Congratulations on your decision to purchase a home! Many people consider purchasing a home the American dream! Other's look at it as their most valuable investment. Whatever your reason to purchase your first home is...there are thing your need to know. Our goal with this page is to educate you on the process and the people you will encounter as you go through the home buying process Let's Get started!
Step #1. Assemble Your Team. For most people, the home buying process requires the services of a variety of individuals working for themselves or for companies that exist to help you purchase the home. It is unlikely that you will be able to provide these services for yourself and it is more common than not that the average first-time home buyer doesn't have the knowledge or access to any of the professionals needed to successfully purchase a home. You will most likely need a loan to purchase your home and so you will need a lender. You will most likely need help finding the right home and you will need access to the homes you are considering, so add a Realtor to the list of needed professionals. You will need an escrow company to handle the legal process of transferring ownership of real estate and an appraiser who will help determine the value of the home you are considering and who will provide a written report (an appraisal) to the Lender considering your loan application to verify the value of the home. You will need insurance on the new home that must be obtained by a homeowner’s insurance agent. You may need other professionals as well such as pest inspectors, roof inspectors, septic and well inspectors. Perhaps you want these inspections or perhaps you will elect for a whole-house inspection for which you may need help locating a good inspector. Some or all of these people will be needed and finding them is part of the process. Let's next describe the process and order of locating your team:
Selecting the right lender is perhaps the most important decision in the home buying process. You can find a great Realtor who helps you find the perfect house and the Inspectors can deliver great inspections and an Appraiser can deliver the perfect appraisal but in the end, if the Lender does not come through with the funds to purchase your home...everything else you have done has been a waste of time. It is important to know that all lenders are not created equally. Many Loan Originators work part-time in the industry while working other jobs or having other interests that take up the bulk of their time. These individuals typically don’t process enough transactions to stay ahead of the ever-changing regulatory and lending industry.
Consumer review sites such as YELP and Google Reviews can help consumers select a lender based on the reviews of consumers who have used their services in the past. Lenders with few or negative reviews might indicate that the Loan Originator does not process many transactions or process them well.
All Loan Originators are required to have and have display a unique identification number issued by the National Mortgage Licensing System on all business cards, correspondence and promotional materials. Additionally, California Loan Originators are required to possess and display an additional license from either the California Bureau of Real Estate or the California Department of Business Oversight. Any Loan originators not possessing the appropriate licenses are working illegally in the industry and are generally processing loans through a third party under their license.
Finally it is important to tell your Loan Originator exactly what you expect from them and for them to let you know how they can best serve you. Methods of communication are among the chief complaints in the Real Estate Industry and top the lists for both Realtors and Loan Originators. It is important to understand that the non-stop regulatory changes since the financial crisis of 2007 have increased the workload for a single loan by over 300%. This means that Lenders are spending 3 times as much time meeting the constantly changing underwriting guidelines and regulatory requirements while at the same time the 30 day escrow period that Sellers, Realtors and Consumers all still expect has not changed at all. This can create contact limitation as Lenders can spend hours per day working on and calling on files to ensure their proper processing. This can create frustration for the Consumer who doesn’t have email or for the Consumer that expects those they do business with to stop and take every call. In this lending environment that is unlikely if Consumers still want the transaction completed within 30 days. Therefore, we recommend that each Consumer and Loan Originator communicate how best to pass along the information and communicate best with each other.
Since you may be spending a large amount of time with your Realtor it is important for you to be comfortable with them and how they transact business. Some Realtors work independently while others work with other Realtors as a "team". Some Realtors use Real Estate Associates to show their clients houses and others can specialize in either "buyers" or "listings". Choosing the right Realtor and finding which style works best for you will help you have an enjoyable home shopping experience.
Your real Estate professional will help you find a Loan Originator if you started at step number 2 and have to work your way backwards but they will also be able to help you arrange all of the necessary or desired inspections you may want or need for the house you are purchasing. Typically, your Real Estate Professional will have existing relationships with these inspectors and they will be able to guide you to someone who will best meet your needs.
In a typical transaction, the Property Seller's Realtor will select the escrow company and title insurance provider before the transaction ever begins. Legally you as the Buyer have the right to choose whichever escrow and title company you would like but remember that the Seller can choose to reject your offer if you choose to exercise that right. It is unlikely that would happen but it is possible. With your team assembled, it is time to move on to the next step.
Step #2. Shopping for a Home. By now you and your Loan Originator should have processed your application and supporting documentation and you have selected the proper loan type and target purchase price that best suits your needs. After this,, your Loan Originator should be prepared to provide your Realtor with a Preapproval Letter attesting to your ability to obtain a loan to backup any offer you make on a Seller's home. This is another reason why selecting a reputable Loan Originator is important. You can ask any Realtor who has been successful in the industry over a period of years how many Preapproval letters they instantly throw away due to past experience with the issuing Loan Originator.
Armed with your Preapproval status and accompanied by your Selected Realtor it is time to go shopping! Your Loan Originator will have already communicated your desired terms to your Realtor which may limit the properties you are going to look at by sales price, location or property type and you will go searching for a new home. After you have found the home you wish to purchase, your Realtor will assist you in filling out and signing an "Offer to Purchase" which will be submitted to the Seller for either an (1) acceptance, (2) a rejection or (3) a counter-offer which rejects at least one of your offer terms but is evidence of a good faith attempt to come to an agreement on the terms in which a Seller will sell their home and a buyer will purchase their home.
During the time when you are shopping up until the point that your transaction has recorded, it is important that you recognize that your Realtor is a professional in the industry of real estate. Remember that you have contracted with them to provide you with their knowledge and if you have done a good job in choosing or accepted the referral from your loan originator then you should value their advice and opinions. Professional and Successful Realtors are on the front-lines of the real estate world. They know the trends occurring in each neighborhood and they know the other professionals in the industry. They have experience with the other agents and brokerages involved and their opinions are worth listening to.
Step #3. Underwriting. The underwriting process can be a complex process where the details about the person applying for a mortgage and the subject property are compared to guidelines for the loan applied for to determine eligibility. The loan process is described on another page within our website that you find here.
Step #4. Post-Closing. Congratulations you have just purchased your home. While you may think that the process is over...it isn't. There are some things you need to know:
After your loan is closed, your loan may be sold. To a Lender your loan is an asset that can be sold at any time. If your loan is sold, the terms of your loan stays the same. Your loan may be sold several times during the loan term and different lenders decide to sell your loan or to sell the servicing rights to your loan. There is nothing to worry about. This is a normal occurrence in the mortgage industry.
After your loan is closed you will receive a copy of your final closing statement from the escrow company who facilitated the transfer of ownership. This document should be saved and given to your tax preparer so that you can take advantage of all of the tax deductions available after purchasing a home.
If you selected to or were required to pay your homeowner's insurance and/or property taxes as part of your mortgage payment then you already have money on deposit for your upcoming taxes and your homeowner's insurance policy is in place. As long as you make your payment on time there will be sufficient funds to pay for your taxes and insurance.
It is important to understand that your impound account can change if your property taxes or homeowner's insurance premium changes. Modest increases or decreases are to be expected. Significant changes could indicate a problem and you should contact your mortgage servicer at any time during the term of your loan if there is a drastic change in the payment of your loan.
Be prepared for supplemental property taxes. This is a common occurrence and is explained in detail here.
You will receive a copy of your property tax assessment every year from the county tax assessor’s office even if your taxes are paid directly from your mortgage servicer. This is common and if you look closely you will see that the copy is provided to you for information purposes only. As long as you see that on your tax bill there is nothing you need to do.
After your loan closes you may be contacted about refinancing. If you obtained your loan through Cornerstone Mortgage we will generally be the first company to notify you if it is advantageous to refinance. You will likely begin to receive loan offers with unrealistic terms and interest rates. You can ignore those solicitations or you can reach out to us to verify if any of them are real offers. Keep in mind that the people making offers do not have your personal details and they do not know what interest rate you already have. If there is ever a question...call us and let us help you avoid scams. It is our goal to be your mortgage professional for all of your future mortgage needs. We will keep in touch and notify you of anything we think is of value in the future.