This first phase of the home buying process is handled differently, by different people. Some are able to plan for their purchase on their own; others will use a trusted adviser such as their investment adviser or CPA. We provide this service for many clients. However it is done, a critical first step is to assess where the baseline is, answering questions such as:
- What are our medium and long term financial goals and how does a home purchase impact these?
- What type of leverage do we want to take on to achieve these goals?
- Are there other goals, such as career and family goals that need to be included in the decision?
During this phase a buyer gets educated on the options available and pitfalls to avoid when planning to purchase for the first time, completing a transition to the next home, or purchasing a secondary or investment property.
Any Realtor® will attest to the importance of this next critical step. During the pre-approval phase, a lending source will review the
documentation and parameters for your proposed financing, often times giving detailed insight along the way. The results of this are not only specific loan options that have been verified as available based on your current situation, but the all-important pre-approval letter which asserts the completion of this process. A seller will look most favorably on a pre-approved buyer. A powerful and reliable pre-approval letter has the following attributes:
- It is generated by a direct lender
- The lender preparing the letter has a good reputation in the lending and real estate community
- The letter represents a thorough process. One that eliminates surprises and gives the homebuyer confidence when shopping for a home
Typically this process is best served when the homebuyer volunteers income, asset and credit information so the adviser can properly asses all options. The result is confident decision making when shopping for a home.
After the negotiation is complete, and a seller has accepted your offer, the next phase is applying for a loan against the specific property you have chosen. If the first two steps have been followed, the borrower’s ability has been thoroughly vetted. Now it is time to make sure the property passes the test as well. The same documentation as used in the pre-approval phase will be submitted along with information about the property such as:
- The appraisal which assesses the market value of the property
- The title search and offer of insurance which clarifies guarantees the stakeholders in the property
- The terms of the purchase agreement between you and the seller
During this phase, your loan package will be compiled, reviewed (called underwriting), and approved. And it is during this phase you will lock your interest rate and the other terms of the financing. Critical in this period is working with a loan adviser you TRUST and can easily COMMUNICATE with.
The final phase is closing. This is the period where all the pieces come together and the ultimate result is having keys to your new home in hand. The parts that must come together on time include:
- Final review of the closing costs
- Deposit of the remainder of down payment funds
- Signing of the loan documents
- Funding of your new loan and recording of the deed giving you title, or formal ownership
As with any process that has many moving parts, this phase requires collaboration. The lender, realtors, escrow company and title company must all work together to complete the transaction and even though it happens every day, one should never take it for granted. Working with an experienced mortgage adviser that can take you from Step 1 to across the finish line will make the story of your home purchase a positive one!