So, You’ve picked ME as your Realtor…Yey!
Now we need to get you ready and able to buy a home. This involves:
Buying a home involves a lot of paperwork. But don’t worry, you picked the right agent when you hired me.
I will introduce you to a unique solution called dotloop. It is an online workspace that connects everyone and everything needed to complete a real estate transaction in one place. dotloop allows us to edit, complete, sign, and share documents without ever needing to print, fax, or email. It helps us eliminate actual paper and keep your transaction organized. We save all the documents there, and you will be able to see the process in action while I do the work.
You will create an account and will be able to fill out all the forms needed, from the convenience of your phone, tablet, or computer! You can also sign all of them in a secure and verified way.
It will speed up the process of buying a home by giving you the ability to make an offer the moment we find THE ONE and any other document that will need your approval and signature from there.
As Realtors, we won’t put an offer on a house for a client unless he or she has been preapproved.
Without a pre-approval, the seller does not know if the offer is financially reliable. In addition, it’s essential that you have an understanding of how much you can comfortably afford to spend on a home, what your monthly payments will be at various price points, what interest rate you qualify for, and how much you’ll be paying each month in taxes, homeowner’s insurance, etc.
The Mortgage Underwriting Approval Process is an article that I highly recommend all buyers should read before applying for a mortgage.
Having the right mortgage lender is a crucial part of ensuring a smooth transaction. Working with a bad mortgage lender can make the process a living hell for everyone involved and put your purchase in jeopardy of not closing on time or at all. You could lose out on your dream property because your mortgage lender was disorganized and couldn’t get you fully approved during underwriting. Shop around to compare lenders. It’s important to work with the best.
Our Recommended Lenders:
Hallmark Home Mortgage
AnnieMac Home Mortgage
Janai Santana Roberts
Paperwork You Need to Gather
Each lender has slightly different requirements regarding what documentation they need from you for the pre-approval process, but in general, expect to provide the following items:
A completed application. The lender will give this to you directly.
The two most recent months (or a quarterly statement) for any assets listed on the application. Generally, checking, savings, 401k, mutual funds, individual stock accounts, IRAs, etc.
Your most recent paystub
Past two years of W2 forms
Past two years of Federal Tax Returns
Past two years of Corporate Tax Returns (if self-employed and you own over 25% of the company)
Getting a Pre-Approval Letter
Generally, once you submit the above items to your lender, you should receive a pre-approval letter within 2-3 business days. The lender may ask for additional documentation. They are not trying to be difficult by asking for additional documentation. After the housing bubble burst, underwriters became much stricter regarding the loan approval process, so a lot more documentation is needed today than it was 10 years ago.
In addition to receiving a pre-approval letter, which shows the amount of house you can afford, you should ask your lender how the preapproval amount breaks down in terms of a monthly mortgage payment plus any PMI, taxes, and insurance. That way you can make sure you are comfortable with what your monthly housing payment will be. Once you’ve received your pre-approval letter, forward it to me for your file so we can have it when we are ready to submit an offer.
Get a Loan Estimate and Understand Your Closing Costs
Also, mortgage lenders are required to provide you with a Loan Estimate (LE) within 3 days of receiving your pre-approval. The LE provides an estimate of the closing costs you’ll need on top of your down payment and shows exactly what fees the mortgage lender is charging you. Make sure you understand these fees.
Generally, we estimate closing costs to be approximately 2.5% of the purchase price of the property. Your mortgage lender will provide you with more detailed estimates based on your exact pre-approval amount. Remember, closing costs are due at closing (except for the appraisal and inspection fees, which are due on the day those services occur) and are on top of your down payment.
So, say you’re buying a $500,000 property and putting down 20%. You’ll need to have $112,500 cash available at closing ($100,000 for your down payment and approximately $12,500 for the closing costs).
Should You Shop Your Loan Around?
Absolutely! Every lender charges different fees and interest rates, so it’s crucial you shop your loan around to at least two lenders. We recommend waiting 2-3 weeks between meetings with lenders as the lender will need to pull your credit report to give you an accurate pre-approval letter. If your credit is pulled by various lenders in the same week, it could affect your credit rating by a few points. If you wait a few weeks, it generally won’t affect your credit rating at all.