13 Steps to Buying a Home

Most consumers do not realize all the steps and procedures involved in buying a home. It is important for you, the consumer to follow the correct path to buying a home. This insures your loan will be approved with the no last minute surprises, and you get the best possible deal on a new home.

Before we begin a little knowledge about Real Estate Agents. Real Estate agents, what they do and who they represent. Real Estate agents by law represent the seller of a home, unless you have a specific contract, called a buyer agency agreement. This agreement ties you and your real estate agent together and ensures your agent is working in your best interest. I suggest interviewing at least 2 or 3 agents to find someone who is both knowledgeable about the local market and is a seasoned agent with experience. For instance if your sister has a friend who is an agent and says to deal with this person, well certainly interview the agent but make no commitment until you are satisfied the agent knows their stuff as it were.

 It is also not suggested that you deal with multiple agents and not sign an agreement. "remember they work for the seller". Of course you can take this route, but from a practical standpoint if you find an agent who you feel will do a good job for you, by having a contract the agent will be more diligent in the entire process and working for you not the seller. I cannot express enough if you do not have a buyer agency agreement, then the real estate agent works for the seller. 

#1 Speak with your lender to get pre-approved: Before you start looking at homes and working with a real estate agent, you need to know exactly how much you can afford to spend on a home and what the estimated monthly payment will be. Even though you may qualify for a home priced at $325,000 the monthly payment may not be in your comfort range. So get this information up front. Then you can direct your agent to look for homes close to your price range. Neither you nor your real estate agent what to spend needless hours searching homes that are outside your price point. 

You may hear the term pre-qualified and pre-approval used almost interchangeably. Actually there is a big difference. Pre-qualified only means that you have given your financial information verbally or hard documents to a lender and they may have pulled a credit report but nothing has been actually verified. A pre-approval is much stronger in that your lender has actually verified the information and run your information through a initial underwriting system used by all lenders throughout the country called DU or DO. These are abbreviations for either Desktop Underwriter or Desktop Originator. Then there is the most powerful, Fully Credit Approved by the Underwriting Dept. This last step is generally only used once you have made a commitment to use your lender of choice, since there are costs involved that by law cannot be charged up, the lender want to make sure you are commuted before expending a great deal of money and time.

Your lender will need to review a number of financial documents such as pay stubs, bank statement and so forth. It is important to supply exactly what is asked. Accurate Information = Accurate Pre-Approval  

#2 Real Estate Agent: If you haven't done so, interview  2 or 3 real estate agents and find an agent who you like dealing with, remember you may be seeing a lot of each other in the coming month or two.

#3 You Found a home, Now what? It's time to write a contract offer, Your real estate agent is the expert here. They will help you decide on the best offer price, asking for any seller assistance to help pay your closing costs ect.

#4 Contract is presented to the seller: These days the seller could be the present homeowner, a bank (foreclosure) or maybe both in the case of a short sale. Your agent can give you a better idea of when you can expect a response from the seller since it varies with each type of transaction.

#5 The seller responds to your offer: There are 3 possibilities here, #1 the seller accepts your contract offer as presented, #2 The seller makes a counter offer, #3 The seller rejects your offer our right.

#6 Ratified Contract: Once the contract terms have been agreed to by all parties then you have a ratified contract and can move forward to making a final loan application. The approval process can take about 20 business days to complete before you go to settlement on your new home. If you have already been fully credit approved then the process can be a lot faster, generally 10-15 days if need be.

#7 Complete the loan application: You will meet with your lender within a day or two once you have a ratified contract. At that time you will supply any new or updated documents and sign the loan application & pay for the appraisal. Once we have your loan application

#8  Your application goes to processing: Your loan is assigned to one processor who will do the confirmation of employment, verify bank account, pull tax transcripts and so forth. As much as I like to think of myself as the link that hold everything together, it is the processor who ties all the links to make the chain. If there is any information that is missing the processor will inform me at that time. During this time your appraisal is ordered and once returned to our office, the entire file is sent to the underwriting department.

#8-a During this period, you will have completed your home inspection and you should speak with your insurance agent about getting a hazard insurance policy for your new home. This insurance is required on all homes that have a mortgage.Give your insurance agent the contact information of your loan officer, as we will need to correspond with the insurance company.

#9 Your loan comes out of underwriting: The underwriter is responsible for ensuring all aspects of your loan is correct and that you qualify under the guidelines for the particular loan program you have applied for. The underwriter will issue a conditional approval subject to conditions. There are always have some conditions, most will be for documents that are still being worked on such as the title binder from the settlement company which we generally do not have when the file is sent initially and other documents that are in the works already. Once we have all the conditional documents ready they are sent back to the underwriter for review. If the underwriter has no other issues then they will give a full approval.

#10 QC Department: Within two days of your closing the Quality Assurance department will verify employment once again and pull a new credit report to ensure no new credit inquiries or debts were incurred between the time your credit report was first pulled. (These are new federal regulations as of June 2010) If anything has changed your loan is required to go back to underwriting for credit approval.

#11 Closing Department: The closing department reviews and ensures all the documentation and financing is correct and sends instructions to the settlement company on how to prepare the HUD-1 settlement statement.

#12 Settlement Company:  The settlement company or attorney prepares the documents and sends them back to the lender for final approval. Once they have final approval you are ready to close.

#13 Celebration: This is your happy day! you close on your new home.

This may seem like a long and tenuous process, and it is inn many ways. By listening to your loan officer and following their instructions this can be a rewarding and happy experience. During the loan approval process your loan officer will be inn contact with you giving status updates at least once a week. Having an open line of communication and being proactive insures a successful transaction.