Buying a home is a big deal. It’s a serious process, and there are big stakes in the game. At Beverly-Hanks, we know it can feel like you’re lost in the forest, with no map for how to reach the summit of the distant mountain. You’re climbing over boulders, hiking higher and higher, with no idea how to make it to the top.
Buying a home should not be such a challenge. Sure, it’s gonna be an uphill climb, no matter which trail you take. But there is an easier path. And you shouldn’t have to hike it alone.
Let’s begin the journey by learning how purchase loans work. Here is a step-by-step walkthrough of how to secure a home loan.
1. Loan Search
If you’re buying a home, you’re going to need the advice of an experienced mortgage professional. And one of the biggest mistakes home buyers make is getting their loan through the first lender they call. Do yourself a favor that will last for 30 years. Call around to different lenders, ask about their rates, and get a feel for the loan officer on the other end of the line. You’ll want to find someone you trust and who will help determine which financing options best suit your needs today and in the future.
2. Loan Application
When applying for a home loan, it’s crucial to supply the lender with as much information as possible, as accurately as possible. Be prepared for a deep dive into your personal finances. All outstanding debts, as well as assets and income, should be included on your application. It may feel uncomfortable sharing that information, but your loan officer wants to set you up for success. An accurate picture of your finances will give you an accurate budget for your home search.
The application isn’t the only paperwork you will need to file to begin the home loan process. Home buyers must submit paperwork supporting the application, as well. You will likely hear requests for pay stubs, two years’ tax returns, and account statements verifying the source of your down payment, closing funds, and reserves. If your paychecks are deposited directly, find out how to get printed copies of your pay stubs from your employer.
Getting pre-approved for a mortgage means you know exactly how much house you can afford. That will help you and your agent narrow or expand your options, depending on the market and your pre-approval rate. Pre-approved borrowers are viewed as “cash buyers”, which gives you greater negotiating power, as well.
5. The Hunt
Now comes the fun part! It’s time to shop for the perfect home. We recommend using the search tools on beverly-hanks.com to narrow your search by price and community. On our site, you can also narrow listings by home features, school districts, and even whether it adjoins a national forest. When you find the right one, your agent will help you negotiate the terms of the sale, including the price and potential terms of the loan.
Mortgage lenders require an appraisal on all home purchases. This is an extra cost for you, but it’s well worth the expense. By knowing the true, up-to-date value of the home, you are protected from overpaying.
7. Title Search
At this step, any liens against the property are discovered. It’s not common, but it’s possible a lien was placed on a property to ensure payment of outstanding debts by the owner. All liens must be cleared before a transaction can be completed. Again, this is an important step for your financial protection.
8. Termite Inspection
Most purchase loans do not require a formal inspection for termite and water damage. However, some loans (especially government loans) do require them. Complete any additional inspections required by your loans as quickly as possible. (Often, they can be done by the same professionals or at the same time as your other home inspections.) If problems are found, repairs may be necessary. And those could hold up your purchase.
9. Processor’s Review
Once your financials and the details of the home are in order, your mortgage professional will package the pertinent information together and send it to a lending underwriter. This information also includes any explanations that may be needed, such as reasons for derogatory credit.
10. Underwriter’s Review
Obviously, the next step is for the underwriter to review the information put together by both the loan executive and the processor. The home loan underwriter makes the final decision regarding whether or not a loan is approved.
11. Mortgage Insurance
One last item may be added to your mortgage package before it’s approved. Many lenders require private mortgage insurance (PMI) when borrowers put down less than 20% on a home loan. This insurance covers you and the lender, should it become difficult for you to make your payments. Usually, the insurance does not add too much to your monthly mortgage bill. And the insurance is removed after you have paid off 20% of your loan.
12. Approval, Denial, or Counter Offer
In order to approve a loan, your lender may ask you to agree to a larger down payment. The most common reasons for this are to improve your debt-to-income ratio or if the property appraises for less than the purchase price. Your lender will not offer you a loan for more than the appraised value of the house. So, if you’ve agreed with the seller to pay more than that, you will be responsible for making up the difference.
13. Home Insurance
After the terms of your loan have been approved, it’s time to build out the rest of your mortgage package. Lenders require fire and hazard insurance on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone. In California, some lenders even require earthquake insurance on condominiums. Like you did for your loan search, it pays to shop around for your home insurances. Once it’s in place, the fee is generally added to your monthly mortgage premium and paid through an escrow account.
Don’t forget to dot your I’s and cross your T’s. During this step, final loan and closing documents are signed.
At this point, the lender sends a wire or check for the amount of the loan to the closing company. You will pay for the difference, which includes your down payment and closing costs, at the closing appointment.
16. Close of Transaction
After your closing appointment, documents transferring the title are recorded with the county recorder. Now you’re ready to begin making mortgage payments. Congratulations!
Here’s how to secure a home loan in 16 steps:
- Loan Search
- Loan Application
- The Hunt
- Title Search
- Termite Inspection
- Processor’s Review
- Underwriter’s Review
- Mortgage Insurance
- Approval, denial or counter offer
- Close of Transaction
That’s it! Now you have a new home!
Ready to Take the First Step? We Offer Trusted Mortgage Advice.
Whether you’re purchasing your first home or it’s just been a while, understanding the process is pivotal to becoming an educated consumer. Guidance from a seasoned mortgage professional will help you become even more confident with your decision and give you peace of mind.
Our Beverly-Hanks Mortgage Services Loan Officers are uniquely qualified to help you evaluate your home mortgage or refinancing options. Their single focus on home mortgages allows them to offer a broad menu of financing options, very competitive rates, and customer service that is second to none.
Reach out to a Beverly-Hanks Mortgage Services professional today!