Owning a home has always been on the wish list of Anoop. After a long span of living in rented apartments, he thought that it was the right time to become a homeowner as he was now fairly secure economically. His income was enough to cover some down payment, but he understood that to buy the kind of property that he wanted, he would have to take out a home loan. What ensued was a protracted, occasionally trying, but on the whole, a successful path towards that loan.
Step 1: Evaluating Financial Status
Anoop commenced with the evaluation of his financial justifications. He sat with Jane, his spouse, to make a calculation of their joint earnings, current liabilities and reserves available. They ensured that they solved all existing financial obligations and were comfortable with the fact that they would be taking on additional financial obligations in the form of a mortgage.
They began with the usual checking of the credit scores. Anoop had a 720, while Jane had 740. Both were good enough to attract reasonable interest rates from lenders. They also made sure to have saved at least 20% of the total value of the house so as not to incur private mortgage insurance (PMI) which would exaggerate their monthly instalments. Furthermore, it was their plan to leave some money for other expenses such as the renovation of the house, relocation costs and other improvements they would want to make to the house.
On having such information, they were more assured of going ahead with the home loan process.
Step 2: Analysis of Financial Institutions
After they were done with their finances, Anoop and Jane began searching for lenders. Their goal was to ensure they partnered with the right mortgage lender who would give them value for their money in terms of service and rates. Anoop looked up the information on the internet and also talked to people among his kuku vanzay who had bought houses not long ago. He discovered that traditional banks and credit unions, as well as mortgage brokers, provided different services with differing terms for loans and interest rates.
Among them Anoop concentrated on three lenders only: a big national bank, a community bank, and a mortgage broker who has been really recommended by a friend. Once they reviewed their options, compared and contrasted rates and the implications and potential consequences of each lender, making several phone calls to both parties for initial exchanges, Anoop and Jane settled on the local credit union for the mortgage. They appreciated the attention they received and the fact that their interest was a bit lower.
Step 3: Pre-Approval Process
The next step involved obtaining a pre-approved loan. Pre-approval was very important because it would demonstrate to real estate agents and sellers that Anoop and Jane were buyers who were serious and ready to make an offer as they had the financial capability necessary to do so. In order to obtain this pre approval, documents were to be submitted to the lender which included the following:
Proof of income (employment and 1099 forms)
Two years of federal tax information
Three months bank statements
Current information about their liabilities (credit card debt, car loans, etc.) is included.
Proof of holdings which will include savings and retirement accounts.
LiARS also completed an official loan application form, which meant filling out personal information and consenting to a hard credit check by the lender.
The Credit Union took about one week to assess the application. During this period, Anoop and Jane were both tense, knowing that the desire to borrow the money for the acquisition of the respective loan and their future home was on the balance. Fortunately, they were prequalified for a loan amount a little in excess of what they had anticipated, affording them more leeway in their search for a house.
Step 4 Making an Offer on a Property and Locating One to Purchase
With the pre-approval letter provided, Anoop and Jane commenced house hunting, brimming with confidence. They liaised with a realtor to help them look for houses within their price range. After what seemed like an eternity of looking without luck, they finally discovered their dream house: an adorable three-bedroom two-bathroom house located in a nice neighbourhood in a good school district.
They made an offer, and after negotiating a bit with the sellers, the offer was accepted. It was an exciting moment; however, Anoop understands in his mind that the process of getting home loans is far from being over. And now, the time has come to begin the actual loan application process in a concrete manner.
Step 5: Completing the Loan Application
With the acceptance of the offer, Anoop and Jane contacted the lender to fill out the loan application. This step was quite different from the pre-approval process. The lender needed more details about the borrowers’ finances. This involved reiterating all the facts present during the document submission and cross-dating all credit reports, including purchase details of the residence to be bought.
Additionally, the lender wanted to know the exact net worth of the property in relation to the amount being borrowed. For this purpose, an appraiser came to see the home or just the land and assess how much it was worth. It was an important step because it confirmed that the value of the home was equal to the amount of money being lent to Anoop and Jane. They had been forewarned that if the value of the home appraisal is less than the selling price, the contract would be adjusted or they would have to pay the excess cash.
Fortunately, the value agreed on in the mortgage appraising process was okay. This enabled the loan to proceed without any hurdles.
Stage 6: Loan Processing and Underwriting
Once the application was registered, it was processed further in the underwriting department. The underwriters’ role was to ascertain whether Anoop and Jane were worth the risk. They scrutinised all the particulars about their finances and employment as well as the home valuation. This was one of the most stressful parts of the process because Anoop and Jane had least control.
When doing underwriting they also had to ask for them to purchase homeowner insurance and title insurance for both the buyer and the lender in case of any complications with the home or ownership of the home. Underwriting took several weeks to complete. To ensure he did not experience any hold up Anoop made sure to keep in touch with the credit union and submit any further information requested by them as soon as possible.
Step 7: Closing the Loan Finally,
After what seemed like an eternity of waiting, Anoop and Jane received the news: their loan had been approved! The last of this process was closing, in which they would then sign every bit of paperwork that would make them the homeowners. On the closing day Anoop read through the Closing Disclosure given by the lender. This document pointed out the terms of the loan, and all the closing costs, and how much money they will need at the closing table. The total amount was somewhat greater than they had expected, but as with any plan they had set aside additional money for such a contingency.
On the day of closing, they went to meet their real estate agent as well the seller and a title official from the title company. Anoop and Jane knew they were officially homeowners after signing several papers that seemed to have letters written on them in the mountains. The borrower agreed that the agreed amount of money would be transferred to the seller, and they collected the keys to their new home.
Conclusion
The whole process of obtaining a home loan was full of searching for information, preparing papers and some anxiety but finally it was worth it. He and Jane were now homeowners and the whole process has been educational in terms of money management, organisation and patience. Having signed the dotted line and now holding the house keys they were the happiest couple eager to begin the rest of their lives in their new house.