Understanding The Loan Application Process For Purchasing a Home

1) Get Pre-Qualified
Before you start looking for a home, you should talk to a loan officer to determine the price range of homes that you can qualify. This will save you time and eliminate some frustration and many Realtor® request that a home buyers be pre-qualified before they begin showing them homes. The loan officer will want social security numbers, 2 years of employment history, 2 years of residential history, gross monthly income, liquid asset balances (checking, savings, money market, 401K, etc) of you and your spouse (or other co-borrowers).

2) Find a Realtor®
Your REALTOR® has many resources to assist you in your home search at no charge to you, the home buyer. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties. REALTORS® can provide local community information on utilities, zoning, schools, etc. There are two things you'll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell? There are myriad negotiating factors, including but not limited to price, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.

3) Finalize Your Loan Application
Your Loan Officer will discuss interest rate, fees (closing costs and pre-paid item), loan programs, terms, estimate the cash needed at closing, monthly payment and answer any other questions you may have. Your Loan Officer will determine what documentation (pay stubs, bank statements, W-2, tax returns, etc) will be needed from all borrowers by the lender. You will probably be asked to pay for the credit report and appraisal fees. Depending upon the locality and the type of the loan, these fees will generally run from $350 to $500.

4) After the Application
Your loan officer or processor will order an appraisal from an independent Appraiser to determine the market value of the home based on other homes in the area that have sold in the past 6 months. This can take a few days to a week to be completed. During this time you should shop for home owners insurance. Many insurance companies offer discounts if they also carry your auto insurance. Your REALTOR® or loan officer can give you references if needed.

5) Processing and Underwriting Your Loan
After the loan application has been completed, it will be turned over to the processing department and then to the underwriter, where the decision to approve or reject the loan will be made. For many home buyers, the period of time between the submission of the loan application and approval of the loan is one of uncertainty and concern. Keep in mind that the lender wants to make the loan. Loan underwriters are looking for ways to approve loans, not reject them. The lender may request additional information. Your loan officer will notify you when the underwriter has approved your loan.

6) Closing
This is the final step in purchasing your home. Closings in Texas typically take place at Title Companies. Within a few days of your scheduled closing date, your loan officer or processor will contact you with the necessary cash-to-close. This is the amount you need to bring to the Title Company. Your cash-to-close includes your closing costs, pre-paid item and down payment (if applicable). You will need to bring the exact amount in the form of a cashiers check made out to the Title Company. At closing you will sign all the final loan documents. Closing will last between 45 minutes to 1 hour. After you and the seller have signed all closing documents, the Title Company will send the documents to the lender for funding; this can take 30 minutes to 1 day depending on your type of loan. When the lender sends the funds to the Title Company, they will disperse the funds. Congratulation, you are now a home owner.