Pre-qualifying can mean several things depending on the lender that you choose, but generally it involves knowing the following points: the area you want to live, the type of home you want, and the loan that best fits your financial needs.
Many lenders will pre-qualify you for free. A simple call, with no obligation, will allow you to know the type of loan that is best for you.
There are hundreds of loans available, so you should know your best options. The lender will also ask if they can pull your credit report. This report will alert the lender to any credit/financial problems. If you've experienced any financial difficulties (many of us have), you should explain that to the lender so they can provide the best alternatives for you. Next, the lender will most likely ask you a number of questions regarding other things about your life, such as employment history, saving habits, marital status, ownership of additional properties, and many other questions to help them determine your ability to repay the loan. This is standard procedure in the mortgage process, so please don't be alarmed.
The following are some additional questions a lender might ask:
Are you a first-time homebuyer?
A first-time homebuyer has not owned a home in the last three years. Why is this important? Because there are many programs that require a lower down payment, provide a lower interest rate, or even provide down payment and closing cost assistance to new homebuyers.
Are you a Veteran?
Many Veterans qualify for a special VA loan that requires no down payment. In most cases, it is easier to qualify for a VA loan.
Becoming pre-qualified is an important step in the mortgage process to enable you to get into the right house with the right terms and conditions. Furthermore, getting pre-qualified helps you strengthen your position when negotiating with the seller as they know that they have a qualified borrower.
You have found the property you want and are ready to make an offer. You must consider what sales price to offer, terms, seller concessions, earnest money, option fee, as well as closing and possession dates.
If you are in a seller's market, you likely will be able to negotiate very little. If you are in a buyer's market, you may be able to get several concessions from the seller.
Keep in mind that a very low initial offer may anger the seller and can lead to no compromise or a refusal to negotiate.
Making an offer on a home can be best accomplished with the help of a competent and trusted real estate agent. An agent is also very important because they should always have your best interests in mind when negotiating with the seller, and they can remain objective throughout the process.
Acceptance occurs when all parties agree to the price and terms of the contract. At that time, the clock starts ticking to adhere to all details that are outlined in your transaction. You should be sure that all changes are initialed, no matter how insignificant the change may be. Absolute agreement and clarity are the keys to protecting your rights and expectations for your purchase.
Once acceptance occurs, the next few weeks are filled with inspections, appraisals, and many other deadlines that you will need to meet to ensure a smooth closing.
Below is list of some of the deadlines that you can expect during the process:
After all parties have agreed to the terms of the contract and the executed date is filled in, a copy of the contract and the earnest money must be delivered to the title company. The title company will carry out all the instructions of your contract and provide the title insurance. The address of the title company chosen will be on your contract, so you can communicate freely with them. Generally, your real estate agent will contact the title company for all key factors and they will review your final figures before closing. A good real estate agent can review the Loan Estimate and Closing Disclosure to make sure you have not been incorrectly charged.
The appraisal is required by the lender to insure the property's market value and to certify the property meets required standards. Two important areas to focus on are the appraiser's value and the lender-required repairs. Although the appraisal belongs to the lender, you typically pay the cost as required by the lender. Federal law entitles you to a copy of the appraisal.
You have the right to do inspections anytime prior to closing. Most buyers choose to get the property inspected during the option period. If there is a major item that must be addressed after the general inspection is done, you can:
A wood-destroying insect report may be required before closing. This report is filled out by a specially licensed inspector and is often done at the time of the general inspection to keep inspection costs down. This inspection report states if there is a current infestation, there has been an infestation, there are conducive conditions (areas that might attract), or the property has been treated. Please keep in mind that infestation in general is easily treatable.
After the Underwriter has reviewed and approved your file, they send it to the Closing team. Loan approval is the full and final approval to get your property closed. Sometimes the loan approval is conditional and you must provide documented proof that required property or financial conditions have been met.
All repairs are generally done after the loan approval. Sometimes a seller might agree to do them early, but don't expect this until you have been completely approved for the loan. Repairs include lender-required repairs that must be done prior to the funding of the loan. Lender required repairs take precedence over all repairs, because the loan will not be approved unless they have been completed. While required repairs are addressed in the contract, repairs that are needed after you are a homeowner should be a concern to you. Savvy real estate agents should always recommend a residential contract to protect you in the coming year.
After repairs are done, it is always recommended to re-inspect the property. Oftentimes, the inspector you originally hired will look over the work done for a nominal charge. Re-inspection should not be skipped, so allow yourself enough time before closing for the re-inspection of items where repairs had been requested.
Before closing, you must obtain homeowners insurance. You will need to provide your insurance agent with the address, square footage, and age of the property. Some insurance companies ask for additional information that can be provided by your real estate agent. Your insurance will not go into effect until your loan has closed and funded. Your insurance premium will be included in your closing costs, so make sure you don't pay for it up front.
The amount of your insurance premium is determined by the type of coverage needed:
Please remember that flood and earthquake damage are not covered by a standard homeowner policy. You may need to buy a separate policy to cover those types of risks, depending on the likelihood of occurrence in your area.
A survey will provide a graphic account of the property you are purchasing. It will show the structure fence line, boundary lines, encroachments, and easements of the property. The buyer customarily pays for the survey, but the cost can be negotiated if the property includes acreage.
During these final few days, you will need to finish up any last-minute details to ensure that you get the keys to your house the day of closing. This is an exciting time, so try to relax and enjoy the process knowing that your new house is just around the corner. Below are a few last-minute things that you will encounter.
Closing is the date and time set aside for you to sign the paperwork. Your real estate agent will coordinate the time and date convenient for you and the title company. As a buyer, you may want to close near the end of the month so that you will minimize the number of days you must pay pre-paid interest. The other consideration is that most closings are scheduled for the last day of the month. A wiser strategy might be to close a couple days prior to the end of the month.
Funding occurs when all the paperwork has been signed and all conditions have been met. Funding may occur on the day of the closing or on the next day. Careful planning will ensure that all expectations have been met. You will not receive the keys for your home until the loan has funded, so plan accordingly for any time constraints.
After funding, your real estate agent will give you the keys to the property and you will officially own your new home. Congratulations!
Supreme Lending is a full-service mortgage lender where the customer always comes first. We strive to provide our customers with the best home financing experience possible, building customers for life.