Mortgage approvals rely heavily on credit scores. So, it’s good to make sure your credit is in order before you start the rest of the process. You need to verify two things: (1) your credit score is high enough to qualify for a loan and (2) your credit report is free of errors that could stop the mortgage process.
There are loan programs that allow down to a 500 FICO credit score, but we recommend having a 620+ credit score so you can have an easier time apply for loans. If your score isn’t there, we can connect you with a credit coach and a free up-front consultation.
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Ideally, you want to shop with 3 different lenders so you can see which lender you like working with and which lender has your best interest at heart. It’s best to choose your lender at this stage so you don’t have to worry about this will under deadlines while under contract for a home.
Once you’re pre-approved, you know exactly the price range you’re approved for and comfortable with. Now, you’ll want to select a real estate agent who can help guide you through the process and help you negotiate your offer with the seller of the home you’re wanting to buy. If you’d like a head start, we can refer to one of the many realtors we work with!
Your real estate agent will then be able to help you search for homes based on what you’re looking for. It’s good to start to figure out how many bedrooms you’re looking for, the price range you want to be in, the school district you want and other needs and wants that help you narrow your search. Your agent can help you set up showings where you can walk through a home before you make an offer.
Once you found a home you love, you can make an offer! An offer involves a purchase contract that is usually about 10 pages of contract details about the terms of the sale. You get to propose sale terms like purchase price, closing date, inspections terms, etc. The seller can accept, reject, or counter with their own terms. Ideally, you and the seller will reach and agreement on the term of the sale
No one wants to move in to a home that ends up needing thousands of dollars of unexpected repairs! A home inspection is optional, but it’s the best way for buyers to get an expert 3rd party opinion on the condition of the home before they fully agree to purchase it.
Even though you signed a contract with the seller to purchase their home, most contracts have an inspection contingency period (check with your real estate agent). This period is where you can choose to back out of the deal or request the seller fix items in a home if the inspection report finds expensive issues you are not comfortable with.
At this point you want to start considering coordinating your move. Your purchase contract will say when your closing date is (this is negotiated with you submitted your offer). You’ll need to consider when you plan on leaving your current residence and making the move into your new home.
Don’t forget that if you’re renting you likely need to tell your landlord in advance.
Most contracts also include an earnest money deposit. The earnest money deposit requires the buyer to place an amount of money (negotiated in the contract) into an escrow account within a few days after the contract is signed by both the buyer and the seller.
It helps show a seller how serious you are about a home and adds a level of financially guaranteeing that you will follow the contract. It is not an expense, it is money that is held by a 3rd party and then given back to you after you close on your home.
The pre-approval with your lender likely covered most of the details they needed for your loan approval. However, at this stage it is common for the lender to need more information or documents to verify your loan approval.
Things like updated paystub, recent bank statement, and miscellaneous documents like child support statements are common requests.
Every lender is legally required to send you a Loan Estimate 3 business days after you are under contract for a home and have completed an application.
Your Loan Estimate will estimate the fees of all the costs of purchasing your home. These aren’t fees just charged by the lender. Buying a home includes costs from different parties like insurance, title work, county fees, transfer taxes, lender fees, appraisal, etc. The Loan Estimate is a good faith estimate from the lender to give you an estimate of those fees.
At this point you’ll want to get home owner’s insurance. All lenders require home owner’s insurance during the entire time you have a loan. You can shop with different insurance companies to find a policy that works best for you, it may be beneficial to first start with the company that your auto insurance is with. You’ll want to get an annual quote and then your lender will collect monthly payment from you to then pay your insurance company annually.
Your lender will order an appraisal on the home. The appraisal verifies that the home is worth enough money to justify the amount the lender is giving to you. A mortgage means that if you don’t pay back your loan, the lender can foreclosure. The appraisal helps the lender make sure that if that ever happened, they can get their money back.
The appraisal is not designed to benefit you. It may tell you some helpful information, but it is mainly to serve the lender. The home inspection is what you as the buyer should rely on for information on your home.
Likely, you will need to pay for your appraisal up-front. After the appraiser inspects the home, the appraisal report will be sent to you showing you the value on condition of the home you’re buying. It is common for the appraisal report to take 1-2 weeks to be completed.
Most contracts have an inspection contingency period where you have a certain amount of a time to get a home inspection and request repairs. Often, you can exit a contract with no repercussions due to the inspection report during this period.
You’ll want to carefully review your inspection report and talk through it with your real estate agent. Figure out what repairs are important and what are not that big of a deal. Home inspection reports commonly show a lot of improvements that can be made. Remember that even new homes have flaws. Your goal is not to buy the world’s most perfect home. Your goal is to buy a home that works for you.
So, you get to decide the repairs that are deal breakers for you.
Your loan officer will send the documents you initially provided to an underwriter who will verify that you qualify for a loan. This is commonly called a Conditional Approval.
After a Conditional Approval, the underwriter may ask for a few extra documents. This is completely normal and nothing to be afraid of. Sometimes they may ask for updated documents, missing pages of documents, or other verifications.
Your loan officer will give you a Closing Disclosure before closing. Most likely, you’ll be given multiple Closing Disclosures since, like the Loan Estimate, they might not be the final numbers.
The Closing Disclosure is legally required to be given to you 3 business days before you’re allowed to close on a home. A lender is required to re-issue a Closing Disclosure if there is a significant change e.g. the APR and fees increase. When you get your Closing Disclosure ask your loan officer if it is the final or if it is estimated.
Compare your Closing Disclosure to your most recent Loan Estimate and explore if anything changed. Discuss these changes with your loan officer if you are uncomfortable with them.
Once you’ve reviewed your Closing Disclosure, you’ll need to send your “Cash To Close” funds to the title company. You loan officer will be able to tell you exactly how much you need to send. Usually lenders either require a cashier’s check or wire transfer. Often, if the amount is above $10,000 a wire transfer is required.
Make sure to verify the wire information with a the lender and/or the title company over the phone and be on the lookout for wire fraud scams. Always confirm changing information with your loan officer.
You will meet with a closing agent and likely your real estate agent to review your final paperwork and sign to close on your new home! After that, you will get the keys (unless your contract has delayed occupancy) and will be able to move in!
It’s easy to overlook this step, after all you just bought a home! But, it’s super important to save all of your financial documents for reference in the future. Many title company will be able to send you a digital copy of the closing paperwork you signed at closing. I highly recommend you save that somewhere where it won’t get lost: Google Drive, Dropbox, etc.
At this point you’re ready to move in! Maybe a fresh coat of paint? Change the locks? New batteries in smoke detectors and such. You’ll be settled-in in no time!
Don’t miss your important mail! After you move, it’s incredibly easy to have the post office forward mail to your new address. Here’s the USPS link to do so.
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