STEP-BY-STEP
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Step 1: What do I do first? Get Pre-qualified!
- Benefits for being Pre-qualified early.
- Allows you to find out what price of a home you can afford.
- Before you start searching for a new home and fall in love with it, lets make sure you are able to purchase it.
- During this time, you will have an idea of your loan amount, interest rate, down payment options, and what a monthly payment might look like.
- Allows the seller and realtors to know that you are able to afford the home by having a pre-qualification letter in hand.
- Allows you to be more efficient with your time while looking at homes within your budget.
- This letter places you in the best position to make a strong offer as all involved are aware that you have had a lender review your financial situation already.
- This letter is typically good for 90 days but can vary based on the loan type approval.
- The letter is typically based on the financial information you provide to determine if you are a good candidate
- Allows you to find out what price of a home you can afford.
- Allows the process to be smoother and less likely to run into surprises that could potentially slow down closing on your new home.
- This qualification can change if you were to change your financial situation.
Step 2: I am prequalified! What is next?
- Shop for a home!
- Realtors help narrow down your search while directing you with the type of home and area that you are searching for.
- Realtors assist with making an offer to a seller along with writing up a contract.
- Often times you will be asked to write an earnest money check.
- Earnest money is defined as money paid upfront in order to confirm a contract showing that you are serious and willing to complete the contract.
- After the contract and earnest money is accepted by the seller, it is common for a buyer to have a home inspection. Your contract might even require it. Typically a mortgage loan may not need this inspection however it is highly recommended for the buyer to obtain.
Step 3: I have found my home! When can I move in?
- Once the property has been identified, your lender will prepare preliminary loan paperwork/disclosures that will require your signatures to allow us to begin this process. This paperwork will assist the lender with your employment, income and residence history. We will also provide a loan estimate breaking down closing cost and down payment requirements of your loan.
- Signing the preliminary paperwork allows us to order the additional services needed for your mortgage along with requesting supporting documentation from you.
- Possible list of needs supporting income/assets.
- Commonly it may be required of you from your banking institution to collect items to document your income (W2’s, paystubs, tax returns) and assets (checking, saving, stocks, etc.) that you have.
- Other items may include proof that you have sold a home or explanations of a prior credit situation or prior residence.
- Additional services are not limited to the list below and may require additional items due to your area.
- Appraisal
- Typically after the home inspection has been approved, an appraisal will be ordered.
- Appraisers are randomly selected and must be ordered by the bank. Each appraisal is specific to the property and to the lender.
- Appraisals are used to determine a value based on similar properties that have sold in the last 12 months or so.
- Title searches (confirming ownership)
- An attorney or their abstractor will typically go to the county courthouse that the home resides and search the title for the past 33 years. They will confirm that ownership has been passed correctly each time the property has been sold and that the title does not have any issues that would not allow it to be passed to you.
- Homeowners insurance
- You will need to determine who you want to use as your insurance agent and review policy / coverage options for your new home.
- Pest Inspection
- Typically completed within 7 to 10 days from the closing date in order to confirm that the property currently does not have any active infestation, previous infestation, previous treatment or visible damage.
- Review with your Realtor on the timing and requirement
- Other possible inspection
- Other possible inspections may include Septic Tank or Well.
- Review with your lender and Realtor on the requirement of this.
- Appraisal
- Possible list of needs supporting income/assets.
Step 4: What is a closing and why am I there?
- The closing (also called a settlement) is a meeting that occurs on the day when you sign your final paperwork for the purchase of your home.
- Typically the closing is handled at the title company’s or attorney’s office who had completed the title work on the home.
- If you are required to bring funds for the down payment or closing cost, you will bring them to this meeting.
- On the closing date, the ownership of the property is transferred to you!
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F◦A◦Q
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What do Lender's review?
- Your credit history
- Good credit history may allow you to qualify for better interest rates because you have shown you are a responsible borrower.
- Credit scores. With your permission, we will request credit reports from the three major bureaus (Equifax, Experian and Transunion).
- These bureaus provide scores, that are similar to grades, on your past borrowing history.
- How well did you do?
- Have you paid all your bills on time?
- How long have you been borrowing?
- Have you taken any new credit lately?
- These bureaus provide scores, that are similar to grades, on your past borrowing history.
- Your income along with your debts
- Have you created a budget for yourself to confirm what you are comfortable in paying?
- We will review your gross income to confirm that you are able to make the monthly payments.
- We review your gross income. Please note that gross income is before taxes, etc have been deducted. Gross income will allow you to qualify for more but remember this in your budget planning as you will use net income for planning.
- We measure your Debt to Income (DTI) to confirm that your debt is not greater than you are able to manage based on your current income.
- Your assets
- Assets are items you own that can be converted into cash if needed
- Items such as Checking, Savings, Stocks, Real Estate, etc.
- We will be reviewing each of these in order to confirm that you have enough money set aside to make your down payment and closing cost (if required) and your monthly payments that will start after closing.
What is a credit score or a credit history?
- Credit scores are typically received by the three main credit bureaus (Equifax, Transunion, and Experian). They are a three digit number that estimates how likely you are to repay a debt. They are used by lenders to help make a decision for your loan application. Credit scores can affect the interest rate that you are given which in turn can affect your monthly payment.
What is an appraisal?
- Appraisals are expert opinion of a value of something. Appraisers are randomly selected and must be ordered by the bank. Each appraisal is specific to the property and to the lender. Appraisals are used to determine a value based on similar properties that have sold in the last 12 months or so.
Who is involved with my loan?
- Our team consists of Mortgage Loan officers, Mortgage Loan Assistants, Mortgage Processors, Mortgage Underwriter and Mortgage Closer. Mortgage Loan officer will begin the process and will assist you throughout the process. Mortgage Loan Assistants help your mortgage loan officer with gathering the upfront documents. Mortgage Processors work tirelessly behind the scenes updating Flood Checks, Verification of Employments in order to prepare to send to underwriting. Mortgage Underwriters verify all parts of your loan to make sure they meet the guidelines required in order to close. Mortgage Closers prepare the final paperwork sent to the attorney’s office for your closing.
Is a down payment required?
- There are several types of mortgages that exist. Some mortgages are 100% financing such as USDA’s Rural Development or VA for eligible veterans. These loans may have additional requirements in order to qualify for them. Other loans may require a 3% or a 3.5% down payment. There are lots of options!
What makes up a monthly payment?
- Your monthly payment is typically made up of Principal and Interest (the Loan), Property Taxes and Homeowners Insurance. If you are borrowing more than 80% of your value, then you would normally have an additional insurance called mortgage insurance. Mortgage Insurance is an insurance policy that insures the lender against foreclosure and compensates investors for losses due to the default of a mortgage loan
What is an escrow account?
- An escrow account is created to help pay your property taxes and homeowner’s insurance premiums on time. The costs for taxes and insurances are paid on an annual basis. Your lender will collect these amounts monthly toward the costs allowing you to accumulate the balance each month. This ensures that both the taxes and insurance are paid on time every year.
How long does the process typically take?
- The mortgage process normally runs between 25 to 35 days depending on the type of property and loan along with the inspections required for the purchase of the home.
What documents are normally required for a mortgage?
- Typical income documents you would gather are documents such as W2’s from current and past employers, Pay check stubs, Most recent 2 years full federal tax returns, and any retirement income. Assets to gather are Bank Statements, Gift letter (if using gift funds), Divorce decree (if applies) Bankruptcy paperwork (if applies),
How do I know what I can afford?
- The 28/36 debt to income rule is a great rule to know! This rule states that your monthly mortgage payment (including insurance and taxes) should not exceed more than 28% of your gross income, and your total debt (including the new mortgage) shouldn’t exceed more than 36% of your gross income. These are just a guide and there are some instances where you maybe able to exceed these percentages for debt to income.
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100 SOUTH BROADWAY
MCCOMB, MS 39648
800.678.5648
NMLS # 421801
PROCESS
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First Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the web sites that have links here. Please contact us with any concerns or comments. This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial and/or investment professional based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information. You are invited to apply. Your receipt of this material does not mean you have been pre-qualified or pre-approved for any product or service. Please consult your tax advisor, as neither First Bank, its affiliates, nor their employees provide tax advice.
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