Chapter 5:
Finding a Home and Getting a Loan
 Now that you’ve analyzed all the numbers, it’s time to find a home and get a loan!
Shopping for a Home
To start, read the listings in your newspaper or on the Internet, or drive around neighborhoods you would like to live in looking for “for sale” signs. Consider the facts about a neighborhood that matter most to you. For example, you may be particularly interested in the quality of the schools, the number of children in the area, the safety of the neighborhood, public transportation access, traffic volume, or some other issue that affects you or your family.
Most people work with a real estate agent, a professional who can show you the homes in your price range that will suit your needs and desires. Real estate agents are free for the buyer – they receive a commission that is paid by the home seller. When you’re ready to make an offer on a home, your agent can help structure the deal to save you money, assist with the mortgage paperwork, and answer last minute questions when you sign the final papers at closing.
Hiring an Inspector
While the home you like may look great, it could have defects that aren’t immediately visible. To ensure that it is in good condition, seriously consider hiring an independent, professional home inspector. A typical home inspection includes an assessment of the property’s walls, roof, windows, doors, plumbing, electrical outlets, heating and cooling systems, insulation, and ventilation.
If the inspector detects problems, you may be able to negotiate the cost of the repair into the purchase price, or require the work to be completed before you buy.
Before Your Borrow
Getting the right loan for you can take some time, but because of the high costs involved, it is important to do it right:
- Get pre-qualified/pre-approved for a loan – Pre-qualifications are a good place to start when you are first looking for a home. They are general projections on how much of a loan you might be eligible for, but not a guarantee of financing. The amount you are eligible for may be vastly different based on your tax returns, credit report and other factors. Pre-approval processes are closer to a real application process, where you fill out an application and get a firm commitment from a loan officer that for 60-90 days, they will definitely finance this amount, barring changes in your financial situation. There is usually a fee for the pre-approval process, but sellers want to know that your financing is in place at the time you make the offer.
- Review and organize your assets and liabilities – Your lender will want to know about all of your assets, including cash, investment accounts, and property you own. Compiling this information beforehand will make the lending process much more efficient. Avoid making any purchases, such as a car or other large ticket item, prior to buying a home. The debt load that you take on can seriously impact your loan amount. Also, don’t deplete your cash reserves – you may need it for unexpected housing expenses.
- Keep your employment steady – Employment needs to be steady for at least two years prior to getting a mortgage (can be different companies but same occupation). Avoid switching into an entirely new job field before applying for a home loan. The lender will determine your constancy in occupation from tax returns.
The Mortgage Loan Process
After you’ve found the home you are interested in purchasing, you can begin the mortgage loan process. While there are many components to it, your realtor and lender will help you through it:
- The loan officer pre-qualifies you.
- You find a home, arrange for an inspection, negotiate the price, and sign a contract.
- You gather all papers that document your income and job history.
- Your loan officer and you fill out an application; you provide documentation and pay any applicable fees.
- The processor sends you a Good Faith Estimate and a Truth in Lending Statement.
- The processor verifies the application information and orders a credit report and appraisal (which could impact the offer).
- The underwriter either approves or rejects the loan application.
- If the loan is accepted, you receive a commitment letter from the underwriter.
- The processor turns the file over to a pre-closer who ensures the appropriate mortgage insurance is approved.
- The pre-closer or closer arranges for a survey and mortgage title policy, prepares the documents for closing, and notifies the closing agent of the necessary documents that need completion.
The Closing Process
After your mortgage is approved and you sign the loan commitment letter, the closing date is set. Closing – sometimes called escrow – is the final step in the home purchase process. This is when funds are disbursed, and the legal title of the property passes from the seller to the buyer.
Your agent will provide you with all of the necessary closing documents. Federal law gives you the right to have 24 hours to review all of the paperwork before the contract is finalized. It is very important that you read these documents carefully and fully understand and consent to the terms. Pay special attention to the closing costs – there should be no surprises or added fees.
Shortly before the scheduled closing, you should make a final inspection of the property. During this walk through, make certain that all of the repairs the seller may have agreed to have been completed.
A closing agent – typically an attorney or employee of the lender or title company – oversees the closing process. You will sign such documents as the closing statement, mortgage, mortgage note, and truth-in-lending statement, and pay the amount due (typically with a certified check). After that, the title to the property is transferred to you, and the keys to the home are yours. The closing agent will make sure the papers you sign are recorded and that the funds are properly accounted for and disbursed.
Resources
You may receive one free copy of your credit report from each bureau per year though Annual Credit Report Request Service:
You may also order your credit reports directly from the bureaus for a fee:
To report a problem predatory lending, contact:
- U.S. Federal Trade Commission’s Division of Credit Practices:
800-688-9889
www.ftc.gov
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