Buying a home for the first time? Let us guide you through your first home purchase. We can answer all of your questions and help you be more successful with your first home purchase. Let’s start with the basics.
What’s the Difference Between a Pre-qualification, a Pre-approval and a Conditional Approval?
A pre-qualification just means someone has glanced at your credit and income and has determined that you are able to purchase.
A pre-approved loan is one that has been run through an automated underwriting system which evaluates the homebuyers credit, income and assets. This automated underwriting system is used for FHA, conventional, VA and USDA loans. It is also important that the homebuyer provides paystubs to make sure their income is properly calculated.
The loan is run through an automated underwriting system and then submitted to an actual underwriter for approval. Unlike a pre-qualification or pre-approval, to get a conditional loan approval, the borrower must submit ALL of their loan documents up-front. Since there is no property yet, the approval will be contingent on a few remaining items such as the appraisal, title insurance. For the most part the hard work is done and the homebuyer can begin their home search. Take a look at what documents you will need to get started.
How Do We Make Things Easier?
We will actually pre-underwrite your loan before you go shopping for a home. What does this mean to you? Since your loan will already be approved prior to going under contract, this will help you avoid any delays or having to rush to gather loan documents. You will also have a major advantage over other buyers because your loan has already been underwritten and you can provide a conditional loan approval to the listing agent.
What Do you Need To Know?
Purchasing a home can seem overwhelming and difficult but a lot of those headaches can be avoided if the proper steps are taken. In general, the purchase process will look something like this:
1) Provide your Lender all of your loan documents.
2) Get Approved for a particular loan program.
3) Shop for a home with a realtor.
4) Go under contract and set closing date & other deadlines.
5) Do inspection on proposed purchase.
6) Assuming inspection goes well, order appraisal.
7) Submit final loan documents along with copy of appraisal to underwriting.
8) Closing(Sign final loan documents, transfer property ownership)
The steps above sum up the basics of what a home buyer can expect during the purchase process. Step 1 and step 7 are critical to this process because gathering loan documents(W2’s, etc) can be time consuming and can cause delays if not properly addressed in a timely manner.
Making sure that your loan officer has ALL of your required paperwork upfront is critical and will make the application process easier for the home buyer and loan officer as well. Please note that there will be some documents that you will need to provide to your loan officer after you go under contract(Step 7). You can see here which loan documents you will need to start preparing.
The reason step 1 and step 7 are so important is because one little document can cause a substantial delay in your closing. The home buyer should have a clear understanding of what documents he/she will need and the loan officer needs to be diligent in getting those documents to the underwriting department. It’s a team effort!
Which Loan Program Is Right For You?
Another important part of being a first-time homebuyer is having a good understanding of your loan options. There are many program available to first-time homebuyers and your loan officer should present those options to you along with the benefits and negatives of the loan programs.
What questions Should You Ask Your Loan Officer?
What’s my monthly payment going to be? This is an important question to cover prior to looking at homes. Set some boundaries regarding max monthly payment before shopping for a home.
How much money down will I need? Again, make sure you clearly understand how much down payment will be required. It’s important to give yourself a $500-$1000 cushion from the estimate provided by your loan officer.
What kind of programs do I qualify for? Find out ALL your options and make a decision once you understand the differences in the various programs.
Who is paying for closing costs? Just another important topic to discuss with your loan officer. Is the seller paying for it? Are you using premium pricing to cover the costs? It’s important to give yourself a $500-$1000 cushion above the estimate provided by your loan officer.
What documents do I still need to provide? Always clarify this with the loan officer through out the application process to make sure you’re on the same page. Don’t leave anything to the last minute.