Are you thinking to Buy your First Home in USA in the near future? Buying a Home represents the main dream for all American people. In this Manual you will find the mortgage loan process, recommendations, and tips for First Time Homebuyers and for beginner Real Estate agents.
1. Pre-Qualification Process
The first milestone borrower must archive is the Pre-Qualification, as soon as you completed it, you will know the maximum loan amount that you can borrow, minimum downpayment, the estimated monthly payment, and the estimated total Cash to close to buy your dream Home.
Tips: Determine how much money you have available to invest for the purchase, based on your income and savings. Do not forget to consider the money for the initial payment and the monthly instalments that you will have to pay.
Which documents are necessary during home buyer Pre-Qualifications?
To get Pre-Approved you will need proof of income and assets, the last two years employment history, and other types of documentation as listed below:
- Driver’s License,
- Social Security card,
- Last 2 years Tax returns (all forms 1040, 1065, 1120, 1120-S, W2s, 1099s),
- Most recently 30 days paystubs in case W2 employee,
- Last 2 months bank statements.
During the Pre-Approval process, me, your Mortgage Loan Officer will calculate your income, also, I pull your credit report, and verify your available assets. All these questions below must be addressed to get you pre-approved:
Pre-Qualification URLA 1003 Questions:
- What is your full, correct name?
- What is the best number to reach you at?
- What is your email address?
- Date of birth?
- Are you married, unmarried or separated?
- Do you have any dependents? If so, how many and what are their ages?
- What is your social security number?
- What is the complete address of the house you are living at currently?
- How long have you lived at this address?
- Do you own or rent?
- How much do you pay for rent or mortgage?
- If you have lived at this address for less than two years, what was your previous address?
- Do you have a mailing address that you would prefer rather than your current address?
- Are you self-employed or do you work for a company?
- Name of your current employer?
- What is your position or title with this employer?
- How long have you been with this employer?
- If you have been with this employer for less than two years, what was the name of your previous employer?
- From what date to what date where you employed with this employer (approximately)?
- What bank or banks do you have your bank accounts with?
- Do you have any retirement accounts, such as 401K plan?
- What is the approximate balance on each of the accounts above?
- How much money are you counting on for the purchase and where will this money be coming from?
- Do you or your spouse, if applicable, currently own any properties? If so please provide the address, approximate amount owed and current status of property (rented, living in it, etc)
- Have you had any bankruptcies, foreclosures or short sales in the past? If so please provide the address of the property where applicable and approximate date of event.
- Are you a citizen, resident or neither?
At the end of the Pre-Qualification process we are able to get the DU (Desktop Underwriter) “Approve/Eligible” and the Pre-Approval letter.
Tips: DU can be requested by listing agents or sellers, the buyer and his/her Realtor should always have a DU copy for better representation at the moment of submitting offers.
2. House Shopping
NOW YOU ARE READY to start looking for properties in your favorite areas along with your prefer Real Estate Agent.
Note that It’s very important to know the maximum monthly payment you can afford, I will advise you of what are your credit limits, not about the assets but regarding income vs total monthly payments, included the future mortgage estimated payment. Each property has different Real Estate Taxes and Insurances (Hazard and/or Flood and/or Earthquake, etc). This step is very important during the process. It is useless for us to fall in love with a house that is beyond our means, this will only bring frustration during the process. Therefore before you start looking for a home, you must first get Pre-Qualified with me, your Mortgage Loan Officer.
The maximum DTIs (Debt To Income ratios) in FHA loans are 46.9% front, 56.9% back. For Conventional loans in general has only backend DTI, maximum allowed is 49.9%, front DTI is not required in many cases. For both programs we should follow the DU recommendations when higher DTIs are not allowed.
2.1 Make an Offer
Once your finances are ready and you have chosen a home that fits your needs, then you are ready to submit an offer. This offer includes the amount you propose to pay for the Home you want to buy. It will also depend on your budget, the value, and the condition of the property. You can offer the asking price or make an offer for less or more money, and some other important information regarding timelines.
Tips: Real Estate Fact today: we are in a “Seller Market”. If you want to WIN an offer you should offer over asking price and be competitive in the proposed timelines.
It’s very important to follow all your Real Estate Agent instructions to have success in your offer!
3. Mortgage Loan Application
At this point, after you got your offer accepted, then you have officially an Executed Contract, Congratulations! Now we are ready to start the loan application after having the six pieces of information by TRID below:
- Borrower name,
- Social Security number,
- Monthly income,
- Subject Property Address,
- Property Value (purchase price), and
- Loan Amount.
3.1 Initial Deposit
Please remember to be in communication with your Real Estate Agent to put the initial Deposit (EMD – Ernest Money Deposit) before the due date to seal and keep active your contract.
Tips: Always consider a high first deposit, also, you can split it into two total deposits to have a most competitive offer.
3.2 Appraisal Inspection
As soon as the initial Home Inspection is completed, and you confirm your intention to continue with the purchase, we are just right in time to order the Appraisal. The Appraisal fee is always paid before the appraiser inspector goes to check the house value, this fee will be will be marked as already paid before closing. They Appraisal fee can be paid with Credit or debit Card.
Real Facts: FHA Appraisal fee in Florida is around $550. Conventional Appraisal fee is around $500.
3.3 Title Documents
After the loan submission, we also send the formal request to Title Company you or seller choose to be the closing agent, requesting the following:
- Preliminary Title Commitment – ALL schedules,
- Lender Address Supplement with subject property site address,
- 24 Month Chain,
- Tax Certification / Tax Roll with tax due dates,
- Wiring Instruction,
- Attorney E&O Insurance (Must have $1 Million liability coverage),
- Closing Protection Letter (CPL),
- Estimated CD with title/escrow fees showing any applicable seller credit, gift at closing, Earnest money deposit and payoffs.
- Escrow Instructions,
- Earnest Money Deposit (EMD) proof of via escrow letter with copy of check or wire,
- Payoff Demands / Letters for all liens on title,
- Plat Map (Survey and Elevation Certificate),
- 203K – Construction Rider (additional to the HOI Policy),
- Power of Attorney,
- List of authorized signers for seller, if seller is an entity or Trust.
3.4 Hazard Insurance
After the Home Inspection, we are ready to request the Hazard Insurance and flood insurance if required, in Florida we need the following documents:
- Wind Mitigation, and
- 4 Points.
For Flood insurance, we need:
- Elevation Certificate (requested to Title see section before).
4. Loan Commitment
Underwriter (UW) will review the loan and send the Conditional Approval Letter or Commitment Letter. In this letter we will find the condition list required for Final Approval.
Each loan can have many submissions to UW until we have the final Clear To Close (CTC), on each submission new conditions can rise. The Loan Commitment Letter is a very important document in the Real Estate transaction, and we must have it before the due date.
5. Clear To Close
As soon as we completed all conditions mentioned in the Loan Commitment letter, and we got the final revision and approval from our underwriting department, then we are clear to close (CTC). Congratulations! at this point you are finally approved from the lender, now the loan is being transferred to the Closing Department to balance and adjust the final cash to close along with Title Company for final closing.
6. Closing Table
The closing of your first Home is a very exciting time! On this very last step before being officially the new owner of your chosen Home, your Real Estate Agent, the title company, the lender and me, your Mortgage Loan Officer will work all together to organize the closing documents and closing day and time for your final signatures.
As you can see, the process of applying for your mortgage can become a bit complicated and stressful if you do not have the professional advice from your Mortgage Loan Officer, that is why I’m here, to help you through the process and guide you making your transaction easy and stress free.
If you are thinking of buying your new Home, or buying an investment property, a second Home, a vacation Home, or refinancing any property in Florida I’m here to help you, send me a message below or click here, and I will be ready to provide you with a totally free Financial Advice.