Did you know that a significant majority of homebuyers, around 86 percent, rely on financing to purchase their homes? For first-time homebuyers, this number increases to 94 percent, according to the National Association of Realtors. This highlights the importance of borrowing funds if you're considering buying a home or have plans to do so in the future. However, the mortgage loan process can often seem bewildering and complex without proper guidance. That's why we've developed this comprehensive guide to help you chart your home loan timeline, covering everything from making an offer to the final closing.
Step 1: Gain an Advantage with Pre-Approval Before you embark on your journey, it's crucial to map out your budget. By obtaining a quick and accurate pre-approval, you'll elevate your offer above others who require financing but may not be as well-prepared. This provides you with an edge, enabling you to proceed swiftly and with confidence. It's important to note that pre-approval involves a detailed examination of your finances, unlike pre-qualification. Essentially, it serves as proof that you are both willing and capable of purchasing a home, reassuring the seller that the deal won't fall through if they choose you. Once you receive pre-approval, you can begin your house hunting journey. Before you start, prioritize your needs and wants, and establish your deal-breakers. The duration of this process varies depending on the number of available homes in your market and the level of competition. Additionally, it's essential to carefully consider the features and benefits of fixed-rate and adjustable-rate mortgages (ARMs), as each option offers distinct advantages. While a fixed-rate mortgage maintains a consistent interest rate throughout its life, an adjustable-rate mortgage's interest rate may fluctuate multiple times.
Step 2: Making an Offer After you've selected a suitable space, your real estate agent will assist you in completing a purchase agreement. This multi-page document outlines the terms of the sale, typically encompassing the sale price, escrow deposit, financing terms and conditions, fixtures and personal property included in the sale (e.g., appliances), inspections and timelines, closing/possession date, and any additional provisions, such as the requested amount of seller credit towards closing costs and prepaids, if applicable.
Step 3: Negotiating the Offer When you present an offer on a home, the seller may choose to accept, reject, or provide a counter offer. A counter-offer details their proposed modifications to the sale's terms. If necessary, you can submit a counteroffer as the buyer. This back-and-forth process continues until all parties reach an agreement and sign the contract.
Step 4: Mortgage Application and Disclosures Once you have a signed sales contract, your Mortgage Advisor has three days to issue and provide you with a loan estimate. After approving the loan estimate, the file remains stagnant until you remove the home inspection contingency. It's worth noting that you may decide to incur the risk of appraisal costs and order the appraisal prior to removing the home inspection contingency.
Step 5: Home Inspection & Final Negotiations Your scheduled home inspection typically takes a few hours to complete. Following the inspection and review of the results, you will usually have the opportunity to negotiate any necessary repairs with the seller. This negotiation process may take a few days. Keep in mind that the home inspection is comparable to a routine check-up, with the inspector assuming the role of a doctor. Rather than conducting an X-ray on your home, the inspector examines it for existing or potential issues, assessing the physical structure, mechanical and electrical systems, as well as plumbing.
Step 6: Appraisal The appraisal represents one of the final steps in the loan approval process. It's essential to understand that we initially approve the borrower, followed by the property. The purpose of the appraisal is to ensure the property's value aligns with or exceeds the contract price, without any outstanding "subject-to" conditions. If the appraisal comes in below the loan amount, it presents an opportunity for you to negotiate the price. The duration of this stage varies based on location, assignment complexity, and the time of year. Appraisals for rental homes or properties with multiple units require additional time, as the appraiser must analyze rental trends in the market area in addition to the standard appraisal aspects. Rural areas pose a greater challenge for appraisals due to the larger distances between homes and sales, as well as less frequent mobility among residents compared to suburban and urban areas. Once the appraisal and any loan conditions are reviewed and signed off by underwriting, you will receive your closing disclosure, which provides a comprehensive summary of your final loan terms, closing costs, and prepaids. Upon receiving the closing disclosure, you'll have a mandatory 3-day cooling-off period to carefully review everything before finalizing your closing paperwork. It's important to note that Sundays and Federal Holidays are not counted within the 3-day period, potentially extending the cooling-off period beyond 3 calendar days.
Step 7: Closing and Recording After the 3-day cooling-off period concludes, you'll have an appointment to sign your final loan documents. This is where all the necessary paperwork is signed, and the property's legal ownership is transferred to you. In most cases, signing and funding occur on separate days. Typically, you sign the documents one day, and the loan funds within the next few days. Once the loan funds, the relevant documents are recorded at the county recorder's office, officially establishing you as the rightful homeowner. Generally, it takes approximately 30 days from the accepted offer to the loan closing date. It's important to remember that these stages represent the typical milestones on your path to homeownership, but there may be circumstances that impact your individual timeline.
Questions About Your Mortgage Timeline? Now that you have a clear understanding of the home loan process, are you ready to take the confident next step in your homebuying journey? The mortgage loan process doesn't have to be daunting. If you're prepared to proceed, contact a Mortgage Advisor at CrossCountry Mortgage today for expert guidance and support.
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