Buyers

Buyers Road Map

DECIDING TO BUY

Purchasing a property is most likely the biggest financial decision you will ever make. Whether this is your first purchase or you are an experienced buyer, this decision must be made carefully

WHY DO YOU WANT TO BUY?
Are you tired of paying rent? Have you decided to pay your own mortgage and not your landlord’s? Have you outgrown your current home? Are you looking for an investment portfolio? Are you looking for a rental property? Would you like a larger yard? Would you rather live in a different area? Do you want to shorten your commute? Having a clear sense of your reasons for buying will help you choose the right property.

HAS YOUR INCOME GROWN?
Property ownership is an excellent investment; whether you are looking for your dream home, a rental property, or to expand your investment portfolio. Owning real estate is one of the least risky ways to build equity or to obtain a greater return on your initial investment.

PREPARATION

Before you start shopping for your property, it is a good idea to make some preparations.

BUILD YOUR GREEN FILE.

A green file contains all your important financial documents. You will need it to secure financing for your property. The typical green file should contain:

  • Financial statements
  • Bank accounts
  • Investments
  • Credit cards
  • Auto loans
  • Recent pay stubs
  • Tax returns for two years
  • Copies of leases for investment properties
  • 401K statements, life insurance, stocks, bonds, and mutual account information.

CHECK YOUR CREDIT RATING.

Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating with an experienced lending institution so that we can determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and Trans Union. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields.

BE CAREFUL WITH YOUR FINANCES.

Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability.

CHOOSE A REALTOR®

Buying a property requires making many important financial decisions, understanding complex issues and completing a lot of paperwork. It helps to have an expert in your corner when undertaking such a large purchase. We can guide you through this process, and also provide you with access to property listings before they hit the general market.

Here are some factors to consider when choosing your real estate professional:

  • Look for a full-time agent – one who has experience completing transactions similar to yours.
  • Interview a few agents: Are they familiar with the area in which you are interested?
  • Ask how much time the agent will have for you, and if they are available at night and on weekends.
  • Ask about their credentials and education: A good agent will continually strive to improve and gain knowledge of the latest real estate trends and hold the highest designations in their respective fields of expertise.
  • Does the agent return your calls promptly? Time is money when attempting to buy a property.
  • Ask for a list of properties they have sold or a list of references.
  • Choose an agent who listens attentively to your needs and concerns. Pick an agent, with whom you feel comfortable.

TIME TO SHOP

Once those preparations are out of the way, it is time to find the right property for you.

TAKE A DRIVE.

Get to know the neighborhoods, complexes, or subdivisions, which interest you. Drive around and get a feel for what it would be like to own a property in the area. Start getting a sense of the properties available in those areas.

NARROW YOUR SEARCH.

Select a few properties that interest you the most and have your real estate agent make appointments to visit them. Ask your real estate agent about the potential long term resale value of the properties you are considering.

TIME TO BUY.

Once you have picked out the property you want to purchase, your real estate agent can help you make an offer that the seller will accept. A good agent will investigate the potential costs and expenses associated with the new property. An agent can also help you draft your offer in a way that gives you the advantage over another offer.

ESCROW INSPECTION AND APPRAISAL

THE PROCESS, STEP-BY-STEP

THE INITIAL AGREEMENT AND DEPOSIT.

An effective agreement is a legal arrangement between a potential purchaser and the property’s seller.

Some important tips to keep in mind to streamline the process:

  • Keep written records of everything. For the sake of clarity, it will be extremely useful to transcribe all verbal agreements including counter-offers and addendums and to convert them into written agreements to be signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.
  • Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. During the process we will keep you constantly updated, so you will always be prepared for the next step.

THE CLOSING AGENT. Either a title company or an attorney will be selected as a closing agent. The closing agent will hold the deposit in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.

HOW TO HOLD TITLE. You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder.

INSPECTIONS. Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the timeframe that was agreed upon in the effective contract to purchase. You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, structure). If you are purchasing a commercial property, then you will need to have an environmental audit done on the site for the lending institution. We can recommend several different inspectors.

Depending on the outcome of these inspections, one of two things may happen:

1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or

2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).

APPRAISAL AND LENDING. It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.

ASSOCIATION APPROVAL. If the property that you are purchasing is conditional upon an association approval, request the rules, regulations, and other important documents from the seller as soon as you have an effective agreement to purchase. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out all of the information completely and legibly so there is no delay in processing the application. If you are required to meet with the association for your approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing, so that it can be recorded with the deed in the county public records.

PROPERTY INSURANCE. If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips.

    • CONSIDER A HIGHER DEDUCTIBLE. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
    • ASK YOUR INSURANCE AGENT ABOUT DISCOUNTS. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also be offered discounts.
    • INSURE YOUR HOUSE NOT THE LAND UNDER IT. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.

We will be happy to recommend experienced knowledgeable insurance agents for every property type.

MOVING IN

CLOSING DAY

If you have come this far, then this means that it is almost time for a congratulations, but not yet. Do not forget to tie up these loose ends:

FINAL WALK-THROUGH INSPECTION.

More of a formality than anything else, the final inspection takes place a day before, or the day of the closing. You will visit the property to verify that all is in working order, everything is the same as when you last viewed the property, that there are no extra items left behind, and that everything included in your purchase is still at the property.

HOME SERVICES AND UTILITIES.

We will provide a list of useful numbers for the activation of home services and utilities after the closing occurs.

BE PREPARED.

We are ready to assist you should an unforeseen glitch pop up, even at this last stage. Something at the property breaks down, or some other minor detail – no need to worry. We have encountered these problems before so we know how to handle them efficiently and in a stress-free manor.

CLOSING.

The closing agent will furnish all parties involved with a settlement statement, which summarizes and details the financial transactions enacted in the process. You and the seller(s) will sign this statement, as well as the closing agent, certifying its accuracy. If you are obtaining financing, you will have to sign all pertinent documentation required by the lending institution. If you are unable to attend the scheduled closing, arrangements can be made depending on the circumstances and the notice that we receive. If you are bringing funds to the transaction, you can elect to either have the funds wired electronically into the closing agent’s escrow account, or bring a certified bank check to the closing in the amount specified on the settlement statement. The seller should arrange to have all property keys and any other important information for you at the closing so that you may receive these items at this time.

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THE HOME BUYERS GUIDE

The Life of an ESCROW

  • Buyer and Seller sign purchase and sale agreement
  • Buyer places deposit
  • Buyer or Seller’s agent /broker opens escrow
  • Escrow holder orders Preliminary Title Report from Title Company
  • Escrow prepares instructions and documents
  • Escrow holder and agent/broker review preliminary report
  • Buyer and Seller sign and return escrow supplemental documents
  • Escrow holder forward the “Statement of Identity” to title officer to clear title under General Index
  • Escrow holder calls lender for Status and Conditions
  • Escrow holder obtain loan approval, check terms, order loan documents
  • Escrow holder reviews file and verifies all conditions have been met including: completion of termite reports,   new insurance, homeowner’s association information, data on liens, prepare additional documents if needed.
  • Escrow holder receives loan documents
  • Buyer’s loan documents are signed and returned to escrow holder with remainder of funds.
  • Escrow holder reviews buyer and seller file, verifying that documents are properly executed, notarized, and funds are good and all conditions have been met.
  • Escrow holder requests funds from lender
  • Escrow holder and title company review the title insurance requirements
  • Escrow holder receives funds from lender
  • Record Deed, close file, prepare statements, disburse funds and prepare 1099 report.

COURSE OF EVENTS IN ESCROW

WE ARE COUNTING 17 DAYS FROM THE DAY AND HOUR OF ACCEPTANCE OF THE OFFER AS OUR STARTING DAY FOR OUR DUE DILIGENCE.

  • I will set an appointment with an inspector to do the inspection.
  • We will all receive (including you) copy of the inspection report to review.
  • You and me will go over all the details and if needed draw a “request for repairs” for you to sign.
  • I will present this request of repairs to the seller.
  • You will need to provide a “proof of funding” for the funds necessary to the close of escrow ( a letter from your bank or something showing that you have the money to close)
  • The seller will have to accept or not our request for repairs and there might be some more negotiating there to do.
  • The seller will order a termite inspection and we will be a advised on the results and receive a copy of the report. The seller is responsible to “fix” problems as per our Wood Destroying & Pest Inspection addendum.
  • You will be receiving a Natural Hazard Disclosure (mainly covering and disclosing the earthquake issue, fire hazard and other local area disclosure.)
  • You and me will be receiving a “preliminary title report” disclosing any problems with the deed or any lien if there is.
  • You will be receiving a set of documents for you to sign all disclosures and I will help you go through.
  • You will be receiving a full set of Home Owners Association (CC&R’s) covering all the covenants of the community.
  • The seller will be ordering a Home Owner Warranty covering one year for all appliances including air conditioning and pool if relevant as per the offer.

ON OR BEFORE THE 17TH DAY YOU WILL BE ASKED TO SIGN A “REMOVAL OF CONTINGENCIES” CONFIRMING THE FACT THAT YOU ARE “IN” AND COMMITTED TO CLOSE ESCROW. IF YOU BACK OUT ANYTIME AFTER THAT YOU WILL LOOSE YOUR DEPOSIT, EXCEPT IF WE HAVE A LOAN CONTINGENCY UNTIL FUNDING. THIS WOULD BE THE ONLY CONTINGENCY REMAINING.

THE INSPECTION PROCESS

WHEN YOU MAKE AN OFFER ON A HOME
Your Purchase Contract will likely contain provisions allowing you various inspections of the property. The purpose of these inspections is to educate you as to the physical condition of the property you are purchasing. While these inspections do not provide guarantees of the condition of the property, they do provide valuable information to you as a Buyer. It is important to remember that your Purchase Contract may provide for withdrawal from the contract if these reports are unsatisfactory to you, but inspections should not be considered an open door to renegotiate the purchase price.

STRUCTURAL PEST CONTROL INSPECTION
Often referred to as a “Termite Report,” the Structural Pest Control Inspection is conducted by a licensed inspector. In addition to actual termite damage, the Pest Report will indicate any type of wood destroying organisms that may be present, including Fungi (sometimes called “dry rot”), which generally results from excessive moisture.

• SECTION I CONDITIONS
Most Pest Reports classify conditions as Section 1 or Section 2 items. Section 1 conditions are those which are “active,” or currently causing damage to the property. Generally, Section 1 items need to be corrected before a lender will make a loan on a home.

• SECTION II CONDITIONS
Those which are not currently causing damage, but are likely to, if left unattended. A typical Section 2 item is a plumbing leak where the moisture has not yet caused fungus decay.

WHO PAYS?
Your Purchase Contract will specify who is responsible for the cost of the inspection and making these corrections. This is a negotiable item and should be considered carefully. I will advise you as to what is customary and prudent.

PHYSICAL INSPECTION
The Physical Inspection clause in your Purchase Contract, when initialed by both parties, allows you the right to have the property thoroughly inspected. This is usually done through a General Home Inspection. While Home Inspectors are not currently required to have a license, most are, or have been, General Contractors. The inspection and the resulting report provides an overall assessment of the present condition of the property.

WHAT IS INSPECTED
The Home Inspection covers items such as exterior siding, paint, flooring, appliances, water heater, furnace, electrical service, plumbing, and other visible features of the property. This is a general inspection and will often call for additional inspections by specific trades, such as roof and furnace inspections.

FURTHER INSPECTIONS
If conditions warrant, the Home Inspector may recommend a Structural Engineer’s Report. Such a report would identify structural failures and detail recommended corrections.

WHO PAYS?
Typically, this inspection is paid for by the Buyer.

WHO PAYS FOR WHAT?

THE SELLER CAN GENERALLY BE EXPECTED TO PAY FOR:

  • Real Estate Commission
  • Document preparation fee for Deed
  • Documentary transfer tax ($ 1.10 per $1,000.00 of sales price)
  • Any city Transfer/Conveyance Tax (according to contract)
  • Any loan fees required by buyer’s lender
  • Payoff of all loans in seller’s name (or existing loan balance if being assumed by buyer)
  • Interest accrued to lender being paid
  • Statement Fees, Reconveyance Fees and any Prepayment Penalties
  • Termite Inspection (according to contract)
  • Termite Work (according to contract)
  • Home Warranty (according to contract)
  • Any judgments, tax liens, etc., against the seller
  • Tax proration (for any taxes unpaid at Transfer of Titler)
  • Any unpaid Homeowner’s dues
  • Recording charges to clear all record against seller
  • Any bonds or assessments (according to contract)
  • Any and all delinquent taxes
  • Notary Fees
  • Escrow Fee
  • Title Insurance Premium

THE BUYER CAN GENERALLY BE EXPECTED TO PAY FOR:

  • Title Insurance Premium
  • Escrow Fee
  • Notary Fees
  • Document preparation (if applicable)
  • Recording charges for all documents in buyer(s) names (according to contract)
  • Homeowner’s transfer fee
  • All new loan charges (except those required by lender for seller to pay)
  • Tax proration (from date of acquisition)
  • Interest on new loan from date of funding to 30 days prior the first payment date
  • Assumption/Change of Records fees for takeover of existing loan
  • Beneficiary Statement Fee for existing loan
  • Inspection Fees (roofing, property inspection, geological, etc.)
  • Home Warranty (according to contract)
  • City Transfer/Conveyance Tax (according to contract)
  • Fire Insurance Premium for first year
  • CC&r’s book (even if the escrow does not close)

YOURS OR THEIRS

THE PERSONAL VS. REAL PROPERTY DILEMMA
The distinction between personal property and real property can be the source of difficulties in a real estate transaction. A purchase contract is normally written to include all real property; that is, all aspects of the property that are fastened down or an integral part of the structure. For example, this would include light fixtures, drapery rods, attached mirrors, trees and shrubs in the ground. It would not include potted plants, free-standing refrigerators, washer/dryers, microwaves, bookcases, swag lamps, etc.

If there is any uncertainty whether an item is included in the sale or not, it is best to be sure that the particular item is mentioned in the purchase agreement as being included or excluded.

GLOSSARY OF TERMS

The SELLER can generally be expected to pay for:

  • Real Estate Commission
  • Document preparation fee for Deed
  • Documentary transfer tax ($ 1.10 per $1,000.00 of sales price)
  • Any city Transfer/Conveyance Tax (according to contract)
  • Any loan fees required by buyer’s lender
  • Payoff of all loans in seller’s name (or existing loan balance if being assumed by buyer)
  • Interest accrued to lender being paid
  • Statement Fees, Reconveyance Fees and any Prepayment Penalties
  • Termite Inspection (according to contract)
  • Termite Work (according to contract)
  • Home Warranty (according to contract)
  • Any judgments, tax liens, etc., against the seller
  • Tax proration (for any taxes unpaid at Transfer of Title)
  • Any unpaid Homeowner’s dues
  • Recording charges to clear all record against seller
  • Any bonds or assessments (according to contract)
  • Any and all delinquent taxes
  • Notary Fees
  • Escrow Fee
  • Title Insurance Premium

The BUYER can generally be expected to pay for:

  • Title Insurance Premium
  • Escrow Fee
  • Notary Fees
  • Document preparation (if applicable)
  • Recording charges for all documents in buyer(s) names (according to contract)
  • Homeowner’s transfer fee
  • All new loan charges (except those required by lender for seller to pay)
  • Tax proration (from date of acquisition)
  • Interest on new loan from date of funding to 30 days prior the first payment date
  • Assumption/Change of Records fees for takeover of existing loan
  • Beneficiary Statement Fee for existing loan
  • Inspection Fees (roofing, property inspection, geological, etc.)
  • Home Warranty (according to contract)
  • City Transfer/Conveyance Tax (according to contract)
  • Fire Insurance Premium for first year
  • CC&r’s book (even if the escrow does not close)

YOURS OR THEIRS

The Personal vs. Real Property Dilemma The distinction between personal property and real property can be the source of difficulties in a real estate transaction. A purchase contract is normally written to include all real property; that is, all aspects of the property that are fastened down or an integral part of the structure. For example, this would include light fixtures, drapery rods, attached mirrors, trees and shrubs in the ground. It would not include potted plants, free-standing refrigerators, washer/dryers, microwaves, bookcases, swag lamps, etc. If there is any uncertainty whether an item is included in the sale or not, it is best to be sure that the particular item is mentioned in the purchase agreement as being included or excluded.

FINANCING ROAD MAP

START A GREEN FILE

A Green File should contain all of your important financial documents. Regardless of the loan type, lenders will need information about you. Make copies of financial statements; bank accounts, investments, credit cards, auto loans, recent pay stubs and two years’ tax returns.

CHECK YOUR CREDIT RATING

Credit scores range between 400 and 800. 620 + is considered “good”. 680 + is considered “premium” and may possibly help get you a lower interest rate.

Below you will find the contact information for the 3 major credit reporting agencies to help you determine your credit rating. Ask your lender how to improve your credit score if you need to. Going forward, treat your credit like gold.

Equifaxhttp://www.equifax.com(800) 685-1111
Experianhttp://www.experian.com(800) 392-1122
Trans Unionhttp://www.transunion.com(800) 888-4213

SAVINGS & DEBT

If you are buying real estate, try to accumulate funds towards your down payment, closing costs (appraisal, miscellaneous fees, escrow, title insurance, etc.) and expenses such as inspections. Furthermore, try to pay down existing revolving and high interest rate debt like credit cards.

TOE THE LINE

Now is not a good time to change careers, move your money around, or buy big ticket items. Lenders like stability. So if you are considering any major changes, it pays to meet with a lender and ask them how to proceed before you make any changes! If you are tempted to buy a big ticket item, consider the following:

A $500 a month debt payment (like a credit card or auto loan) could lower the amount of home you can afford by about $83,000! *
 

* Based on a 30 year mortgage at 6% interest.

HOW TO FIND A LENDER

Today, lenders can be found through a variety of sources. In addition to calling on ads in the newspaper, you can also find and apply to lenders over the internet, and through referrals from your REALTOR. We would be happy to suggest lenders we have used successfully, who have proven themselves competitive and capable even with problem properties or poor credit.

CHOOSING THE RIGHT LENDER

Interview several lenders to evaluate the following:

  • Ability to explain things clearly and return your phone calls in a reasonable time period
  • Competitiveness of interest rates, costs & fees.
  • Availability of loan programs that suit your credit profile and desired property
  • Access to local loan approval committee that understands the kind of property you are buying

CHOOSING THE RIGHT KIND OF LOAN

Today there are so many types of loans on the market that it is beyond the scope of this page to list or explain them all. Your lender is the best person to help you select a loan program to suit your needs. Below is a summary of the three most popular loan types we see in practice; for more detailed information click the link at the end of this page.

  1. FIXED LOAN: The fixed rate loan assures your monthly payments will stay the same over the life of the loan, which is typically between 15 and 30 years. Fixed rate loans may be best if you intend to hold the property for a long period of time, say over 7 years.
  2. ARMS (ADJUSTABLE RATE MORTGAGES): ARM’s may be suitable if you plan to sell or refinance your home within the next few years. The starting interest rate is typically lower than a fixed rate loan, saving you money initially. However, it is important to understand the index, the readjustment interval, the capitalization rate and downside risks of an ARM before making a final decision to use this type of loan.
  3. INTERMEDIATE ARMS: Also called HYBRID LOANS, these loans can offer fixed interest rates for the first 3, 5, 7 or 10 years after which the interest rate adjusts with the market every 6 months or year thereafter.

CREDIT REPORT

Typically, it costs under $50 to check your credit. With your permission the lender will order a review of your outstanding loans and your repayment history from a third party credit agency.

APPLICATION / PROCESSING FEE

This cost, typically a few hundred dollars, is charged to cover the lender’s work to evaluate your ability to repay the loan. Some lenders will credit this back to you upon closing.

WHAT IS APR?

The APR, or annual percentage rate, is the sum total of all your borrowing costs expressed as a percentage interest rate charged on the loan balance.

For example: After fees, the original interest rate quote of 5.875% might work out to a 6% APR loan, where the interest costs about $6,000 per year for every $100,000 borrowed, and the principal payments are calculated based on the length of the loan term (for example 15, 20, or 30 years).

INDEXES

The interest rates on variable loans readjust periodically based on changes in an index. Typical indexes include the Federal Funds Rate, Treasury Bill.

POINTS

When mortgage companies are competing by offering lower interest rates, they may charge you a one-time pre-paid interest payment calculated as a percentage of the loan. Called points”, this may range from 0.25% to 2% of the loan balance, and is usually paid up front. Points are tax-deductible; consult with your tax advisor.

APPRAISAL COST

Lenders hire experienced, often independent appraisers to evaluate the property’s purchase price, condition and size compared to similar recent neighborhood sales. This helps ensure the purchase price is not too high, and gives the lender more confidence in getting repaid in the event they are forced to sell the property if the borrower defaults. The appraisal costs vary depending on the property, type of appraisal, and region.

MISCELLANEOUS FEES

Expect to see various charges incurred in the processing of your loan which might include notary, courier, and county recording fees.

PREPAYMENT PENALTIES

These vary widely, so be sure you know in advance if your lender will charge a penalty if you refinance or sell, and the certain period during which the penalties apply.

DOES IT HELP TO BE PRE-QUALIFIED BY A LENDER?

The pre-qualification process can be completed fairly quickly, based on less information than is required for getting pre-approved. While it is fast and it does help, a pre-qualification letter is an opinion from a lender of the maximum amount of real estate you can qualify for. In a competitive seller’s market, an offer from a buyer with a pre-qualification letter could lose out to a person who is pre-approved.

GET PRE-APPROVED BY A LENDER

There are several benefits to going the extra mile and getting a pre-approval letter. First of all, you will know exactly how much real estate you can afford. When you find a property you want to buy, your offer will be in a better positioned than someone less prepared. Finally, being pre-approved is more efficient; it reduces the amount of time it will take your lender to fund your loan. Be prepared to provide comprehensive documentation, which the lender may independently verify, including but not limited to:

  • Job and career status
  • Income
  • Monthly debt payments
  • Cash available
  • Total assets and debts

MORTGAGE BROKERS AND LENDERS – WHO DOES WHAT?

The mortgage broker is the person or company who is your main contact throughout your loan. They are often able to work with a number of lenders, who actually provide the funds for the loan. Typically, the lender pays the mortgage broker a fee for acting as the intermediary and providing all the customer service.

FILLING OUT THE APPLICATION

There are standard forms to be completed when applying for a loan. Some mortgage brokers keep these on their website so you can fill out and submit the forms on line. The information will be verified and used to qualify you for your loan, so take the time to answer questions accurately.

DOCUMENTATION

The mortgage broker will need copies of the documents you began gathering in the first phase of the loan process, including:

  • Either 2 years of W-2 forms from your employer or 2 years of tax returns if you are self-employed
  • Recent pay stubs
  • 3 months bank and money market statements
  • Brokerage, mutual fund and retirement account statements
  • Proof of other income sources (alimony, trusts, rental income, etc.)
  • Credit card statements
  • Auto /boat / student / miscellaneous loans
  • Drivers’ license or form of ID
  • If you’re not a US citizen, then copy of your green card or visa
  • Copy of any existing mortgage debts if you are applying for a home equity line of credit or another mortgage

STAY IN COMMUNICATION

The lender will have an analyst, usually called an “underwriter”, crunch your numbers and verify your documentation to confirm your ability to repay the loan. Once you are in contract on a property, there may

also be a loan approval committee which will meet to review the underwriters’ conclusions regarding your creditworthiness, and to evaluate the property on which they are lending. This is called the underwriting process, and questions are bound to arise. Be sure to return your mortgage broker’s calls promptly to keep the process moving forward smoothly. Check in with your broker periodically.

THE SIGNING

When the lender is ready to “close” your loan, or “fund” it, your real estate agent and your mortgage broker will have you sign the final loan documents. Signing will typically take place in front of a notary or an escrow officer. Ask your mortgage broker if there is anything you need to do to prepare for this, such as bringing a photo ID or perhaps a cashiers’ check if you are purchasing real estate. Allow yourself enough time to review the documents for accuracy.

IF FUNDS ARE BEING WIRED: “Wiring instructions” direct the electronic transfer of money between financial companies. If possible, arrange to have the wiring instructions in place ahead of time and checked for accuracy by both the sender and recipient of the wire. It is critical that these instructions be exact, and even so, delays are all too common.

CONGRATULATIONS!

Your mortgage broker will probably call you to confirm that the money has been transferred and the loan has closed. Always follow up with a phone call to confirm that your loan funds went where they were supposed to go. It is a good idea to keep records of this critical phase of the transaction once completed.

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