Buying your first home is exciting because, well, you’ll have a home of your own. No more querulous landlords, quirky roommates, and quixotic basement bedrooms. Instead, you’ll enjoy the pleasure of coming home to your own place. However, it’s also intimidating. The Wells Fargo scandal has made many people wary of becoming mortgage borrowers.
Additionally, buying your first home is not a simple process. Even Dan Gilbert, who founded Rock Financial, one of the largest mortgage lenders in the US, considers it intricate. “A mortgage transaction,” he said, “is very complex, very complicated, and very localized–the rules are not just by state but by county, sometimes even by municipality.”
Still, millions of people figure out how to buy their first home every year. Let’s look at two aspects of buying a home: first, finding a good mortgage broker; and second, understanding the long chain of events involved in the mortgage process.
Finding a Trustworthy Mortgage Broker
A mortgage broker is a professional who will work with a number of lenders to find a loan that will perfectly suit your particular needs. Some mortgage brokers, like Eagle Home Mortgage, have even evolved into becoming full-service mortgage bankers, which means that they can use in-house services to provide loan programs.
The best way to find a trustworthy mortgage broker is to ask the real estate agent you plan to work with for a recommendation, as well as the names of his or her clients who have used the services of the recommended mortgage broker. Others option to find a reliable broker include talking to a number of lenders, shopping around a bit, and doing a Google search for reviews on any that you might be considering.
The Mortgage Process in a Nutshell
The mortgage loan process can be broken up into distinct steps, about six in total. First, get pre-approval; second, go house shopping; and third, fill out a mortgage application. After this, there are three more phases: the loan processing phase, the underwriting phase, and the closing phase.
Let’s take a look at each stage.
- Get pre-approval:
It doesn’t take much time or effort to get pre-approval. It basically involves getting a credit report, referred to as a tri-merge, from the three credit bureaus. This should not be confused with a mortgage pre-qualification. While mortgage pre-qualification will help you estimate how much you can afford to buy, a pre-approval means a lender has checked your credit, verified your documentation, and approved a certain loan amount for a limited period of time.
- Go house shopping:
How do you shop for a house? It’s a two-step process: reconnaissance and field trips.
- Reconnaissance: Do a Google search for online real estate portals. You’ll find websites like Zillow, Trulia, Yahoo Homes, Redfin, Just Property, and so on. These will give you brief descriptions, details, and pictures to help you come up with some realistic ideas about what you want when you go shopping.
- Field trips: Find a real estate agent to begin the process of finding a home that you’d like to buy.
- Fill out a mortgage application:
This is fairly simple. There are various sections of the form, which you’ll read through and fill out. The Uniform Residential Loan Application is a five-page document to give the lender some basic information. Even if you hate filling out forms, do your best to be thorough because the information you provide will be used to approve or deny your new mortgage loan.
- The loan processing phase:
Filling out the loan application was the first step in the origination of the loan. Now the lender will process the document to decide whether to disburse funds or decline your application.
- The underwriting phase:
Underwriting basically means the process by which a loan is approved or denied. A professional underwriter will weigh a variety of factors before making a final lending decision on your mortgage loan.
- The closing phase:
If you’re at this stage, congratulations! You’ve closed escrow. The seller has concluded that you satisfy all the conditions stipulated in the purchase contract. The deed to the property will now be recorded in your name!
Buying your first home is a journey and something of an emotional roller coaster. You’ll sigh with relief when it’s all over and may even feel a little giddy as you stand in front of your front door with your shiny new key in hand. You now have a place of your own, a place that you can call “home, sweet home.”