March 9th, 2009 6:29 PM by Diego Quintero
The new home purchase process is intricate and requires a seasoned professional to guide you. This blog is meant to give you a general idea of the process. This is not intended to replace the need of a realtor or a real estate attorney. Please make sure to consult your trusted professional as each scenario is unique. Let's conclude this homebuying series with step three.
We have made it to the end of the inspection period and now we are re-focusing our attention to the financing aspect. To provide a timeline, we are approximately 10-12 days beyond the approval of the contract. An experienced Realtor and a serious buyer would most likely find themselves one month into the entire process before reaching the closing. So this portion of the series may take as many as 15 days to accomplish. The best part of this is that it is all in the hands of the banks and title companies. From this point, it's excitement and anticipation that is building up, but limited responsibility on your part. You may need to submit small bits of data, and time is still of the essence, but generally there is not much to do since you are the consumer/buyer and you have submitted all of your information already. Communication is a must, make sure to keep tabs on the transaction to avoid any delays.
As we previously discussed, the bank will try to protect its interests by obtaining an appraisal report, a preliminary title report, a review of your termite inspection, and a review of all of your personal data to approve the loan. These key elements to the loan submission must meet the bank guidelines in order to achieve the milestone of 'docs drawn,' which means that the bank has approved the loan and has issued the bank note/agreement.
The appraisal report is completed to provide the home with a fair market value. The appraiser measures the home, takes notes on the upgrades & condition of the property, take lots of pictures, and then compares the home to other sold homes. Ideally, these comparisons are within a one mile radius to the subject property and are a match in terms of square footage, upgrades, etc. The bank underwriter will scrutinize this report more than anything else in the file. We may find that the underwriter will send back the appraisal so that the appraiser can explain his/her findings in more detail.
The title commitment or preliminary title report is also completed by this time. The title company ensures a clear title upon transfer of the property. Much like a standard insurance policy, the title company insures the title to be clear from any liens placed on the property while the previous owner had possession. This includes workman's liens which can be placed up to 180 days after the new owner takes possession of the title. Keep in mind that this is the previous owner's responsibility and this is the key reason for title insurance.
By this time, you may have received a call from your loan officer asking you to lock the rate. You will be able to select a lower rate, with greater closing costs or a higher rate with lower closing costs. Generally, the loan officer should select the rate that will enable the consumer to have enough liquidity in his/her accounts to make adjustments to the new home, since things are always needed. It is important to have this discussion with the loan officer as soon as you can. There is not a set time to lock the rate, either. This may have been done as early as when the home goes under contract all the way to three days prior to closing.
The loan documents are drawn to match loan costs, rates, terms, and conditions. This is the time where the consumer meets with the title agent, notary, or attorney to 'settle.' The settlement statement or HUD-1 will give you the breakdown of all of the numbers. Pull this out to see where all the money will go and how much you need to close the transaction. When signing the many forms, be sure to pay close attention to the HUD-1, the note, the deed of trust, and any note addendas. These forms tell you where the monies go, the interest you pay, whether or not you may pay early, and provide you with the deed to the property.
This concludes the series of homebuying. I hope that it was helpful and informative. As always, call or email if you have any questions. I send my best to all of you.
Your trusted mortgage professional,
Diego L. Quintero