Who are these people and how will they help you get a home loan? Discover answers to many of your mortgage questions.
Financing a new home can be confusing and stressful, because so many steps and so many people are involved.
Understanding more about the process can take some of the mystery out of it and make this exciting purchase less stressful.
What is a preapproval and why do I need it?
A preapproval is done by a loan originator (sometimes called a loan officer) who helps you understand what purchase price range you qualify for — but just as importantly, what price range is comfortable for you.
Doing this before you start house shopping is important. It can save you time by focusing on the properties that fit your goals and needs, and also keep you from being disappointed. How? Most sellers will not take offers from buyers who are not preapproved. So if you find your dream house before you are preapproved, you could lose it to another better-prepared buyer who is able to make an immediate offer.
RELATED: 5 tips for first-time homebuyers
Verification and evaluation
Once you find that dream house and have an accepted contract, an army of people are involved in collecting, checking and evaluating information. The approval of a home loan depends on two major areas:
● Your qualifying information needs to be verified.
● The property you want to buy must be evaluated.
The loan originator may need to ask for updated or additional information. They will also provide information about loan programs, as well as interest rate and closing cost information.
When you are ready, they will lock your loan, which protects you against any rise in interest rates while you are waiting to close. The loan originator will provide you with lots of documents for your signature that disclose federal and state laws that protect you, and other information that is pertinent to getting financing.
Do I need a home inspection?
Most lenders do not require a home inspection, although it is highly recommended. The home inspection evaluates the condition of the property and what repairs may be needed now or in the future. You are responsible for selecting an inspector if you decide to have the property you want to buy inspected.
What about an appraisal?
All lenders require an appraisal. The main purpose of an appraisal is to make sure that the house you are buying is worth at least what you are paying for it.
Appraisers focus on the market value and they will look at similar recent sales of property to make this determination. While an appraiser may note problems or damage to the property and even may require repairs, if you want to know the condition of the property, you should not rely on the appraisal but get a home inspection.
What does the title company do?
It is their responsibility to make sure that the title of the property is clear and marketable. They will make sure there are no liens on the property and that transfers between previous owners have been properly recorded. They often will provide title insurance.
While most lenders require title insurance to protect their interest in the property, an owner's title policy is not always required. However, I highly recommend it. It's rare for title issues to occur, but if they do, you will not be protected by the lender’s policy.
How do I obtain a loan?
Back at the lender, there are many other people involved in getting you that loan.
● The processor verifies all the information you provided.
● Once that is done and the title work and the appraisal are finished, the underwriter looks at the whole package and makes sure that the information fits the guidelines for the loan program you have chosen.
Once the loan is clear to close, documents will be prepared for your signature; the final amount of cash you will need to bring is calculated on the HUD or settlement paper; and a wire is sent so your loan can be used for your purchase.
A journey of many steps
Obtaining a home loan is a complicated process that requires a great deal of orchestration if it is to go smoothly.
Ask real estate agents and friends for recommendations to help you find the right lender. Use tools such as Angie’s List to do some research; it’s important to work with a lender who spends the time to answer your questions and understand your needs.
It’s also critical to work with a company that has a good track record in meeting contract dates. No one wants to have a moving van waiting and be told at the last minute that their closing is postponed.
As of February 13, 2015, this service provider was highly rated on Angi. Ratings are subject to change based on consumer feedback, so check Angi for the most up-to-date reviews. The views expressed by this author do not necessarily reflect those of Angi.