Tuesday, November 13, 2012

Securing your Mortgage Loan

Not everyone has the cash to purchase a home outright.  This is why securing a mortgage is a very important step in the home buying process.  It's a lot of paperwork and due diligence but it doesn't have to be overwhelming.  For all prospective buyers, I HIGHLY recommend you first...

1. Get a pre-qualification letter - I highly suggest speaking to your local bank or mortgage broker to understand how large of a loan you can qualify for.  Everyone and their brother is a mortgage broker (and realtor) these days.  This isn't the time be shy, ASK QUESTIONS. There is a wide range of loan products depending on your situation.  This way, you can narrow down our search requirements in terms of price range.  This also shows your seller that you're a REAL buyer and your offer should be taken seriously!

With your pre-qualification letter, you made your offer and the contract was ratified.  Depending on what contingencies you put in your offer, buyer now does his due diligence by getting a home inspection report, inspect HOA or condo docs, or order termite inspection.  The Bank also does it's due diligence by...

2. Bank Appraisal - Your bank will require an appraisal done on the house.  The most STANDARD loan will require you put down 20-25% of the appraised value in down payment (most conservatively speaking). 

3. Borrower Due Diligence - The bank will then go into full due diligence mode.  This is where they gather all the information they need to approve the loan.  This includes:
  • Personal Financial Statement
  • Tax Returns (2-3 years)
  • Recent Pay Stubs and proof of employment
  • Proof of Assets (eg: bank statements, stock portfolios, 401k, etc.)
  • Credit Reports
You should have your approval in 30 days or more, depending on the availability of information.  Once approved, we go to closing! This is where additional cash is funded (if needed), buyer/seller signs their lives away, and keys are exchanged.  After that, hopefully your realtor takes you out for a steak dinner (at least I do)!

No comments:

Post a Comment