The Home Buying Process

2. Get Pre-approved

3. Select your realtor

4. Find your new home

5. Provide required paperwork for your loan

6. Arrange a Home Inspection

7. Select your Homeowners’ Insurance Company

8. Relax & let us take care of the loan process

9. Contact Utility Companies

10. Close on Loan / House Purchase

1) Consider your budget, credit and financial situation

How much house payment can you afford?
The first and most important thing to consider when thinking of buying a home, is how much you can afford for a monthly house payment.  Only you know how much money you have left at the end of the month and if you have ‘Month’ left at the end of the ‘Money’ then you may want to consider paying off some other commitments before purchasing a home. You may also qualify for a loan that is more than you want to spend and more than your monthly budget will allow.  Buying a home is exciting, but it is a huge commitment and making yourself house-poor can be miserable.  Remember, you don’t have to spend all you may qualify for!  There are many different loan options and although the standard 30 Fixed Rate Mortgage is really the best choice for First Time Homebuyers, there are also loans that allow you to pay only the interest due each month (for a set term) and loans where you can pick a payment option.  Pick a payment or Pay Option ARMs as they are commonly known are often a good choice for loan savvy investors.Don’t forget to budget for utilities
If you are not used to paying utility bills like water, gas & electric, you will need to budget for these also.  Use the square footage of the size house you would like to buy and multiply that by 14 cents.  We are all different in our use of utility resources, but that figure will give you a good estimate to work from. How is your credit?
When you apply for a loan, we will need to know what your credit is like.  Most loan programs have credit score limits and restrictions on allowable collections, judgments, bankruptcies, foreclosures and late payments.  We will not pull your credit without your permission, but when we do, it will be a tri-merged credit report that shows information from all three credit repositories.If you know you have credit issues or are not sure how your credit looks we can pull a report for you and work with you to get your credit where it needs to be so that we can get you the best mortgage for your needs.  Don’t be embarrassed if you think your credit is not great – we’ve seen it all before and we’re here to help, not criticize.  Life happens, not always as we plan it.How much money will you need in the bank?
There are many loan programs: some requiring a down payment, some requiring that you have a reserve of a certain amount of monthly payments in the bank, but by far the most popular loans asked for are 100% or ‘No Money Down’ loans.  Some of these may require that you have $500 into the purchase, or $500 in the bank and some don’t.  It will all depend on your circumstances, whether you are a First Time Homebuyer, whether your have any military service, entitling you to a VA loan, your credit score and your annual income.Even if you don’t need any money up front to buy a home, there are nearly always expenses involved in buying a new home: earnest money, closing costs, moving expenses, new furniture, deposits on utility services etc.  Will you have the finances to cover these types of expenses?

2) Get pre-approved

In order to get you pre-approved we would need the following information from you:
Full name(s)
Social Security Number(s)
Date(s) of Birth
Number of dependents living in the home with you
Your address(es) for the past two years
Your employment history for the past two years
Details of your checking and savings accounts
Your permission to pull your credit report
Details of any monthly commitment not showing on your credit report such as: child care expenses, child support, alimony, new credit obligations, private notes.We will also want to know how much you want your monthly payment to be and how long you anticipate living in the new home.  This will help us determine the kind of loan that will be best for you now and in the future.We will not need to get paperwork from you when you initially call or visit us to get pre-approved as our pre-approval letter will condition for this.  Please be aware though that you will need to prove what you tell us if you go ahead with the loan.Once we have you pre-approved, we will give you a letter that you can give to your realtor, so that they know how much house you can afford.  Your approval is good for as long as you don’t significantly change the circumstances on which you were qualified and as long as the qualifying interest rate is applicable.Any negative change in your employment, credit, or financial situation may put your loan qualification into question.  So, from the time that you apply for your loan, until the time that your loan has funded, we would strongly advise that you do not change your employment situation, reduce your assets, open any new lines of credit, make any late payments or allow anyone else to pull your credit.

3) Select your Realtor

We work with a number of different realtors and would be pleased to refer you to someone who will be able to help you.  We only refer to realtors whom we are sure will take good care of you as we feel that referrals also reflect upon our judgment.Your realtor will help find the kind of home you are looking for and can help you negotiate with the seller to ensure you get a good and fair deal and maybe some help with closing costs.  Your realtor, like us, will be there for you throughout the home buying process.  They can advise you and help with any questions.Once you have selected a realtor that you trust and you both are happy to work together they will discuss the difference between being a customer and a client. For more information on this subject, please visit:  http://www.irec.idaho.gov/publcs/agency-disclosure-brochure.pdf

4)  Find your new home

Tell your realtor about the kind of home you are looking for, price range, which areas of town, if you know – or they can advise you if you are new to the area.  Your realtor will research the properties on the market, make appointments and accompany you to view homes that meet your criteria. They are experts in the housing market and can help you identify the benefits or pitfalls of one house over another. When you find the home you would like to buy, your realtor will help write up your offer.  At this stage you will need to be prepared to put forward some Earnest Money to secure your offer.  You may either leave your Earnest Money into the transaction or if your loan program allows, you may get most or all of it back at closing.There may be several communications back and forth as you and the seller agree on the price and conditions of the purchase.  This is where you will really come to appreciate your realtor as they will assist you with how to proceed and respond to counter offers.Once you and the seller agree upon terms of the Purchase Agreement, (link to Purchase Agreement in Mortgage Glossary) your realtor will get a copy of the signed Agreement to us so that we can work on getting the loan closed for the date that you have agreed to purchase your new home.

5) Provide required paperwork for your loan

We always try to keep the paperwork to a minimum, but we have to prove everything that we put on your loan application when we pre-approved you.  The following list is typical of the kind of documents we will need: If you are paid on a W2
2 months’ paystubs
2 months’ bank statements
If the loan is a First Time Homebuyer Idaho Housing loan we will also need 3 years’ federal tax returns to prove that you have not owned a home in the past three years.If self employed
2 years’ federal tax returns, all schedules and year to date profit and loss
2 months’ business & personal bank statements If Active Duty Military
Proof of Service (available from Virtual MPF)
Latest LES
DD1747 (a postcard that you get from the Housing Office)
2 months’ bank statementsWe will advise you of any further supporting documentation that we will need from you as the loan process progresses and we would ask that you get these to us as soon as you are able.Within three days of your application, we will have preliminary loan disclosures for you.  We can either hand them to you or mail them to you.  These disclosures will give you a lot of information about the loan and we prefer that you come into the office so that we can take the time to talk through the information and have you sign a copy for our records.  We ask you to sign, only as proof that you received the information, not for any loan committal.  You will not be obligated on a loan until you sign the Note and Deed of Trust at closing.  Depending on your home buying experience and how many questions you may have, signing loan disclosures can take between 1 – 2 hours, after which you should know everything you ever wanted to know about your loan… and more!

6) Arrange a Home Inspection

A home inspection and is very different from an appraisal.  We will order an appraisal to determine the value of the property you have agreed to buy.  A home inspection is concerned with the condition of the house, not its value.  A home inspection is not a requirement for a home loan, but most likely your realtor will advise that you have one and if so, it should be done within a few days of your Purchase Agreement being signed, so that any major matters arising from the inspection can be brought up with the seller.  You or your realtor may arrange the home inspection.   

7) Select your Homeowners’ Insurance Company

Your new home will have to be covered with a Homeowners’ Insurance Policy (also known as a Hazard Insurance Policy).  This is required to cover the value of the home to protect you and the lender in case of accidental damage or destruction of your home.  If you new home is in a flood zone and yes, believe it or not, there are flood zones in Mountain home, You will need to carry extra flood hazard insurance: this insurance can be expensive.  We can refer you to certain insurance companies for affordable coverage, but of course it is your choice who you select.  Whoever you have your auto insurance with is a good place to start.

8) Relax & let us take care of the loan process

As soon as we receive the final signed copy of your Purchase Agreement, we will order the title work to the property and order an appraisal to establish the true market value of the home you are buying.  When we have this information from the title company and the appraiser, we submit the loan along with all the supporting documentation, to be underwritten.  The underwriter may call for additional documentation: we call these ‘conditions’.  Once we have all (if any) conditions, we send the file back to the underwriter and request your final loan documentation to be sent to the title company.  By this time, we must lock your loan interest rate.  During the whole loan process we will be watching rates, so that we can lock the lowest available rate for you.When the final documents get to the title company they will work up your settlement statement. A copy of this is sent to us so that we can check the figures.  When we agree that the figures are correct, we will be ready to close.  We will call you with any amount that you may need to bring to closing: you will need either cash (if it is a small amount) or a cashiers’ check made out to the title company.

9) Contact Utility Companies

Approximately one week before you are due to close on your new house, you will need to contact the utility companies to give them notice that you will be taking over the bills, or starting new service if the house is empty.  You should arrange the service to start on the date that the loan is due to fund and you receive the keys. 

10) Close on Loan / House Purchase

On the day that you are due to close, we ask that you come into our office ten minutes before your scheduled closing time so that we can go over the figures on your final settlement statement.  Once you are happy that all is as expected, we will go to the title company to ‘close’ on your new home. You will need to have your cash or cashiers’ check (if applicable) and your ID with you.  A ‘closer’ at the title company will talk you through all the legal documents you have to sign.  This process usually takes about an hour and we will be there with you in case you have any questions.  After all the documents are signed your closer will take copies and send the originals by overnight carrier to the loan funding department. Some lenders will fund the next day, some two days after you sign as they like to have the signed package back for a full 24 hours to check that all legal documents have been signed correctly. They may also check on your credit and employment status to ensure that there have been no significant changes since the loan was approved.  When they are satisfied, they release the funds and send the wire to the title company.  The lender usually tells us that the wire has been sent and we will give you a quick call to advise that the loan has funded.  The funds are generally sent around lunch time then the title company has to disburse funds and record the transaction before the home is officially yours.  When all this has been done, the title company usually calls your realtor to advise that you can collect the keys.  The home is yours!