By Amanda Rundquist, Director of Marketing and Communications, BANK
Contracts, disclosures, appraisals – oh my! Buying a home can be overwhelming. We break it down in just 8 steps to help you take the OH MY out of the process.
- Pre-qualification. The first step when buying a home is to work with your lender to get pre-qualified for your loan. You will provide some basic income and debt information so the bank can give you a preliminary approval on the amount you can borrow. This is required by most realtors before they will show you any houses. Once you are pre-qualified, you are ready to house hunt!
“It’s important to shop around for a lender who fits your needs. A low interest rate is great unless there are a ton of fees “hidden” in the loan. Ask each lender for the rate, fees, and closing costs associated with their loan.” Derek Kramer, Mortgage Loan Officer, BANK
- House hunting. The fun begins! With your pre-qualification letter in hand, you and your trusted realtor will begin to explore homes that meet your needs and are within your budget. Once you find the perfect home, you are ready to make a competitive offer, using your pre-qualification letter and your earnest money, which shows the seller your intent on buying the home. This amount can be part of your down payment, but it is due when you make the offer. Talk with your realtor about the amount that is preferred in your area.
- Purchase agreement/contract. Your realtor will draw up the purchase agreement. This is your contract to buy the home from the seller. This document outlines the terms of the purchase: the price, the closing date, and any details you wish to negotiate with the seller such as appliances, fixtures, and contingencies, etc. Be sure to talk with your realtor about a home inspection, which will need to be included in the contract. This is at your cost, but strongly recommended.
- Initial Disclosures. Once you have a signed purchase agreement with both parties (you and the seller), your lender will begin sending you documents called Initial Disclosures. These documents will show you an estimation of the fees you will be paying at the closing. These fees can include the attorney’s fee, appraisal fee, and the lender’s servicing fee. These fees are part of your closing costs and can be rolled into your loan. You will need to sign these documents and return them to your lender.
- Underwriting. After your lender receives the signed initial disclosures, they will begin the underwriting process. This process verifies your income, assets, and liabilities (what you owe) and ensures you will be able to make your mortgage payment. You will be asked to submit documents at this time. Think “the 2’s:” your most recent 2 months of bank statements, 2 years tax returns, 2 W-2’s, 2 paystubs. If you are self-employed or own rental property, you will be asked for additional documentation. Divorced? You will be asked for your divorce decree and any child support or alimony payments. There may be additional documents required and your lender will stay in close contact with you during this process.
- Appraisal/Title opinion/Homeowners’ insurance. During the underwriting process, the house you are buying will need to be appraised, which your lender will arrange. This determines if the home is worth the asking price. The title opinion is also done at this time. It is done by an attorney or title company who reviews the title to the home to ensure there are no liens on the property which would impede the purchase. These two items take the longest during the loan process, usually 2-3 weeks. During this time, you will need to obtain a quote for homeowners’ insurance and provide that to your lender.
- Rate lock. Your lender can now lock in your interest rate which secures your interest rate for the life of your loan. Your escrow* amount is calculated, and the terms of your mortgage are set. This determines your monthly payment. At this point, you will sign your closing disclosures. These will reflect the final closing costs, which are due at closing. Check with your loan officer on how you can lock your rate earlier.
- Closing Day. The day you have been waiting for has arrived! Your lender will coordinate the final documents that need to be signed and handle all the details. At the closing, you will make your down payment, sign the mortgage documents, and get the keys to your new home. Congratulations – it’s time to celebrate!
Buying a home can be overwhelming. When choosing a mortgage lender, be sure to closely review the fees they charge, compare interest rates, and ask about closing costs. It’s important to also know if your lender will sell your loan to another lending institution or maintain the servicing within their branch. Then choose a lender you can trust to help you navigate this process with transparency and honesty.
To speak to one of our mortgage experts, contact Eric Busch (firstname.lastname@example.org) or Derek Kramer (email@example.com) or call 515.223.2265. Visit www.BANK.bank/home-loans to get started!
*Escrow is an account the bank holds for you with money that pays your real estate taxes and homeowners’ insurance which is rolled into your monthly mortgage payment.