I AM A HOME BUYER… WHAT DO I NEED TO KNOW? (Continued)
Your lender…
Your lender is not only a source of purchase funds; she is your trusted financial advisor.
For many home buyers, the first contact with a lender
is to pre-qualify for a loan. Pre-qualification involves an informal review of your finances. Based on this review, your lender determines an amount that you could borrow. A pre-qualification letter can help you establish a purchase price range. That is, if you pre-qualify for a $250,000.00 loan, your purchase price ceiling is that amount plus your anticipated down payment.
Once you write an offer, you will begin the formal loan application process. You may be a candidate for a standard 30 year fixed rate, or perhaps a loan with a shorter term (20, 15 or 10 years), or a variable rate. You will also choose among different classes of loans – conventional or government-insured (e.g., FHA). In the latter class, if you are active military or a veteran, you may be best-served by a VA loan. Your lender will explain various loan options and terms and guide you to the one that is best for you.
When you apply for a loan, your lender will provide you with two important documents – a Good Faith Estimate (“GFE”) and a Truth in Lending (“TIL”) disclosure. The GFE has detailed information about total transaction costs, such as what the lender will charge for your loan and what your title insurance and closing costs will be. The TIL has detailed information about the loan itself, such as the term and payment schedule, total amount financed and payment amount (excluding taxes and insurance) and whether or not there is a penalty for early payment.
• Read More About The Good Faith Estimate & Truth-In-Lending
In order to approve you for a loan, your lender will need to review information about your income and assets. You will be asked to supply bank statements, pay stubs, tax returns and other pertinent financial documents. You must provide the required information quickly to keep the application process on track.
Your builder…
Perhaps your future home is (today) but a rendering of what will be built on the corner lot of a brand new subdivision. Whether you purchase a tract home or work with a custom builder, many buyers prefer the flexibility and control of buying new. You put together a list of your needs and wants and your builder delivers them; rather than searching and settling for something that is almost right, but not quite.
For a tract home, you will preview models and work with your builder (or your realtor) to identify a style you like. Once you settle on a style, you will have the opportunity to upgrade from the standard inclusions by choosing among a generous package of extras (e.g., granite countertops, an over-sized garage, a “mother-in-law” suite). Alternatively, you may decide to purchase a vacant lot and then work with a custom builder and an architect to design and build your home from scratch.
In either case, you will probably have the option to work with an “in-house” lender. This has the advantage (and perhaps the synergies – easier underwriting of your loan) of one stop shopping. Of course you can choose your own lender, but it may be advantageous to work with someone familiar with your future home site and/or builder.
Your title company…
Most real estate purchase transactions are consummated with the assistance of a title company. Our dual role is to insure your lender’s lien position and/or your ownership interest in the property AND to coordinate the signing and recording of closing documents and the exchange of purchase funds.
• Read More About Title Insurance & The Closing Process
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