The Homebuyer’s Guide
Advice about shopping for your home loan
The Consumer Financial Protection Bureau of the U.S. government issues a large booklet called a Homebuyer’s Guide that lenders must give to borrowers. While it explains the process of getting and closing a mortgage to buy a home, it’s not the easiest document to read and digest. To help you understand the complex processes described in the booklet, the important information from that document is listed below.
The Home Buying Process
Many people think you find your house before you get approved for your loan. Traditionally, that’s how it’s been done, and that’s how the Homebuyer’s Guide outlines it. But it’s not the smartest way to go about it. Here are 11 more productive steps to buy a house:
1. Decide you are ready to buy a home. Whether it’s your first home, a second home or an investment property, weigh the pros and cons, and then decide what you’re looking for.
2. Shop for a mortgage lender. Find someone who speaks your language and offers you alternatives. With his help, determine the best loan for your situation.
3. Pre-apply for a mortgage — or pre-qualify with Prime Mortgage Lending, Inc. This step will let you know exactly how much house you can afford. During this process, determine how much you’re willing to spend per month on your mortgage.
4. Find a real estate agent. Find one who listens to what you want before showing you any houses. Make sure you tell the agent that you’ve been pre-approved (or pre-qualified).
5. Choose a house and negotiate a price. When you know how much you can borrow, you can confidently make an offer. Sellers know that you’re serious if you’ve been pre-approved. If your bid is contingent on selling your current home, make sure that process is underway.
6. Apply for the mortgage loan. If your lender has done his work, there should be no surprises in this step.
7. Have the house inspected. This is a necessary step so that you know everything works and there are no surprises (such as mold, structural damage or insect infestation).
8. Get needed services. When buying a home, you need an attorney, an escrow company, insurance and other services. If you are paying for these services, you can choose whom to hire. At this point, take steps to learn how much your closing costs will be. See Loan Estimate (LE)
9. Do a final walk-through. Once your loan is approved and you’ve lined up all the services you’ll need, walk through the house one final time, looking for problems and imagining what it will look like after you move in.
10. Close on the purchase. The closing is an exciting time and a trying time, as you’ll have to sign a lot of documents. Make sure you understand everything you’re signing, but when it’s over, you’ll be the proud owners of a new home.
11. Move into your new home. Most of the time, you get the keys and can move in right after closing, but sometimes you agree to wait, either for the seller’s sake or for your own.
Shopping for a Mortgage
According to the Homebuyer’s Guide, finding the right mortgage is the most important step in the process, even more important than finding the right house. The type of mortgage you choose affects every other aspect of your purchase, from the closing costs to your monthly payment. Work with a lender — such as an independent mortgage lender — to sort through your options to find the best match.
In most states, including North Carolina, you’ll find many types of mortgage loans to choose from. Some, like VA loans and USDA loans, don’t require down payments. Others, like renovation and FHA 203k loans, have special requirements. Once you choose the loan that works best for you, you’ll have a much better idea how much money you’ll need up-front to purchase your new home.
Don’t Forget the “Other Costs”
The Homebuyer’s Guide reminds you that you’ll have other costs besides your monthly mortgage payment, which includes the principal and interest. You’ll also be responsible for your real estate taxes, which can vary wildly depending on the state and city you are moving into. Normally, those taxes are included in your monthly payment.
Other costs include insurance. Some mortgage loan types require that you carry (and pay for) mortgage insurance, which protects the lender in the event that you default on the loan. Then there’s homeowner’s insurance, which protects your home in case of accident and other damage. Mortgage lenders require you to carry homeowner’s insurance, although you can obtain it from your own agent.
The Loan Estimate (LE)
Your independent mortgage lender must give you a Loan Estimate within three business days of receiving your mortgage application. The LE replaces the Good Faith Estimate (GFE) and Truth in Lending disclosure. It specifies the loan amount, the interest rate, the term of the loan, your closing cost estimate and much more information. It doesn’t require you to do business with that lender.
“When Zachery lived in CA, I had the pleasure of working with him on 20+ transactions over 3 years. Words that describe Zachery and the service he regularly delivered- partnership, professional, communicative, organized, transparent, and above all else integrity. Asheville NC is fortunate to have a Business Professional like Zack- you want him on your Team.”
“Zack is extremely well informed and so personable. He takes the time to explain things in fullest details. He knows his business and takes excellent care of his clients. In many cases, he’s found “deals” that otherwise were unknown to the home buyer.”
“Zack was great! He and his team made the entire process very easy, stress-free and we closed early! What else could you ask for?”