Tuesday, June 1, 2010
6/01/2010 10:55:00 AM | Posted by
Arbor Mortgage
The most stressful step for a first time home buyer is often the first one. Where do you start the home buying process? It’s not as daunting as it seems. Let’s walk through the home buying process step by step.
Step 1 – Become Pre-Approved for Financing
Many new home buyers make the mistake of looking at homes first, before becoming pre-approved for financing. They could spend countless hours finding just the right home, only to find out they don’t qualify for a home loan. For this reason, many real estate agents won’t even start working with a client until they know that they can be approved for a mortgage.
Your first phone call should always be to a trusted financing source. Many people ask, “How do I pick a lender?” Start by asking your friends and family for a referral to someone they have worked with successfully. Try getting at least 3 options, and then research those companies. Be sure to call them all on the same day for quotes when you’re ready to be pre-approved. Calling them the same day solves two problems; it ensures that you are getting “apples to apples” pricing from each (since pricing changes every day) and it ensures that your credit pulls will all be grouped together and only count as 1 mortgage pull. If you don’t have any friends or family that can refer you to someone, you can still check online or your phone book; just be sure to research the company with places like the Better Business Bureau.
Step 2 – Choose a Buyer’s Agent
First time home buyers can be reluctant to work with a real estate agent for their buying needs because they are afraid of the cost. What they don’t know is that most often, it doesn’t cost anything! That’s right; home buyers usually pay $0 to work with a buyer’s agent. In most circumstances, the seller pays all the real estate agents involved by taking the agreed upon commission to their agent, and splitting it between the 2 agents.
The advantage to working with a buyer’s agent is that you will have someone that works exclusively for you; writing a contract with YOUR best interests in mind. When you work with the listing agent on a property, that agent has a fiduciary duty to the seller. This means it’s their job to make sure the seller gets the best deal possible, NOT YOU.
When choosing a buyer’s agent, use the same tactic of asking your friends and family for a referral. If that doesn’t work, your loan officer will always have a list of preferred agents that he knows give great service.
Step 3 – Find a Home
Now it’s time to put that buyer’s agent to work. Give your buyer’s agent your list of requirements for a new home and let them provide you with suggested listings to view. Don’t forget to research your chosen area fully for things like school systems, crime rates, and amenities. Maybe you want to be in the country, 10 miles away from the closest fast food joint. Or, maybe you need to be right in the heart of the city, just blocks from every hot spot. Either way, remember to not just research the home, but also the community.
Step 4 – Write a Contract
Even though your buyer’s agent is working directly for you to write the purchase contract, always read everything you are signing. There are certain things you want to make sure are included in your contract. Items to watch for:
- Do you want the seller to pay your closing costs? This needs to be written into the contract, either as a percentage or a dollar amount.
- Earnest Money – how much money is the seller asking for up front with the contract? Earnest money shows the seller that you are serious about purchasing their home. If you walk away from the contract, you forfeit that money to the seller; unless there are contingencies
- Contingencies – There should always be at least 3 contingencies written into the contract for appraisal, inspection and financing. That way, if the house doesn’t appraise for the sales price, or if the inspection turns up something unacceptable, or if your financing falls through, you can always walk away from the deal with your earnest money intact.
Step 5 – Full Loan Application and Conditional Approval
Once a purchase contract has been executed, the hard work begins. Your full loan application with your loan officer must be completed and processed for approval. The most important part of this process for you is to follow your loan officer’s directions as quickly as possible. It will feel like they are asking your life story, but try not to get frustrated. The state of mortgage financing today causes banks to be much more cautious in approving loans, so they ask for a lot more documentation to be sure you’ll be able to make the payments. Just turn in whatever documents are requested as quickly as you can, and your loan will be processed a lot smoother.
During this part of the process, be sure you are asking as many questions as you need, and hold your loan officer accountable to answer them promptly. The one thing that makes this part easier for all parties is communication. Keep in constant touch, and ask questions when you don’t understand something.
Once the loan officer has all the items they need, which can include application, appraisal, title search and more, the loan will be submitted to underwriting. The underwriter will review the file and provide a conditional approval. This is an approval with conditions that must be met in order for final approval to be issued. Conditions can be a variety of items from a letter of explanation to an updated pay stub or even additional information on the appraisal. If the underwriter requests something of you, just be sure to get it back to your loan officer as soon as possible.
Step 6 – Final Approval and Closing
Once the conditions have been cleared on the approval, a final approval and clear to close is issued by the underwriter. This is when the closing is scheduled. Bring your identification to the closing along with all people on the purchase contract to sign the documents. Not all purchase loans will fund on the same day the documents are signed. You will officially own the home (and get the keys!) once the loan funds.
Step 7 – Party at Your House!
For more information on first time home buyer programs Contact Us.
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- Arbor Mortgage
- Arbor Mortgage is a Michigan based mortgage lender that has been providing mortgage solutions for more than a decade. Since 1998, Arbor Mortgage has helped more than 20,000 people purchase or refinance their homes. Arbor offers a variety of mortgage programs including FHA, USDA Rural Development, VA, Conventional and Alternative loans.
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