The first thing a buyer of real estate needs to know is their price range. See this article on buying power to help determine the amount you would qualify buying. This article basically discusses how lenders determine the amount a person can qualify to borrow. You might also look at the Basics of Loan Qualification which discusses its three parts.
Further, you may want to understand a little about mortgage insurance if you do not have 20% of the purchase price for a down payment. If funds are limited you may want to consider asking the seller to pay for some of your buyer’s closing costs which is discussed here.
As you can see, the lending process is complicated and ever changing. We recommend locating a lender you like and trust. Lending, we believe, is a personal service that demands a one on a one relationship. We suggest buyers hire a local lender. If you need any help in this regard let us know.
Looking for the Right Home
After a price range and the terms needed to be included in the offer are established with the trusted lender it will be time for the fun part; shopping for a home that meets or exceeds a buyer’s needs. This is where great real estate brokers can make a huge difference in finding the right property. A great real estate broker listens to a buyer’s needs and goals. They will show buyers enough homes to get them comfortable with the market and what is available. They put buyers first and are not the ones that rush buyers into a decision. They help them make an informed decision. This would probably be a real estate broker that is fulltime, informed, and knowledgeable. It is a real estate broker that cares about their clients and their needs.
Making an Offer and Inspecting the Property
After a desirable property is found an offer will written that includes the terms for the purchase per the lender’s instructions. Here’s where great real estate brokers can shine because they provide the buyer with comparable sales that show the value of the property so the buyer makes an informed decision. Sometimes there may be items needing clarification prior to the buyer making an offer. However, it is probably best to make an offer first with any necessary contingencies included in the offer. The reason to make an offer first and then investigate aspects is because an acceptable offer typically prevents other buyers from making an offer. A great real estate broker knows if one buyer likes a property because of price and amenities it is likely other buyers will find it desirable also. The accepted offer would almost always have contingencies allowing the buyer to inspect the property without the risk of losing the property or their earnest money. This gives the buyer time to inspect the property without fear of losing it. A typical price range for an inspection runs about $340 to $400 which a home inspector typically requires at the time of the inspection. If the property turns out to have issues that cannot be overcome then the buyer terminates the transaction and gets their earnest money back from escrow. Of course, there can be many other contingencies which a good real estate broker would review with you. Typically, an inspection contingency runs for 10 days but this is negotiable as are all other aspects of an offer. Great real estate brokers will go over all aspects of an offer and make sure their client is well informed about the offer.
After the Property Inspection
Now that the property has been inspected and found to be acceptable the lender would order an appraisal. A typical cost for an appraisal is around $550 and can take a week or two to complete. The lender almost always gets this fee upfront from the buyer because they would be responsible for the fee if left unpaid by the buyer. Typically lenders will wait to order the appraisal until after the home inspection to make sure the property is acceptable to the buyer. They do not want to add another cost onto the buyer if the property turns out to have insurmountable issues. If the appraiser concludes that the property is at least worth the purchase price and there are no items requiring to be fixed by the appraisal then the process moves to the next aspect of the transaction which is underwriting.
Underwriting
Underwriting is done by a person or persons insulated from influence by all including the lender. The time it takes an underwriter to review a loan package can vary and sometimes the process can be backed up due to volume which can add to the review process. The time involved can be 48 hours to weeks if there are issues found with the loan package. Underwriters are the checkers of the transaction. They review all aspects of the transaction from the buyer to the property and make sure the transaction meets the lenders and general aspects of the type of loan the buyer is obtaining. When a loan is in underwriting potentially the underwriter can and typically does ask for addition information about the buyer or property. Underwriter have full authority to deny a loan if any aspect of the transaction does not meet lender and government requirements. Once the loan is approved by the underwriter it will be ready for the documents to be prepared and sent to the closer.
Drawing Docs
The preparation of documents to be sent to the closer for review and signatures is typically called – “Drawing Docs.” This process typically takes about 24 hours. This is one of the final aspects of the loan process prior to obtaining signatures for the parties involved in the transaction. It is the process of preparing all lending documents to send to the closing office.
Lending Documents to Closing Office (escrow).
Once the loan documents are received by the closer (a neutral party) they are reviewed and prepared for signature. Any additional documents are prepared by the closer. The closer then calls all parties and schedules an appointment to review them with the buyer and seller and get their signatures. Buyers and Sellers sign and review the documents separately making sure they meet their understanding of the transaction. A great real estate broker will always be at the signing to make sure everything goes smoothly and that all questions are answered. Once everything is signed and approved the documents are sent back to the lender for final review. This process also ranges in time depending upon the schedule of everyone involved. But it can happen the same day the documents are received if everyone has the time including the escrow officer.
Final Review by Lender
After loan documents are received back from the escrow officer they will review the documents to make sure they have been completed and signed properly. This can be on the same day or next day. It depends upon the lender. If it is taken care of the same day they call it “table funding” which basically means they may be able to fund and record the same day they receive the documents for review and the same day the documents were signed by everyone. This can be an important question the buyer will want to ask the lender because it can make the difference in closing sooner than later. The question to the lender is “can you table fund my transaction.” It may or may not mean that the transaction will close the same day because there are other considerations, such as, the time of day everyone is signing. But if a buyer wants to get the keys as soon as possible it can be an important question. Once the documents are reviewed and credit is re-checked by the lender (do not buy anything on credit prior to this process or my may be denied the loan) and found without changes the loan is approved and funds are sent to the closer.
Closer Funds and Records Transaction
When funds are received by the closer the property’s Deed of Trust is sent to the county for recording into the buyer’s name. A check is written or a wire is made to pay off any outstanding loans the seller has on the property. A check or wire is prepared for the seller as they instructed. Once the property is recorded in the buyers name a call goes out to all parties letting them know that the transaction is completed and that funds, if any, are available to the seller. In Washington state the seller has until 9:00 PM the day of recording to be out of the property. If the seller is already out the buyer may be able to get keys and assess to the property upon recording.