New to the home loan process and wondering what it will take to secure your first home loan? Here is a step-by-step guide to first time home buyer loans.
Find a lender. Talk to your friends, family and real estate agent to find out whom they'd recommend as a lender or, if you prefer, check the Internet and newspaper for potential lenders. If you have an established relationship with a bank or credit union, this is also a great place to consider.
Fill out an application. After you've chosen one or more prospective lenders, you'll need to fill out a loan application with each one. To complete the application, you'll need the following supporting paperwork:
Get a good-faith estimate. After reviewing your loan application, the lender will provide you with a good-faith estimate outlining what the closing costs are going to be. If you do not receive this automatically, insist that it be sent to you. Then review all of the costs and terms of the loan. Look at the type of loan chosen, the number of points that you'll pay (a.k.a the loan origination fee), the interest rate, the down payment required, the length of the loan and any prepayment penalty clauses.
If you are considering more than one lender, use this information to decide on the loan that is best for your needs and then make the lenders aware of your choice.
Negotiate. If you aren't happy with some of the loan terms, now is the time to speak up. Ask your lender if there is room to negotiate the closing costs on your loan. If you are interested in buying down the interest rate on your loan, now is also the time to speak up about this.
Wait for an answer. Once the details of your loan have been hammered out, your lender will begin the process of getting your loan approved. This will include having the home that you intend to buy appraised and checked for a clear title. It will also include a thorough check of your credit record.
Quite often the lender will require additional information from you before he can approve the loan, so don't worry if this occurs.
You may be asked to pay fees associated with processing, the credit check or the appraisal now, rather than at closing.
Acceptance or denial. Once all aspects of your loan application have been considered, the lender will notify you as to whether or not your loan application has been approved. If your loan has been accepted, a closing date will be scheduled, and your loan papers will be drawn up.
Tie up pre-closing details. Prior to closing, you will need to secure a cashier's check for the down payment and closing costs, and you will be expected to obtain homeowners insurance for the new property.
The lender will also provide a copy of the loan papers for your review. Check them closely to make sure that the closing costs are in line with your good-faith estimate.
Close on your new home. On the day of your closing you will likely meet at an attorney's or escrow office to complete the transaction. At that time you will need to present proof of insurance and to pay any money owed to the seller. The seller will also pay any money owed to you (rent, unpaid taxes, etc.)
At this time you will also sign the mortgage, and the deed to the home will be transferred to you.
Finally, you will pay any closing costs owed to the lender, and he will provide you with proof of your payment, and a signed copy of all loan papers.
You will then be free to leave with the keys to your new home.
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