With the expiration of the First Time Home Buyer Tax Credit getting close, the most common question that I am asked is "what are the all the steps in the process of buying a house?" Having been in the mortgage business for close to 20 years now, I have a great deal of experience making this process as painless as possible.
Here's a quick walk-through on how purchase loans are made.
- Loan Search - Seek the advice of an experienced mortgage professional to better understand which financing options suit your needs now and in the future.
- Loan Application- Supply the lender with as much information as possible, as accurately as possible.
- Documentation- Submit paperwork supporting application. Commonly required items include pay stubs, two years of tax returns, two months of bank statements verifying the source of down payment, funds to close and reserves.
- Pre-Approval - This allows you to know how much you can afford to spend on a home and gives you greater negotiating power.
- The Search - Now is the time to begin your search. Once the right house is found, the terms of the sale will be negotiated, including the potential terms of the loan being sought.
- Inspection - You will need to hire licensed professionals to inspect the property for defects, termites and water damage.
- Appraisal - Your lender will require an appraisal of the home you wish to buy. An appraisal determines the marketability of the property relative to the rest of the market.
- Title Search - This process reveals any liens against the property. All liens must be cleared before a transaction can be completed.
- Processor's Review - The mortgage processor reviews all the information and sends it to underwriting. (Always be nice to your processor)
- Underwriting Review - Underwriters make the final decision as to whether or not a loan is approved.
- Decision - The lender issues a letter stating an approval, denial or counter offer.
- Clear to Close- Assuming the loan is approved, all terms and conditions of the approval need to be accepted and satisfied by the applicant. The loan is clear to close once underwriting receives the acceptance from the buyer.
- Closing - During this step, the final loan and closing documents are signed.
- Funding- At this point, the lender sends a wire or check for the amount of the loan to the closing company.
- Close of transaction - Documents transferring title will now be recorded with the county.
- Congratulations! You now own your new home. Now begins the most important step of all. Enjoy your new home.