The process of applying for a mortgage and buying your first home can sometimes feel like an obstacle course. Buyers may express confusion and frustration, but if you use the resources available to you and follow the advice of experts, the procedure can be much smoother and simpler. Here are five basic steps to follow to ensure the best outcome.
5 Steps For An Easy Home Closing
Step 1 – Pre-approval
In the months leading up to and during the home-buying process, it is important that you are prudent with your spending and steadfast in paying your bills on time so that when lenders review your credit report, you will be in your best possible financial situation. The first step is to find a lender you wish to work with and get pre-approved in order to establish to sellers and real estate agents that you are a viable purchaser. Your loan representative will request a list of documents from you, including but not limited to W2s, pay stubs, bank and other financial statements. It is important that you are comfortable with the lender you will be working with. The representatives should clearly and completely answer your questions and provide you with a preliminary outline of all costs you will be responsible for at closing.
Step 2 – Offer
Once you find a home that suits most of your needs as well as your budget, make a reasonable offer. If it is accepted, congratulations! This is the first major hurdle you must pass on your way to becoming a homeowner.
Step 3 – Purchase agreement
Now you must hire an attorney to aid you in the process. This person will prepare a purchase agreement (also known as a contract of sale), between you and the seller outlining the terms and conditions surrounding the exchange of property.
Step 4 – Mortgage
After all parties have signed the contract, you must send it to your lender. Your loan representative will request a list of updated documents from you. The lender will also arrange for an appraisal of the home you are purchasing to certify that the home is worth at least as much as the amount of the loan you are applying for. At some point in this process, you will be required to lock in your interest rate. Typically this lock-in period is for 30-45 days. Be sure it will last until at least a couple of weeks after the “on or about” closing date specified on your contract so if the closing is delayed, you will not lose your rate. This can be imperative during times of climbing interest rates. Continue to be cautious with your spending at this time, as your lender will be reviewing your finances regularly up until your closing date. Any new debt you incur during this period could prevent the closing of your loan.
Step 5 – Closing
The real estate closing is the final step in the home-buying process. Either the evening before or morning of the closing, you should do a “walk-through” of the home you are purchasing to make sure it is in essentially in the same condition as when you signed the sales contract.
You must bring certain items to closing, such as a government-issued photo ID and a certified check. The purpose of the closing is to make sure all parties involved have satisfied the terms and conditions outlined in the contract. For example, if the seller agreed to pay for any portion of your closing costs, it should be reflected in the settlement statement. If the seller promised to make repairs to the home, they must show proof that those repairs were made. If they did not make the repairs, it is probable that they will be required to leave money in an escrow account to cover the cost of you having the repairs made.
As the purchaser, you will be required to review and sign a great deal of paperwork at the closing. While it can be time consuming, you must thoroughly review and understand each document that is handed to you. Be sure you receive copies of all of the documents involved in the closing. Even if you are given electronic copies of the paperwork on a disk or via email, it is important that you have hard copies of these documents as well.
Lastly, once the final document is signed and all money has exchanged hands, it’s time to breathe a sigh of relief and celebrate! You are now the proud owner of your very first home.
Should you have any further questions about home closing or the mortgage purchasing process, feel free to contact a mortgage banker at Cliffco!