The Loan Process – Purchasing a House

Homebuyers are occasionally frustrated with purchasing a home because they have no idea of the sequence of steps involved. Below are the steps that may help them understand the process.

Step one: Shop for Property. Read classifieds, search online for home listings, contact real estate agents then visit open houses until you’ve finally decided which property to purchase.

Step two: Pre Qualify the Borrower. Approach brokers and present to them your income, assets and current debts so they can help you prequalify for a loan amount you can manage to repay. Form 1003; an application form containing relevant personal and financial information about the applicant can be used in prequalification.

Step three: Pre Approve and Price the Loan. Brokers may have their preferred lenders. They present scenario to them to get an interest rate suitable to your financial situation. You may have the option to have the rate floated or locked this early of the process.

Step four: Sign Purchase Contract. Think before you ink. Make sure you’ve fully decided what to purchase before signing any contract because once signed, backing out will cost you money. Agree on which closing costs you will pay, and which will be paid by the seller.

Step five: Request for Home Inspection. Hire a licensed appraiser to do the home inspection and scrutinize the structure of the house. Order appraisal report required for the loan.

Step six: Obtain and Clean Up Credit Report. Pull credit report and make sure to clear up existing debts; close out open credit cards that were never used and take out duplicates. Look for any mistakes with the bureau’s reporting and have them corrected as well. Cleaning up credit report improves your credit score.

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Step seven: Collate and Order Documents. The following are the documents that need to be collected or ordered for the loan. Documents should be the most recent ones.

o Drivers License and Social Security ID

o Paystubs (2 months)

o W-2’s , Complete tax returns (2 years)

o Tax Returns and YTD Profit & Loss Statement (for self-employed; 2 years)

o Complete bank statements (2 months)

o Retirement accounts, 401k, mutual funds, money market, stocks

o VOE, VOD , VOR, VOM

o HOA Certs and CC& R ( if applicable)

o Home Owner Insurance

o Escrows and Title Reports

o Signed Disclosures

Step eight: Get Lenders Approval and Satisfy conditions. Submit collated docs to the lender for approval. Lenders have different guidelines and requirements for different loans.

Step nine: Loan is Clear to Close. Once loan is approved and conditions are satisfied, lender sends in clear to close conditions and sets the date for closing.

Step ten: Final Closing and Funding. Lender coordinates with processor, broker, borrower and title agent to set the table and sign all documents ready for funding. Once you’ve gotten to this point, shortly thereafter, you will be moving in to your new house.