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The Complete Guide to Buying a Home in 2019

STEPS

  • Prepare Your Credit and Finances
  • Initial Consultation
  • Receive Your Preapproval Letter
  • Start Shopping For a Home
  • Sign the Purchase Agreement
  • Close Your Loan
Plattsburgh Mortgage Team
Buying a home in 2019 is a significantly different experience from a decade ago. In 2007 the United States experienced a subprime mortgage crisis that caused panic around the world. The financial markets were in chaos and many banks shut down. This financial meltdown was a result of too much borrowing and poor underwriting standards. According to “The Street”, in February of 2011, home values experience their largest decline in value in 27 years.
With all of the uncertainty surrounding home buying, new rules and processes were established. If you are looking to purchase a home in the future, this guide should help you prepare for that process and understand the ins and outs of the mortgage process.

 

Prepare Your Credit and Finances to Purchase a Home

Step 1 – Pay Down Your Credit Cards
 
To improve your credit score and maximize your buying power, you will want to pay down all of your credit cards. Do not close or open any new accounts. The perfect balance to high limit ratio is 15%. This means that if your credit card has a maximum limit of $1000, you should aim to have a balance of $150. By reducing the balances on your credit cards you will see an immediate increase in your credit score. Try not to make any unnecessary purchases with your credit card. You should not pay off the card but try to keep the balance at 15% of the high limit. This is not a required step but a best practice. It is still possible to be approved for a home loan with credit card balances.
 
Step 2 – Check Your Credit Report
 
You would be amazed how many clients apply for credit only to find out about an unpaid collection on their credit report. Granted, a few collections might not result in a loan denial but it might impact your loan terms. Check your credit report with a free site like Credit Karma. Review the report thoroughly for any unpaid collections or errors. You should reach out to the creditors and set up a payment plan, if you cannot pay the account in full, and try to correct any errors on the credit report before applying for a mortgage.
 
If you have any additional questions about this, we do offer free credit consultations and can handle most of this process for you. Give us a call at (518) 324-5544 and we will set up a time for you to meet with us. Do not dispute any information on your credit report. In most cases the dispute will need to be settled prior to the bank approving your loan. It might be possible to settle the account outside of a dispute. Talk to your mortgage representative for the best options. 
 
Step 3 – Prepare Your Documentation
 
Mortgages are complex and come with a lot of paperwork. Although the bank should try to handle most of the paperwork for you, documenting your income and assets is the only way to get approved for a mortgage. Get your documents ready. Review the document list below and gather all of the documents that you have available  You may not need all of the documents or they might not be relevant to you but if you want to save a few trips to your mortgage office, prepare your documents. If you cannot locate some of the documentation, tell your mortgage representative. Together you can prepare a plan for the best course of action. Your mortgage representative might have some tips on how to obtain the missing documents. We promise you are not the most disorganized person we have worked with. 
 
To learn more about creating a smooth loan process click here
 
Documentation List
 
  1. One month of recent paystubs
  2. The past 2 years complete tax returns
  3. Copies of your Drivers License
  4. Current bank statements (All pages should be included)
  5. Child Support Orders and Divorce Decrees
  6. Pension, Disability, or Social Security Award Letters  
While gathering your documents together remember the questions your mortgage representative will be asking. It could help you include relevant documents not mentioned on this list. 
 
  1. Assets – Where are the down payment and closing costs coming from? 
  2. Income – How will you be able to pay the mortgage?
  3. Property – Does the value of the home support the purchase price ?
  4. Credit – Have you managed your bills properly in the past and are you likely to pay the mortgage every month?
Make sure to avoid unexplained large deposits and avoid any unnecessary credit inquiries. A credit inquiry can lower your credit score and any unexplained large deposit can result in more paperwork.  The Patriot ACT defers some responsibility for verifying illicit money on the banks and mortgage companies. Due to the Patriot ACT,  banks are required to obtain a paper trail and valid letter of explanation for any large deposits outside of regular payroll. If you have cash saved or plan on receiving a gift from a relative, make sure to discuss it with your lender. A gift will require an executed gift letter, a copy of the check, and a copy of the donor’s bank statement. Discussing this upfront with your mortgage professional will make the process easier on all parties.
 
To read more about gift funds and download a gift letter click here
 

If the loan amount is below the maximum FHA loan amount and your credit score is 580 or higher, chances are you qualify for a loan

Schedule Your Initial Consultation

Once you are ready, it is time to contact your lender. At Bank of England we take pride in scheduling a thorough initial consultation to prepare you for the loan process and insure you fully understand the terms of your loan.  When you call the office we will take down your information to start the loan application and get an idea of the loan documents you might need to bring and get a 50,000 foot view of your credit and financial profile. We will schedule a time for you to meet with us and go into more depth about your loan options tailored to your specific needs. During the initial consultation we will review your documentation and issue the preapproval letter.

Choose Your Loan Program

Today there are many loan programs available but not all of them might fit your needs or credit profile. FHA, VA, USDA, and Conventional loans are just some of the options you might qualify for. By reviewing your credit and financial profile your mortgage representative will discuss the positives and negatives of each program with how it fits your goals. Once you decide on a loan program we will issue a pre-approval letter and introduce ourselves to your real estate agent. 

Start Shopping for a Home

Congratulations! You are now pre-approved. You will be able to shop with confidence knowing your file has been reviewed and determined to be eligible for financing. We will provide your pre-approval letter to your chosen real estate agent and you can start scheduling showings to view properties that have your interest. 
 
Before you put an offer in on a home it is important to know how much the monthly payment will be and how much money out of pocket you will need to close the sale. We make this easy by providing detailed loan quotes to all of our preapproved clients. Just give us a call or use our loan quote form and we will make sure you understand all of the costs associated with your new home purchase. 
When you have settled on a house, your real estate agent will discuss making an offer on the home that you are satisfied with. An open line of communication is needed during these times as depending on your financial needs the offer may or may not be acceptable by your chosen loan program. It is important to work with a mortgage professional that is there for you when you have question. Make sure you are working with a team that takes your calls and provides clear answers to all of your questions. 

Sign the Purchase Agreement

Now that you have found a home and agreed on a purchase price, your real estate agent will submit an offer to purchase the home. If the sellers agree, the real estate agent will prepare a sales contract for you and the seller to sign. 
 
When the contract is signed, make sure to notify your lender and they will begin to prepare the loan application and relevant loan disclosures to be signed. One of the lender’s will reach out to you and discuss the best time for you to meet and sign the completed loan disclosures as well as order the appraisal and title commitment for the property. At this time, if you are missing any documentation needed to process the loan file we will request the documents. It is important to provide the documents in a timely manner. Underwriting a loan can take some time and even if your closing date is scheduled out 45 days, any delay in providing documentation can delay your loan closing 

The Disclosure Meeting

You should schedule 1 hour for your disclosure meeting. Give yourself enough time to make sure you fully understand the loan process and have all of your questions answered. Buying a home can be a complex process. The more educated you are about that process the more smooth it will be. 

Close Your Loan

Once your lender has received all of your documents, the appraisal, and the title commitment, the file will be submitted to underwriting for a clear to close. Typically, if you have provided all the necessary documentation, you can expect to hear from the underwriter within three days of receiving the title commitment. After receipt of the clear to close the attorney or title company will schedule your closing. 
 
Homeownership is a big step in anyone’s life and you should expect a professional and detail oriented team to guide you through that process. Interest rate is important but there are some many other factors to consider when you purchase a home. Hire the right team to represent your interests and make your dream a reality. 

Bank of England Mortgage strives to make homeownership easy.

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