A purchase mortgage is a home loan taken out to help a buyer pay for a home with the home serving as collateral for the loan. Since a home is normally the largest asset any of us will purchase in our lifetime, we normally don’t pay for the home in cash. Rather, we pay a certain portion in cash and the rest by taking out a mortgage and making tax deductible payments to pay off the mortgage.
Here is a step by step plan to make buying your home as easy as possible.
The first thing you want to do is get pre-approved for a mortgage. By calling us at 800 Homestead, your federally licensed, Mortgage Loan Officer (MLO) will give you an idea of if you can buy a home now, or what you need to do to put yourself in a position to buy a home. The pre-approval process will give you an idea of the price range of home you should be looking for. This will allow you to start your shopping to see what will fit your family.
After your pre-approval, you will want to find a reputable realtor that is familiar with the area you are looking to purchase. Try coming up with a referral from a number of sources. For example, Homestead will be happy to refer you to one of our preferred realtors, and look for a referral from a friend who you know bought or sold a home though their agent. This provides some type of assurance of the competency of your agent. Your agent will be able to provide great insight as to the area’s you are looking into, school districts, if the asking price is fair, and any other details. that will be important to your home buying decision.
If we’ve done a good job on #1 and #2, then steps 3-9, just got a lot easier!
Enjoy this part! You’re shopping!. Based on your input, and the Homestead preapproval letter, your realtor will narrow the search to a manageable amount of homes for you to evaluate. Before shopping, make sure to have a list from the entire family of what is important and don’t forget to prioritize them. Is a big lot important to your son, but not to you because you have to cut the grass?
Once you have identified the home for you, then your realtor will assist you in making an offer. If this is the first negotiation you’ve been involved in, this can be the most stressful part of the process. Rely on your realtor here to get to a fair price. Please be careful, the negotiation should be about getting a better price of what you want to pay for a home you are buying, and not so much about what you can pay for the home you buy.
In the contract, you will be negotiating not only contract price, but also seller concessions closing and possession date.
The sellers may make a counter offer and there may be some tweaking of the figures and timeline to close. After both sides agree, you will be expected to make and Earnest Money Deposit(EMD), which are funds that go into escrow as your good faith gesture of intent to purchase the home.
Now that you have an accepted contract, time is of the essence. To those ends, quickly get into Homestead Financial Mortgage to finalize your mortgage application. Make sure to have your standard items needed for you to make your application. See the attachment below:
At the application, make sure to have a list of all questions for your Homestead MLO regarding the financing, making sure the payment is what you expected as additional information comes in, like taxes, insurance and mortgage insurance.
Make sure you take your time during this step. If, for any reason, you don’t understand something regarding the terms of the mortgage, make sure to slow everyone down, until you understand everything. As we’ve said before, this is the largest asset we will purchase in our lifetime, so make sure to understand everything.
We recommend getting a home inspection. These should be performed as quickly as possible after contract acceptance. Checking the soundness of the home for the buyer is the home inspector’s job. A home inspector will check for structural items: foundation, roof, plumbing, electrical and overall structure of the home.
The inspector prepares a report, noting areas of concern that be addressed by the seller in order to move forward. For example, the plumbing leaks, parts of the electrical system should be updated. The seller will have the opportunity to respond to the inspectors recommendations. Some items on the inspection may be fixed, others may result in a financial concession.
It is important to note, a building inspection is different from an appraisal, which is performed by a licensed appraiser, usually during the next step, “processing the mortgage” where the appraiser renders an opinion of value.
If you can get the parties to agree after the building inspection, that’s normally the last real barrier to getting the purchase closed.
The building inspections are finished, and terms are agreed, now Homestead will(continue) to process your mortgage. What that means is the Homestead mortgage application package you signed, your credit, capacity and asset verification documentation, and appraisal will be underwritten and a credit decision will be made, or really affirmed.
During this point, you will look to “Lock In”, meaning commit the rate for your mortgage with Homestead. You signed an application with a rate, however the rate is not guaranteed, or is “floating” until the lender “Locks your Rate”. In other words, guaranteeing the rate for a period of time, usually through closing.
On approval of your mortgage application, you will be given an approval letter or Mortgage Commitment Letter, which confirms your approval terms of your new home loan. Again pay close attention to the terms of your loan are what is expected.
This normally takes place at a title company. This is the day of settlement, in other words, the seller is will get their money and you are getting your home. You will bring your down payment, closing costs and prepaids in the form of certified funds payable to the title company. You will be signing all of the mortgage closing papers, and title company papers to consummate the purchase of your new home.
Now that all of the docs are signed and the funds have been exchanged, you have your keys, and your new home!
Important Note: Avoid putting your “Life on a Truck”: If at all possible, avoid a big move on closing day. This is one of the biggest, and most involved transactions of your life. If the slightest detail is off, your whole life is on a truck, which creates an enormous stress. For example, if the home you are buying is not finished, or ready, there is an error on any of your documents, you can just go back home and wait, even negotiate more concessions. However, if your “life is on a truck”, the stress can cloud your judgement at a time you need to be clear headed.
If you follow these 9 steps, you should be able to keep stress to a minimum and enjoyment to a maximum. Happy house hunting!