Whether you’re a first-time homebuyer or on the hunt for a home upgrade, our homebuying guide will help walk you through the process. Don’t worry if you don’t understand every step – the mortgage lending experts at Royal Credit Union are here to help with all your questions.
Step 1: Get Preapproved To Find Out How Much Home You Can Afford.
Online calculators and your monthly budget let you make an educated guess about how much house you can afford, but most Realtors will require a preapproval letter from a trusted local lender like Royal Credit Union before turning you loose on the home hunt. A preapproval letter shows Realtors and sellers that a lender has verified your financial situation and you are preapproved for a loan up to a certain amount. It’s important to get a preapproval before you look at homes – getting preapproved first keeps you from house shopping outside your price range and also shows sellers that your offer is serious and you can likely afford to buy their home. Most Royal preapprovals are valid for 4 months.
This is also the time to research the buying process. You’ll want to consider the different types of loan terms and programs available, and you’ll need to plan for closing costs and a down payment. Don’t worry if you don’t have the traditional 20% down payment – Royal offers home loan programs to meet the needs of almost any buyer. Connect with a Royal Credit Union loan specialist and get educated on all your options.
Step 2: Home Shopping With A Realtor
This is the best part about home buying! You will spend lots of time looking at potential homes online and in person with your Realtor. Think about your priorities and how well each home would meet your needs and wants. Take your time and be sure to consider all the options.
Keep in mind that depending on the amount of your loan compared to the home appraisal value (also called the loan-to-value-ratio or LTV) you may qualify for a Home Equity Line Of Credit or HELOC. A HELOC could make it affordable to remodel or repair a purchased home, so if you absolutely love certain features of a property but would need to do some work on other aspects, you might have options. Ask your loan specialist about a Home Equity Line Of Credit from Royal Credit Union if you’d like to explore this option.
Step 3: Pick Your Home And Make An Offer
Once you find your perfect home, it’s time to make an offer. Your Realtor will help you submit a purchase agreement and handle your earnest money, which is money that shows a seller that you are committed to your offer. The earnest money can be used to cover part of the closing costs and down payment; usually you can get your earnest money back if you find a problem during your home inspection.
Step 4: Loan Processing, Home Inspection And Appraisal
After the seller has signed your purchase agreement, Royal Credit Union can start the loan approval process. Your loan specialist will review your down payment, closing costs, loan terms and any available loan programs. Once the agreement is signed you can also choose to lock in your mortgage rate on that day or any day before the closing date. Although we can’t predict how rates will change in the future, it never hurts to ask your Royal loan specialist for advice on how to use this option to your advantage.
This is also when we will ask you for updated documentation to complete your final loan approval, initiate a title report, and obtain flood certification. These parts of the process help protect you by ensuring your income and assets are correct, your new home doesn’t have other claims against the title, and that you can insure your home against flood damage if needed.
Around this time, you will have your home inspected. A trained home inspector will review the home’s electrical, plumbing, heating and cooling systems; foundation, roof and siding; and other elements to make sure there are no major problems. An inspection is not usually required, but most offers include “contingent on inspection” wording that lets you back out of the purchase if a critical issue is found. You’ll receive a copy of the inspection report once it is complete.
We will also have your home appraised. Royal Credit Union will request that a third-party appraiser provide an unbiased, professional opinion of your home’s value. The appraisal is based on comparable properties with a similar location, features, and condition in your area and helps to determine how the value of the home compares with the price. This is important because it determines your loan-to-value-ratio. You will receive a copy of the appraisal when it is complete.
Step 5: Final Loan Approval And Disclosures
Once all the elements from the previous step are in order, Royal Credit Union can begin underwriting the loan for your new home. Depending on the situation, we may request additional information or provide a final approval and give a closing date. A few days before closing, you will receive the final disclosures that explain all the closing costs and down payment funds. You will review this document with your loan specialist to be sure you’re prepared for the final step, closing!
Step 6: Closing
At the closing, everything is finalized and you sign all the required documents. By this stage, all the paperwork has been filled in except the final details and your loan has been approved, you’re just making it official with your signature and payment of the closing costs. Closings are normally held at the title company and someone will review all the documents with you and explain where to sign. Once all the papers are signed, you get the keys and can move in!
As you can see, you’ll be working closely with your home loan specialist throughout the process from start to finish. That’s why it’s important to choose a trusted local lender like Royal Credit Union. Our home loan experts are ready to start your application or help answer any questions you have, and they love making the home buying process as easy as possible! Get in touch with us today!