New regulations have come forth regarding time line requirements. These changes extend the time necessary to complete the loan process. The details of the hold waiting periods are covered in Regulation Z. Therefore, if a lender is telling you that they can close your deal in a week, you can be sure they are not telling you the truth.
Learn the 6 Steps:
First, you need to get pre-approved. This is an easy step and does not cost you anything. Also, this step is very important -- as many people search out homes on their own just to find out that the house they found is not in the price range that they qualify for. This approach turns into disappointment and lost time. Most realtors will only work with people who have been pre-approved.
We will take a 10-minute application on the phone or you can apply online through our SSL secure application form. We will also need to review your credit. Bad credit does not necessarily mean that you cannot qualify.
The approval determines your maximum loan amount and your monthly payment. Here are several of the key elements for determining loan approval:
Credit score and history: FICO tri-merge mid-score must be above 620. ...more on credit
(DTI) Debt to Income ratio: up to 41% for VA and up to 44% for FHA. ...more on DTI
(LTV) Loan to Value ratio: down payment N/A for VA loans, 3.5% required down for FHA loans. ...more on LTV
Rental history or mortgage history: good to have last 12 month of on-time payments.
Compensating factors: such as employment, reserves, additional down payment funds, and other factors.
Co-borrower(s) & Co-signer(s): Some restrictions apply. FHA allows for a co-signer known as non-occupant co-borrower.
Next, we provide a pre-approval letter to your real-estate agent. You will need a knowledgeable real estate agent to help you find the home of your dreams. Real-estate agents work on commission, so it will not cost you anything. If you do not have an agent, we can introduce you to a seasoned professional who will help you throughout the buying process.
Then, you will meet with the real-estate agent and let him/her know what you are looking for. The agent will search for the house you want in the area you want and take you to see different houses.
Once you have selected the house you want, a sales contract is signed and submitted for the seller’s approval. You will need to put a small deposit on the house to keep it from being sold to anyone else. The deposit can be as little as $1,000 and will be applied towards closing costs at settlement. Once approved & signed by the seller, the contract becomes ratified and legally binding.
This is where the financing process begins and takes about 3 to 4 weeks till day of settlement. See new Regulation Z on hold waiting periods.
We will need to collect some income document from you. And, order services: appraisal, title work, pest inspection, and homeowner’s insurance.
Once all the paperwork is processed, a settlement date is scheduled. At settlement you will need to sign all the paperwork and you will not have to make a mortgage payment until your second month. Your first month’s mortgage payment is deferred until you either sell or refinance your home.
What documentation will I need?
W2's for the past 2 years
Personal tax returns for the past 2 years, current income statement & balance sheet for business (self-employed only)
Current pay stubs for the past month
Bank statements for last 2 months for each active account with sufficient reserves (all pages)
Latest retirement statement for each active account (all pages)
Residence addresses for past 2 years
Addresses and loan information of other real estate owned (if any)
Clear copy of Driver’s License
Clear copy of SS card
Certificate of Eligibility and DD214, (veterans only)
How much money do I need?
There are some out of pocket expenses that you should plan for.
Down Payment: VA requires 0%, FHA requires 3.5% but can be a gift from a family member
(EMD) Earnest Money Deposit: goes towards closing costs and can be as little as $1,000
Credit Report: $9.34 per borrower
Appraisal: range $350 to $450
Pest Inspection: $175
Home Warranty: this is optional and usually a good buy if you are purchasing an older home.
Although each situation is somewhat different, there may be a small amount that needs to be paid at closing. To minimize this amount, it is important to get the seller to contribute towards closing costs. Your realtor will help you in getting seller contribution.
