How much can you afford?
Before you can begin to search for a new home, you need to determine your budget and estimate how much you can afford. One of the most important factors in figuring out your financial budget is getting pre-approved for a mortgage. A mortgage is an advance of money from your lender that will cover the finances of your new property. The mortgagee (you) must make monthly payments to repay the debt. The monthly payment consists of principal and interest and is repaid over 15, 20, 30 or 40 years. This is how most homes are financed.
- Apply for a mortgage/paperwork/loan application.
- Lender begins processing application.
- Lender provides booklet of estimated closing and related costs.
- Lending institution requests a credit report, verification of employment and assets, and an appraisal of home.
- Estimate of your loan costs in form of initial Truth in Lending Disclosure Statement or Good Faith Estimate.
- Lender evaluates the application and pre-approves the loan.
- Home search begins. Agent shows you multiple listings.
- You find the house you want and make an offer.
- Lender processes loan and issues final approval.
- Lender disburses funds to closing agent.
- Sign closing documents and loan is funded.
- Appropriate documents recorded at county recorder’s office.
- The home is yours!
Can you get financing?
Unless you’re a cash buyer, homes and financing are closely intertwined. (Financing is the difference between the purchase price and the down payment, commonly referred to as the mortgage.) Of course, a bank will only lend you money if they’re sure your credit is strong and they’re confident you have the ability to pay them back. A bank checks your credit by studying your financial history, income, federal tax returns, pay stubs, and long-term debt information (such as credit cards, auto loans, child support, etc.) to determine if you are a good candidate for a loan. If your credit report is good, then you have an excellent chance of obtaining a mortgage. If not, then you must take the appropriate steps to improve your credit rating.
Writing the offer and closing
Once you’ve found the perfect home, your agent will write up the offer. Once the offer is accepted, there are various steps that need to take place before you can close. These include the loan application, qualification and commitment, all inspections completed and repairs made if necessary, property is surveyed and appraised, the title is analyzed and the title insurance commitment is issued, and you have secured homeowner’s insurance.
The closing is the meeting where the sale transaction is finalized. The Disclosure Statement is released, money is exchanged, all paperwork and agreements are signed, and the title of property is transferred. And you become a homeowner!