Are you a first-time homebuyer? Obtaining your first mortgage can be scary and confusing. We outlined the entire process for you to help set your mind at ease!
Step 1: You will need to get pre-approved (or at least pre-qualified).
It is important to know what loan amount you are approved for so that you can start looking for houses within your price range. For a pre-approval, you will need to provide us, your lender, with your driver’s license, social security number, marital status, contact information, most recent bank statements for all accounts, employment information, most recent 30 days paystubs, most recent 2 years of W2(s), and most recent 2 years tax returns. We will also need to pull a tri-merge credit report. Once we have all of the necessary information, we will provide you with a written commitment of the maximum amount that we can lend you.
Pre-approval only requires a few minutes over the phone to ask about your credit score, your current salary, the amount of your down payment, and what your monthly debts are. We don’t require any documents for pre-qualification, which is why it is much more accurate to get pre-approved. You can get pre-approved by filling out a loan application here: http://po.st/VDLoanApplication
Once you are approved for a loan amount, you can start to look for houses that you know you can afford. Real estate agents also prefer working with buyers who are pre-approved. Pre-approvals can also help you identify any potential credit issues you may be unaware of and will give you time to resolve these issues before you find your dream home. Lastly, sellers are more likely to accept your offer over others if they know that you can definitely afford the house.
Step 2: You found your dream house and the contract has been signed!
Congratulations! The next few steps before you decide on a lender will go as follows:
1. Your escrow or earnest money deposit check will be cashed. This is generally non-refundable, but there may be some contingencies built in. Make sure to check with your realtor about that.
2. Schedule a home inspection. Don’t be afraid to ask questions, this is one of the biggest purchases of your life! Also, remember that you will be responsible for the cost of the inspection.
3. Review the seller disclosures from your real estate agent. Review the listed improvements or renovations and make sure permits were obtained when necessary. These documents will also disclose pest infestations, water intrusions, sinkholes, HOAs, environmental hazards, property line disputes, etc. Review them all and get any additional inspections as needed.
Step 3: The loan process.
If you chose to get pre-qualified before you found your house, then you will need to fill out your loan application now. If you already filled one out, then congrats! You are on your way! The process will play out as followed:
1. Preparing Your Loan. We, your lender, will gather all the necessary documentation. These documents will be reviewed and submitted to processing. Also, loan disclosures will be sent to you to review and sign. The processor will contact you for any additional needs.
2. Appraisal.The appraisal will be ordered within 24 hours of the formal loan application. Expect processing to make their introductory call if they did not contact you previously for any additional info.
3. Underwriting.Your loan will be submitted to underwriting within 5 calendar days and is typically underwritten within 1-2 days.
4. Conditional Approval. The underwriter will conditionally approve your loan. The processor will request any additional items needed for closing and they will continue to send weekly updates.
5. Get Homeowner’s Insurance. Obtain your insurance within 24 hours of conditional approval so that you don’t delay your closing.
6. Final Approval. Your processor will submit conditions to the underwriter and then final approval will be issued.
7. Clear To Close. Your loan is clear to close and the closing disclosure will be sent to you 3 days prior to closing.
8. Closing Day.Documents are signed, loan is recorded and keys are exchanged. Congratulations, you are officially a homeowner!
Some do’s and don’ts for your credit score during the mortgage process.
1. Don’t apply for new credit cards. This includes general credit cards (visa, mastercard, etc.), credit cards for retail stores, etc. Each of these companies will pull your credit to approve you for their card, which will cause your credit score to drop. You could lose 2-50 points for each hard inquiry.
2. Don’t pay off collections or charge-offs. This will decrease your credit score immediately because it will change your last activity date. If you decide you want to pay off your old accounts, make sure to do it through escrow. Also, before you go to escrow, make sure that you validate that the debt is yours and that the creditor agrees to give you a letter of deletion.
3. Don’t close credit card accounts. If you do, your debt ratio will go up. This can also affect other credit score factors, such as length of credit history.
4. Don’t max out or over charge your credit cards. This will bring your credit score down 50-100 points. The ideal scenario is to keep your balances below 30%. If you decide to pay off your credit card, make sure you do so for all accounts.
5. Don’t consolidate your debt onto 1 or 2 credit cards. If you do this, it will appear that you are maxed out on that card.
6. Don’t do anything that will cause a red flag to be raised by the scoring system. This includes adding new accounts, co-signing on a loan or changing your name or address with the bureaus. The less activity on your credit reports the better.
1. Do join a credit watch program. You can check your reports weekly, or sometimes even daily depending on which program you choose. That way, if something does show up on your report that could cause your score to go down, you will know immediately and can resolve the issue.
2. Do stay current on existing accounts. This includes anything from mortgage payments to car payments. One late payment can cost you 30-75 points.
3. Do continue to use your credit card as normal. It is important to keep up your pattern, otherwise, your score could go down.
4. Do call your lender if you receive anything from a creditor or collection agency that can affect your score. They may be able to help you to stop any derogatory reporting to the bureaus.
For our full loan survival kit, give us a call today: 770-309-0939. We are happy to help!