactory appraisal and title search, your lender will contact you with the final approval. A commitment letter will be issued at this time.
At the closing, papers are signed, keys change hands, and the home officially becomes yours!
The lender will establish the closing date. Before closing you should review all loan documents and your purchase agreement and do a final 'walk through" inspection to ensure nothing has changed or been removed from the house.
You must pay for the rest of your closing costs and down payment at the closing.