So, you’re thinking about purchasing a home. That’s awesome! This is a very exciting time, and you may be wondering how to initiate the process. Don’t worry! We’ve got you covered. This handy step-by-step guide will help lead the way.
Your journey begins here: Get pre-approved.
Ideally, you'll get pre-approved for a mortgage before you start shopping for a home. The time to get pre-approved is not after you've already found a house you want to buy. By the time we spend a day (or two or three depending on how busy your schedule is and whether or not you kept a copy of last year's tax returns), the house you want will be gone.
So get pre-approved. And do it months before you want to start looking at houses. No matter who you are, how good your credit is, or how many times you've purchased properties before, getting a mortgage can be a complicated process. Give yourself time in case you need to correct a credit report, track down old court documents, or pay off a debt.
- Most REALTORS® won't submit an offer to purchase a home without a pre-approval letter. And the market is extremely competitive right now! Don't wait until you're ready to submit an offer to get pre-approved. Then it becomes a stressful, emergency situation for all parties involved. Take the easy way out! Get pre-approved early.
- A pre-approval will tell you how much house you can afford. I start the conversation with customers with, "how much are you comfortable spending for a monthly payment?" If you tell me $1,800/month, then I can show you how much house you can purchase with the down payment you have available that will meet your budget. I can also show you the maximum amount for which you can qualify based on your income, assets and debts.
- Pre-approval means you're already halfway done with the process. Once a seller has accepted your offer to purchase a home, you will likely only have 30-45 days to complete the process. That might seem like a long time, but it goes quickly! If you've already been pre-approved, you've already provided the bulk of the paperwork necessary for processing your mortgage loan.
Find a house. Negotiate a contract.
Once you're pre-approved, the fun begins! You can start shopping for a home.
- Don't even think of not hiring a REALTOR®. One reason there are so few homes on the market is that they sell so quickly! When a home comes on the market - especially one that is modestly priced - it could have multiple offers in a day or two. You will never see that house if you're not working with a REALTOR®.
- Put your best foot forward when you're ready to make an offer. This is not 2011. This is not the time to look for a "deal." Sellers know what their homes are worth and they're not going to accept less. That's not to say there aren't some great opportunities out there. There are! But if you are getting a mortgage, you are competing with people who are offering more money than you and they're offering cash. Put your best foot forward and make a strong offer.
- Be realistic. I know you don't want a mortgage payment of more than $900/month. But unless you have a significant down payment, you'll need to cough up a little more. The median price of a home in Jefferson County in April, 2019 was $362,000. With 5% down, that's a payment closer to $2,300/month. (1)
- Stay positive. You may not get your first choice. Or your second choice. Or your third choice. But you will find a home. And you will love it! And it will all be worth it in the end. Remember, you don't need a ton of inventory. You only need one home!
After your offer is accepted and depending on how long it's been since you were pre-approved, we may need to update paperwork like paystubs or bank statements. You'll receive a "Homework Items" email with a complete list of paperwork we'll need in order to submit your loan to underwriting.
eConsent to receive disclosures electronically
A mortgage requires a ream of disclosures to be signed once you're under contract to buy a house. We prefer to save a tree and save you from carpel tunnel by sending most of those disclosures electronically. But before we can do that, we need your permission. You'll receive an email asking you to logon to our web site, create a password, and give us your permission to send disclosures electronically.
Once we have your permission, the disclosures will be prepared by our disclosure team. You will receive an email notification that disclosures are posted on the web site and ready to eSign. It's important to eSign disclosures promptly. We can't order the appraisal until this step is complete.
Loan submitted to processing / underwriting.
Once I have the necessary paperwork, and disclosures have been eSigned, I'll submit your paperwork to my processor, Michela. Michela will order all the "internal" items like tax transcripts, title report, escrow fees, and appraisal. She will then submit the entire file to our underwriter. The underwriter makes the decision as to whether or not they will approve the loan.
Pay for appraisal
The appraiser will require payment in advance. Once the appraisal is ordered, you'll receive an email from the appraisal management company (United States Appraisals). They'll ask you to go to their web site and give them a credit or debit card number to pay for the appraisal.
Initial underwriting approval.
Our underwriter will review the loan package and issue a "conditional approval." A conditional approval means the loan will be approved once we meet certain conditions. We know what some of those conditions will be. One condition will be the appraisal. We won't have the appraisal for our first trip to underwriting.
The underwriter will also ask for anything else they need clarification on. They might ask for an explanation of a deposit on your bank statement or evidence that your earnest money cleared your bank account. I make every attempt to submit all paperwork the underwriter needs the first time. And I'm pretty good at it. It's unusual to receive more than a handful of conditions.
Five Star Reviews!
After we receive our initial approval, you'll receive a request from David to leave us a review (or two or three) on Facebook, Zillow, and/or Google. We take customer service very seriously, and we’d love it if you’d tell the world about your experience working with us. Not only do we want to hear about it, but it also helps future clients learn more about us as well.
We'll collect all the conditions (or additional paperwork) the underwriter has requested. This will include items from you as well as internal items like evidence of homeowner's insurance and verification of employment. The idea is to submit everything back to the underwriter at once, so we don't have to go back and forth, which is frustrating and a waste of time.
eSign Closing Disclosure
The Closing Disclosure is usually sent after we receive the appraisal. This is the final accounting of closing costs, prepaids, and credits that will tell you the final figure you need for closing. After you eSign the closing disclosure, we are required by federal law to wait three days before you can sign your closing documents.
Final underwriting approval.
When the underwriter has everything they need to approve the loan, they'll issue a "clear to close" or final underwriting approval. We're almost done!
Sign closing documents.
A transaction doesn't officially "close" until the loan documents are signed, the loan funds are disbursed, and the deed is recorded at the courthouse. In Washington State, signing and funding usually occur separately. You will likely sign your loan documents a day or two before your loan actually funds or closes.
After final underwriting approval, loan documents are sent to the escrow company by email. Once the escrow company receives the loan documents from the lender, they will call you to schedule an appointment.
The escrow agent (or LPO, Limited Practice Officer) will answer any questions you have. I also try to attend my signings. It isn't always possible, but I'll make every effort to be there provided I don’t have a scheduling conflict.
At signing, you will be asked to produce an (unexpired) driver's license. You will sign approximately 1,000 pieces of paper. Seriously. Practice your signature now to avoid getting hand cramps at signing!
Your escrow agent will also tell you when and how to wire your down payment and closing costs. Wiring the funds is preferable to writing a check. The escrow company probably won't accept a personal check, and they may have to hold a cashier's check for 24-48 hours. It’s definitely worth coughing up the extra $30 to your bank, and having the funds wired.
Keep in mind that you must wire funds from an account the underwriter has reviewed and approved. If gift funds are being wired to escrow, the account number must match the account number on the gift letter.
Your loan probably won't fund until a day or two after you've signed the closing documents. That's when all the money will be distributed: Your lender will wire your loan amount to escrow. The seller will get their check, and the seller's mortgage will be paid off (if applicable). Escrow will also pay your homeowner's insurance premiums, any property taxes that are due, and HOA fees.
After funding, there is one final step: recording. The escrow company will take a couple documents down to the courthouse - usually the Warranty Deed (which transfers ownership of the property from the seller to the buyer) and the Deed of Trust (which secures the lien; this is the document that allows your lender to foreclose if you don't pay!). Once those documents have been filed at the courthouse, you are officially the property's new owner.
Congratulations! You’ve now made it through the entire mortgage lending process. Time to pop the champagne, collect your keys, and get moving!