First time home buyers who dip their newbie toes in the mortgage waters might soon find out there’s a lot more to know than originally thought. It is a brand new world with lots of new terms, people and businesses and it can be a bit overwhelming at first. Even seasoned buyers can find the mortgage process quite a bit to handle sometimes. But for Florida first time buyers, knowing ahead of time what to expect and when to expect it will make the process a smooth one. Here’s what to do financially when you’ve decided to stop renting and start owning.
Month 1: You’re starting the exploratory phase but you’re still committed to buying your first home. Yet buying a home isn’t something you should do on your own, especially as it relates to financing. Know this, nearly all traditional mortgage companies offer the same suite of home loan options. Mortgage lenders spend a lot of time and effort on marketing and loan officers live and die from referrals but both will try and differentiate themselves from everyone else. Typically the primary differences are experience in the industry and stellar customer service.
Month 2: Now it’s time to get some referrals for financing. You can get them from your selected realtor, friends, and family or your financial planner or CPA if you have one. Once you make your choice about where you’re going to get your first mortgage, you’ll then speak with your loan officer over the phone or at the place of business. This is the prequalification stage. After a relatively brief conversation about your income, current debt, and employment, the loan officer will research current mortgage rates and provide you with an amount you can comfortably qualify for as well as a list of loans that meet your needs.
Month 3: It’s getting closer. But now it’s time to submit a loan application to your loan officer and discuss loan options. Many first time buyers require financing solutions that require little to no down payment. USDA, FHA and VA loans are very popular choices for first-timers and these programs are backed by the government. The application process is often completed over the phone, online or your loan officer might offer to come to your home or place of business and take the loan application face to face. You’ll sign a list of documents, most importantly your loan application and authorization forms allowing the lender to inquire about your employment and credit history.
Your loan officer will electronically submit your application to an automated underwriting system which will, within a matter of moments, provide a list of items needed to get your loan to the full approval state. You will then have a preapproval letter in hand. It’s time to submit copies of your paycheck stubs, bank statements, and tax returns if needed.
Month 4: Your loan officer may have told you not to make any sudden changes about your work, employment or make any relatively large purchases. Don’t go buy a car while your loan is in process, for example. You have your preapproval letter in hand so it’s time to get serious about finding your first home. This, of course, is done with your real estate agent. A professional realtor is a pro at negotiations and they will help with the heavy lifting by finding some home options you like. And, surprise, a buyer’s agent doesn’t cost you a dime.
Month 5: By now you’ve likely looked at your fair share of homes and you may very well be in a position to make an offer. You should always keep in close contact with your loan officer as well. Interest rates move over time and it’s possible that rates have gone up which effectively lowers the amount you can qualify for. Conversely, rates may have gone down and your buying power received a boost.
Month 6: You’ve found a home. Wheels begin to spin rather quickly after the contract has been signed. Your lender will need an appraisal and many lenders ask for money to pay for an appraisal upfront. Your loan will be reviewed one more time and any expired documentation will need to be updated. Credit documents such as a credit report, pay stubs, and bank statements need to be no more than 30 days old when it’s time to fund the mortgage.
Once your loan has received full approval and you’ve met all your loan conditions, loan papers are orders. At your closing, you will sign a host of closing documents and have your down payment (if needed) and closing cost money wired to the settlement agent. After signing, the lender does one more review of your file, making sure all the documents have been properly signed. You’re now a first-time homeowner.
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