Your Path To Home Ownership
If you are just tuning in to this series, this is Part 2 or 3 on your Path to Home Ownership. It would be useful if you read Part 1 first and here is the link. Your Path To Home Ownership Part 1 of 3
Part 2 picks up with Step #8 through 14 of the 21 steps you will take with me guiding your way on the Path to Home Ownership.
Step 8. ( Loan Officer and Home Insurance Agent)
As part of your request for your loan, your loan officer will need you to select your home insurance carrier and have proof of a binder guaranteeing that you have ample perils insurance to protect your investment. You might first call the company that insures your car. Generally there is a discount if you insure both with the same carrier. As part of you purchase , we would have requested the mandated California Zone Report on the property. One of the optional reports that can come with that Zone Report which we requested is a Clue Report. By ordering the C.L.U.E. Home Seller's Disclosure Report, you will have a greater comfort level on a property for which the loss history is known. This will be useful information at the time you are getting a binder on the property. If there is a loss history within the last five years, it can in some cases also impact on an insurer's coverage.
Step 9. ( Loan Officer )
Now that you have selected the loan program that you will use to finance your home purchase, the loan officer is required to present you with a GFE ( Good Faith Estimate). You may have already received this and may receive them each time there is any change that affects the loan rate or costs associated with the loan. The GFE is supposed to given to you within 3 days of applying for a loan.
Step 10. ( Loan Officer)
While you and your loan officer have been in constant communication, one of the options your loan officer will advise you about is that it may be time to lock in the loan rate. If this rate has changed ( higher or lower) than what was used as the rate on your Good Faith Estimate, along with the lock to secure the interest rate on your loan, you will be given another GFE, to sign off on.
Step 11. ( Loan Officer and Appraiser)
As part of loan qualifying process, the property you are purchasing also has to qualify and that is determined by a licensed appraiser. It used to be that appraisers were on call to the lenders, often employed by them or as independent contractors. When the housing market collapsed,, new rules were established governing how the appraisal process comes into play. The new rules require the appraiser and the loan officer or lender have an arms length relationship to prevent the possible influence of the appraisers opinion of value . When the loan officer places the order for an appraisal, it will be to an appraisal management company and they will assign the appraisal in according to next available. In most cases you will pay for the appraisal fee prior to the appraisal being done. Your loan officer will discuss this with you.
Step 12 ( Loan Officer and Underwriting)
Once appraisal has been released and confirmed the Loan to Value ratio is adequate, the Loan Officer will prepare all the documents in the loan folder to be sent over to the underwriting department who verifies all the terms and conditions of the loan are known and disclosed and that you and the property are fully qualified for the loan or that conditions are required for your final loan approval.
Step 13. Loan Approval , (Loan Office and Underwriting )
Once the loan has been underwritten, you and I will receive notice of final loan approval. The approval approval will confirm the interest rate, the term of the loan ( how many years until the loan is paid off- typically shown as 30 years or 360 months) )
The loan approval while called final is often actually conditional approval. The underwriting dept may state conditions they need met for drawing the loan docs and funding the loan.
Step 14. Conditions ( Loan officer )
You will likely receive a call form the loan officer and he will present you with a list of conditions usually by e-mail for you to complete. These conditions can be anything from documents that were incomplete, to missing documents or needed explanations by underwriting. It can a request for a letter of explanation about overtime income, missing or incomplete tax returns, missing pay stubs, undocumented income or a myriad of other items that are needed.
The conditions will generally fall under two categories. Those items needed "Prior to Loan Documents " or "Prior to Funding". Most of the examples above are prior to Loan Documents issues. While all the conditions have to be met, the items are critical and the other conditions are generally easier to complete.
You are now in the home stretch in you path to home ownership. But there are still some steps to go, so stay with me here.
Steps 15 through 21 will be in Part 3 - The steps in this last part discuss the loan docs themselves, signing loan docs and the balance of down payment, funding the loan, removal of remaining contingencies, close of escrow and finally getting the keys to the property and moving in. Becoming your REALTOR® for life. You are almost Home now.