Financing – The Loan Process
The idea of financing a home can sometimes be a daunting one. When broken down, however, the process really can be less intimidating than one may think.
Step 1: Review Financing Options
Financing your new home purchase begins with a consultation with a qualified loan agent. If you wish, we can recommend one who has the requisite experience, competence and integrity.
There are a wide array of loan options, and choosing the one that works best for you will depend on a number of factors: your financial wherewithal and future plans, the monthly housing expense you are comfortable with, cash available for the down payment and closing costs, how long you plan to own your new home, etc. You may wish to consult your accountant regarding financial and tax implications.
Step 2: Loan Pre-Approval
Your home search should begin with obtaining formal loan pre-approval—so that you fully understand your financing options, what you can afford, and what your closing costs and ongoing housing expenses will be. Furthermore, a lender pre-approval letter significantly strengthens your position when it is time to make your purchase offer to the Seller. Your loan agent will guide you through the pre-approval process, which involves the submittal, to chosen lenders, of your loan application and accompanying documentation regarding employment, income, assets, debts and credit history.
Step 3: Your New Home is Found & your Offer Accepted
You have already been loan pre-approved; now the lender must approve the specific purchase terms and the property itself. This involves review and approval of the purchase contract, the property appraisal, the Preliminary Title Report, and any other supporting documentation required. Depending on the lender, the property and specific circumstances, this process typically takes from fourteen to thirty days.
Step 4: Loan Approval
The property has appraised satisfactorily and all supporting documentation approved by the lender. The lender issues a formal loan commitment letter, and the purchase contract’s loan contingency is removed.
Step 5: Loan Documents
After formal loan approval, the loan documents are drawn up and sent by the lender to the title company. After careful examination, you sign these and other closing documents; they are then notarized by the escrow agent and returned to the lender for final review and funding.
Step 6: Funding
The lender funds the loan, depositing the loan amount into the escrow account. You deposit any additional monies necessary to complete the purchase such as the remainder of your down payment and closing costs. These final monies are typically delivered by cashier’s check or bank wire.
Step 7: Recordation of Transfer of Ownership & Close of Escrow
The legal documents transferring the property into your name and the deed of trust pertinent to the property’s new loan are legally recorded with the County Clerk. The funds in escrow are then disbursed, as appropriate, to the Seller, the Seller’s lender and other involved parties or service providers. Escrow is closed, and you are now the owner of your new home!