The Loan Process For Buying a Home
Buying a home is an exciting yet stressful time, especially if you’re a first time homeowner. Many buyers don’t realize that there’s a lot of prep work to do before you even start looking at homes.
The following are some additional tips on home loans and what to expect when buying a home.
Step 1: How much can you comfortably afford
Once you’ve decided that you want to buy a home, you should determine what home loan payments you can comfortably afford. There are many tools available such as an affordability calculator that give you a general idea of what your payments would be. Quickly see how much interest you could pay and your estimated principal balances. You can even determine the impact of any mortgage principal prepayments for a full yearly or monthly amortization schedule.
Step 2: Determine which home loan best suits your needs
There are many home loan options available from first-time buyer programs to traditional conventional, jumbo, and FHA loans. There are 30 year and 15 year fixed loans as well as adjustable and hybrid loans such as a 5/1 ARM or 3/1 ARM. If you’re interested in lower payments, an interest-only loan may be a good option for you. With all the options available, you need expert advice to help you choose the right home loan for your situation. Be sure to visit our home loan options page to learn about all the options that are available and if you have more questions, you can call one of our home buying experts at +1(949)683-0310.
Step 3: Contact a real estate agent and start shopping
This is the fun part. Once you’ve been pre-approved for a mortgage and have an idea of what price range you qualify for, you can work with a real estate agent to view homes for sale in the areas you’d like to live. Once you find a home you like, you can work with the real estate agent to draw up an offer and complete a purchase agreement. The seller has the option to submit a counter-offer and you may go through several rounds of counters. Once you and the seller agree to the price and terms, escrow will be opened. Typical escrow periods are 30 days but 45 and 60 day escrows are not uncommon.
Step 4: Review your home loan application and update your file
Depending on how much time has passed since we issued your mortgage pre-approval, we may need to collect some updated information and updated documents from you. We probably have everything we need, but it is a good idea to go over the home purchase document checklist to ensure we have everything we need. Once we have updated your file, your home buying specialist will go over the details of your loan program, confirm the rate that you want, and go over your closing fees. We’ll make sure that you understand every detail of your home loan program and answer any questions you have before moving forward.
Step 5: Lock your mortgage rate
At this point, if you’d like to secure your interest rate, your home buying specialist will send you a lock agreement to confirm the terms of the home loan and rate. Once you review and approve the lock agreement, your home buying specialist will collect a lock deposit fee to lock in your rate. The lock deposit will be credited towards your closing fees at the end of the transaction. For more information about the lock deposit, please view our “What is a lock deposit” video. Once we receive the signed lock agreement and lock deposit, we will send you some preliminary disclosures such as the good faith estimate and truth-in-lending disclosure to review and sign which detail the terms of your rate and loan.
Step 6: Home inspection and appraisal
Shortly after escrow is opened, it is advisable to schedule a home inspection with a professional who will walk you through the property to look for any red flags such as structural damages or appliances that may not be working properly and other items that may need to be fixed. It is a small investment for some peace of mind. Any major issues would need to be addressed before the close of escrow date. While your loan is being reviewed and processed, we will schedule an appraisal appointment with the seller’s agent to confirm the value of the home. Unlike a home inspection, that appraisal is a requirement to determine that the home is worth what you are paying for it.
Step 7: Mortgage approval, signing, and closing
Once we have everything we need, your account manager will submit your complete file to the underwriting department for approval. Once approved, we will prepare home loan documents for you to sign. Generally, you will sign your loan documents at the escrow or title office and it will generally take between an hour and an hour and a half. After we receive the signed loan documents back, we will review your loan file one more time to make sure we have everything we need. If everything looks good, your loan will fund 2 to 3 days after your signing, and you will get the keys to your new home!