Financing Process

Housing Budget Documents Loan Application Good Faith
Loan Approval Clear to Close Closing

Step one: Pre-Qualify Interview

Prior to the property hunting process, it’s wise to meet with one or more Lenders to become pre-Qualified for a loan. The pre-qualify process is not an in-depth loan application. It is a discussion with the Lender to determine your overall family income and debt. The process can take between 30 minutes and an hour. The interview can be conducted over the phone or in person. There is no fee for this service from the Lender.

We strongly recommend that you refrain from using out-of-state or Internet Lenders. Their costs are often excessive AND there are many scam artists out there.

At the end of the process you will receive a “Pre-Qualification” letter from the Lender, acknowledging that you are qualified to purchase property “up to” a given amount. This letter is needed when you submit an offer for a property, to demonstrate that you are a capable purchaser.

Once you have an accepted agreement for the purchase of a property, you will then complete a mortgage application with your lender.

Step Two: Housing Budget

During the loan pre-qualification process you will discuss what monthly Housing Budget you can comfortably afford. The budget will include an amount for the mortgage itself, an amount for annual property and fire taxes and for property insurance.  Frequently, home buyers “qualify” for more house than they can actually afford to pay for.

It’s important that YOU tell the Lender the maximum loan payment (including taxes and insurance) you are comfortable with - and that will determine how much you can pay for your property.

Tax Advantages: There are substantial tax savings when you own your own home. You can deduct your property taxes, insurance and up to 100% of the interest you pay as part of your mortgage (often thousands of dollars). So, much of the money you pay as part of your mortgage payment, is deductible on your tax return. That helps you to “afford more house”.

CAUTIONDo Not make ANY purchase that will absorb your available cash (some of which you may need at closing) OR, buy ANYTHING on payment terms before you close on your property. It will change your credit score and may make you ineligible to purchase.

Step three: Documents

While you are viewing homes to purchase – this is the time to get your financing documents together – especially if some of your funds are coming from untypical sources – 401K, loan from a parent, retirement account, stocks and bonds.

Your Lender will guide you – but, at the minimum, you will need the following documents when you are ready to make your loan application:

(a)Two years of W2’s
(b) Thirty days of pay stubs
(c) Two months of all bank statements
(d) Twelve months of rent check payments
Copies of all applicants driver’s licenses and social security cards
(f) Information about retirement accounts, 401K, CD’s, social security or disability income, child support, alimony and more.

This is also the perfect time to “clean up” any negative issues that show on your credit report. Your Lender will give you a copy of this report and will give you guidance on how to get the errors corrected. They may also help you through this process.

Step four: Loan Application

Once you have attained an accepted offer on your purchase, your Lender will walk you through the Loan application process. There will be a fee for this process of from $300.00 to $400.00. This fee pays to process the loan application, an appraisal and other related costs.

This is the point in time when you will need all of the documents that we have previously discussed (and perhaps others). The loan “Originator” (the person taking your loan application) will complete all of the procedures needed to present your application to an “Underwriter” (the person who works for the Lender and has the final say for approving your loan). The Underwriters job is to determine if your loan application meets all of the Lender and Federal agency guidelines and that your loan is a risk worth taking for the lender.

Step five: Good Faith Estimate

The “Good Faith Estimate” is a document that you will receive within days after completing your loan application. This document  will provide you with all of the details about your loan –the term of the loan, the interest rate, the “points” (a fee you pay for obtaining the loan), the “rate lock” (how long the Lender will guarantee the terms of your loan before it has to be rewritten).

Step six: Loan Approval

Loan approval by your Underwriter is likely to come with a set of “conditions”. These conditions are a whole variety of “picky” but very necessary items that your loan Originator must obtain or satisfy before final approval.

At this point your Originator will be in close contact with you over these issues. It is important that you respond to any of her requests quickly.

Once these conditions are satisfied you will receive a “Clear to Close” from the Underwriter.

Step seven: Clear to Close

“Clear to Close” is the GO signal for everyone to go into overdrive. Your loan Originator will move loan information to the attorneys for the preparation of all documents – your TPN Realtor will move any last minute changes to your Purchase & Sale agreement to the attorneys - and the attorney’s paralegals (those special people who do most of the attorneys work and get little of the credit) get to work creating the HUD statement that everyone relies on at the closing to satisfy all regulations.

Once the Buyer and Seller’s attorneys have agreed on all of the “numbers” in the transaction – a date will be chosen for the closing and all parties will be advised.

Step eight: Closing

“THE GATHERING” This is the day when everything comes together. The buyer – the seller – both attorneys – the Realtors – sometimes the loan Originator will be there as well.

Occasionally the Buyer and Seller appear at the closing at different times. Normally the buyer’s appear first because their process can take from an hour to two hours to complete. The sellers can appear later because their process usually takes from 30 to 45 minutes.

It’s a great time!  We’ve seen tears of joy from buyers of their first home – and tears of nostalgia from homeowners who are leaving a home of 30 or 40 years – where their children grew up - where family memories reside.