Mortgage 101: Understanding the Path of your Mortgage Loan
The Home Buying Process – Step by Step
Purchasing a home is a big decision and an exciting one! Every step along the journey moves you one step closer to your final goal – owning your dream home. Here is the typical path that most home buyers will follow.
- Evaluate the responsibilities of owning a home: financial costs, upkeep, repairs, etc. and decide if you are willing to take these on.
- Meet with a lender to become preapproved for a specific mortgage amount. Knowing how much you can afford will make it easier to focus on homes in your price range. A preapproval will also make your purchase offer more credible because the sellers know your financing is certain.
- Make a list of what you are looking for in a home. There are some key factors to consider to ensure your new home fits your lifestyle and budget, and is a wise investment that will grow in value. Use our home buying checklist to get started.
- Now comes the fun part – begin shopping for a house. There are many ways to do this: most commonly you will work with a real estate professional who can guide you toward homes that match your criteria and handle the negotiating and purchasing process on your behalf. Ask one of our Mortgage Loan Originators to refer a Realtor to you if you are not already working with someone. The internet has made it easy to view homes online before you even visit them in person.
- Find a home and make an offer. A written offer is a legally-binding document that confirms your interest in buying the home. It spells out conditions of the purchase, including the offering price. The sellers can accept your offer as-is, produce a counter-offer, or reject your offer outright. Your realtor will have an essential part in any negotiations with the sellers and will try to find common ground that will result in an accepted offer.
- Place earnest money into a trust account. Earnest money is typically used to place a “down payment” on the home and demonstrate your commitment. When the loan closes, this earnest money is applied to your down payment or closing costs.
- Formal underwriting begins. The information from your application begins to go through a verification process to ensure your debts and income match the information provided. In addition, an appraisal is ordered to confirm the value of your prospective home. A title search is also done to ensure there are no problems with ownership of the property such as outstanding tax liens, judgments, additional mortgages or owners, or anything else that could cause problems in transferring the property to you.
- Clearing of conditions: While the loan is in underwriting, you will have the opportunity to address the stipulations to the purchase offer. These may include conducting a home inspection, pest or mold inspection. Well and septic inspections are often done before the loan closing to ensure there are no problems. The home sale is usually contingent on these inspections coming out favorably. This is also the right time to purchase home owner’s insurance, which will be required by your mortgage lender.
- Loan closing: Before funds are released to finalize your home purchase, loan documents are signed that legally bind you to repay the mortgage. Paperwork is also signed that formally transfers ownership from the seller to you. At the loan closing, you will sign multiple documents designed to thoroughly explain the terms and costs of your mortgage, the repayment agreement, and to pledge your home as collateral to the bank. At the end of the loan closing, you are officially a home owner!
- Recording: The closing agent will handle the recording of any public documents after the loan closing.