When you’re prepared for the home buying process, you can avoid surprises and plan accordingly. Before we dive into the process, however, let me first introduce to you all the parties involved in home buying process.
You will consult with a mortgage loan officer either in person, over the phone or online. The loan officer will collect and review your income, assets liabilities and credit, to determine your ability to repay and help you determine your price range and your best mortgage options. Pre-approval is highly recommended over pre-qualification in which documents are not necessarily provided to the lender. The loan officer should provide a loan worksheet or closing cost worksheet so you can see what fees are involved, how much it will cost you and how much your mortgage payments will be.
Your mortgage loan officer or your loan processor will collect and review all the necessary documents.
The loan processor will complete all sections of your loan application and run your loan through automated underwriting.
AUS or Automated Underwriting is the first step in the underwriting process. DU also known as Desktop Originator or LP known as Loan Prospector are computer programs that pre underwrite the loan to determine your eligibility. Note: The information submitted for the AUS approval has to be verified in final underwriting.
If there is anything unusual about your file or anything that the loan officer or loan processor are not sure of, they could submit your file for full underwriting. This could avoid any uncertainty and make sure the borrower qualifies before sending a pre-approval letter.
Additional information may be required to fully complete your loan application such as, verifications of employment or letters of explanations as required to explain any discrepancies.
The Lender will send a pre-approval letter stating the loan amount and loan type you are pre-approved for and they will list any conditions of final loan approval.
Start looking at Houses with a Realtor®
Many items of the purchase agreement are negotiable for example the purchase price, closing date, and seller contributions towards buyers closing costs etc. Don’t worry, your Realtor® will help guide you through the whole process. It a good idea to make your offer contingent upon a home inspection.
Home inspections are still optional but highly recommended. Most people choose to hire a professional home inspector to inspect the home for it’s over all condition and advise the home owner of any defects.
Loan officer receives fully executed purchase agreement, updates borrowers file accordingly and converts the pre-approval into a full residential loan application. Borrower has the option to lock in on the interest rate.
Documents in the file can be no older than 30 days from the date of the official application, so borrower may need to provide updated asset, income and/or credit docs.
The appraisal evaluates the property to establish its fair market value and to make sure it meets minimum property standards based on the mortgage you choose. The title company does an independent title search on the property to make sure you can get clear title to the property at closing.
You will need to make arrangements for home owners insurance and provide that information to your lender.
At this time, the loan processor will submit your loan application to underwriting for final loan approval.
The lender may need additional information to complete your file so please be patient and cooperate fully.
The underwriter very carefully reviews all the documents provided and cross checks underwriting guidelines to make sure everything is in perfect order.
This may or may not be required. Most sellers request that you have a written statement of full mortgage approval at some point before the closing. This Commitment Letter states the terms upon which the lender has agreed to with regard to your loan.
This is a five-page form that provides all the details about the mortgage loan, including loan terms, monthly payments, fees and other costs. You will receive this document three business days prior to closing your loan.
At this time, the mortgage company will prepare all the final closing documents and send those to the title company.
Title Company closer walks the borrowers through loan disclosures and notarizes the signatures.
You sign the final loan documents and receive the keys to your new house. You will need to bring a cashier’s check or wire the funds for closing directly to the title company.
I am Patty McLain and I have been helping home buyers, first-timers and otherwise throughout the Twin Cities and Greater Minnesota get the financing they need since 1991.