Home Loan Process
If you’re planning to buy a home in California for the first time, then congratulations! As exciting as the idea of home buying may be, the home loan process can be equally overwhelming, especially for first-timers. But don’t worry, we have you covered. We’ll walk you through the California mortgage process in today’s post. This will help you understand the process and prepare for it better. Let’s get started.
California Mortgage- The Home Loan Process
Here are the series of steps involved in the home loan process in California. Take a look:
1. Start Saving Money
Before you start your home buying journey, start your savings early. Your savings matter. This is because when you get a mortgage loan, you will incur some out-of-pocket costs. For example, the down payment which can be 3 percent or more of the purchase price. There are also closing costs and fees, which can range to anywhere between 2 to 7 percent of the purchase price. Therefore, save early to improve your success chances. If you’re having problems saving up for a down payment, speak to one of our loan officers today to see what your options may be. You might qualify for a down payment assistance program, or put a plan together to help you get to where you want to be.
2. Decide on a Budget
It is crucial to decide on a monthly housing budget before you start applying for a loan. This is much needed to ensure you don’t opt for something you can’t pay for in the long run. You don’t want to be “house poor”, meaning all you have is enough money every month to cover your house expenses.
3. Loan Pre-Approval
The next step is to get a pre-approval. A pre-approval confirms your creditworthiness to the seller without buying a purchase contract. Moreover, it gives you, the potential buyer, an advantage in the real estate market. As a lender provides this letter, it shows the real estate agent and the seller that you’re a serious home buyer and qualified. It further increases your chances of securing the purchase.
It’s nothing complex. The lender will pre-approve you after asking a few questions related to your finances and reviewing your income documents and bank statements.. They will review your credit reports to see your payment history, credit accounts and credit score to estimate your creditworthiness.
Furthermore, based on your credit standing, expenses and income, the lender will know what you can afford to pay when buying a new home. Once you know what is affordable for you, it will save you time in finding a home that is within your price range. The seller will also see you as a qualified and serious buyer. All this will make the process of home buying fast and EZ.
4. Application and Document Submission
When submitting your application, make sure you are organized. For this, gather all the documents needed for mortgage pre-approval. Documents include tax returns, W-2 and 1099s, bank statements, and pay stubs.
Also, use a standardized form called the URLA (Uniform Residential Loan Application) or Fannie Mae Form 1003 to submit your application. We have a user friendly online 1003 that you can utilize once you’re ready. By preparing in advance, you can significantly lower the stress and make an offer confidently.
5. Home Hunting
Once you get a pre-approval letter and have a budget in mind, you can begin hunting for your dream home. Shop confidently within your price range so that you don’t buy a home based on your emotional or personal liking and eventually exceed your budget. Put simply; it won’t let your emotions get the best of you.
6. Work with a Real Estate Agent
We recommend that you work with a highly experienced realtor in your area to speed up the process. If you don’t have one in mind, ask us, and we’ll be happy to recommend a few to you. They can use their experience and provide you with current listings to help you view complete details of homes for sales in the neighborhood or locality you wish to make your purchase.
Once you find your dream home, the realtor will make an offer that appeals to the seller on your behalf. The real estate agent understands how to structure the proposal, including contingencies that should be completed before the deal is closed. This includes:
- Appraisals should be close to the loan amount.
- Inspections of the property should be carried out to ensure there are no major property issues.
- Borrowers obtain funding
All this is essential because contingencies protect the buyer and their earnest money. Earnest money is a deposit that confirms to the seller that you’re an eligible and committed home buyer. Moreover, once the terms of the home-buying deal are approved, both parties must sign the purchase agreement to move forward to the next step.
7. Open Escrow
Normally you want to work with the lender who preapproved you; they already know you and the process will be fast. Your lender will explain the different types of mortgages like Conventional, FHA, Jumbo, and VA, to name a few. Also, be ready to furnish updated documents as needed. The paperwork you provided during the preapproval process would recently be out of date by now.
At this stage, the lender will provide a loan estimate summarizing the following:
- Loan term
- The estimated closing cost of the escrow
- Interest rate and APR
- Monthly payment based on taxes, interest, principal, and insurance
- Estimated funds needed to close
8. Mortgage Processing and Underwriting
At this stage, the loan processors collect all your information and documents from the lender and about the property, which is assembled into a loan package. It is then sent to the underwriter, who reviews the package and decides whether to reject or accept the loan application. Please note, if the application is approved, the next step is to lock the loan interest rate. There will also be an appraisal and an inspection conducted on the property to ensure you are purchasing a home that’s worth the asking price.
Before closing, we have the pre-closing step. This is when the title insurance is ordered, and it is ensured that all the contingencies are satisfied. Next, the closing is scheduled.
Finally, you’re all set to go to the closing table and sign the documents to realize your homeownership dream. When you come for closing, carry two forms of ID and schedule time with the escrow officer to discuss the process after ownership. This is the last step when getting a home loan in California.
For more information or assistance with the home loan process, contact us. We are experts and can help you smoothly and seamlessly navigate the process.