1. Save Cash in a Verifiable Asset Account
Lenders need to see that you have funds that are easily accessible in a bank account, 401K, or some other liquid asset account to cover the down payment, closing costs and reserves. Reserves are funds that you may need to have after closing on the home and it assures lenders that you will be able to continue making payments on your loan in the event of an income loss.
2. Assemble your advisors
While this is not mandatory, it does help to know or have an idea of who you will refer to during the different stages of the home buying process. For example, most home shoppers have a realtor but no loan officer. Although a vast majority of realtors have a preferred lender/loan officer, ultimately you have the final say in who you choose as a lender/loan officer. Here is a list of some vital advisors you will need during the homebuying process:
Mortgage Loan Officer
The mortgage loan officer’s role is to help you navigate the home buying process. Your loan officer will help you apply for a mortgage loan with the lender and will issue a pre-approval. They will collect income documentation, order the appraisal, submit the file to processing and underwriting and work with the attorney to prepare for closing.
Your realtor will help you find the perfect home for your needs, can offer information about the area the home is located in such as school zones, market appeal, etc. and they will help you to negotiate the contract. Realtors can also assist you with finding inspectors and ordering any inspections you may want to have done on the property.
The attorney provides legal representation and will be there on closing day to conduct the closing and go over all documents. They also conduct title searches on the home being purchased and can negotiate should a search uncover a problem.
Homeowners Insurance Agent
A homeowner’s insurance agent is another valuable resource to have on your board of advisors during the home buying process. The homeowner’s insurance agent can give you an estimate of what it would cost to insure your house, provide different coverage options and advise on claims filed by previous owners of the property.
3. Gather Documents
Having your documents prepared prior to meeting with a loan officer can speed up the closing process. Please refer to The Home Loan Process article for more information on the documents required for pre-approval. Some additional documents to submit once under contract to help speed up the closing are:
- Copy of the Earnest Money Deposit check (never use cash)
- Bank Statement showing earnest money coming out
- Income documentation such as 2 years of W2s, 2 most recent pay stubs, 2 years of federal tax returns, etc.
4. Respond Immediately to Information Requests
Once your file is with underwriting, the underwriter may request additional items. Be sure to get those items over in a timely manner –typically within 24 hours. The longer it takes to respond to those requests, the longer it delays closing. Underwriters have a certain amount of days they are allowed with a file so the sooner they receive the requested documents, the quicker they can process the file and ultimately approve for closing.
5. Avoid these major changes during the home buying process
- Large purchases like buying a car, appliances, or furniture
- Inquiring on new accounts
- Opening new accounts
- Closing accounts
- Changing jobs
All of these changes could potentially impact your credit by increasing your debt-to-income ratio, which can result in a larger down payment, higher interest rate or potentially a loan denial.
Have additional questions about making your mortgage process a smooth one? Contact us today!