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The process of obtaining a mortgage is the most thorough review of your income, assets and credit. After all, you are seeking to borrow thousands of dollars to purchase or refinance your home. It is important that all aspects of your financial condition are reviewed to satisfy the needs of the lender and to ensure the loan is suitable for you.
In a purchase transaction the process begins prior to even looking for a home. It is always best to become pre-qualified or pre-approved. This ensures the that home buying process runs smoothly. By taking this step first, you will know how much of a monthly payment you can afford and how much of a down payment you will need to make. You will also know the approximate total cost of the transaction.
Your second step will be to start looking for a home. People do this in different ways. You can drive around the area you would like to live in and call on signs of Realtors posted in yards. This can be effective but it can also be very time consuming. Especially, if you are not familiar with the area. The Realtors you will be speaking with represent the seller. They will do all they can to assist you, but remember their client is the seller.
The better way to find a new home is to contact a Realtor, and retain them as your Buyer Representative or Buyer Agent. You are now their client. They will review your finances with you and look for homes in your price range. They will also discuss any special needs you may have. These needs could include area schools, proximity to commuter locations, shopping malls, churches, and many other important aspects of the community. They will also discuss any special features you need in a home. They will then find homes in the MLS (Multiple Listing Service) that meet your needs.
Once a Buyer Agent finds you the right home, they will help you structure a purchase offer for the home. The agent of the seller cannot assist you with making the offer they can only present it to the seller. Your Buyer's Agent can help you put an offer together and present it for you.
Now the offer has been accepted. It is time to complete your mortgage application. The specifics of the property are added and you begin the process of appraisal and final underwriting. This results in a Commitment Letter. The Commitment Letter is the lender's promise to provide financing for the home under the provisions of the commitment. You will also complete your home inspection. This may include a well test, septic test, termite test, and in some cases a complete engineer's report or structural exam. Remember, you are buying a property for several hundred thousand dollars. A small investment now, could save you a lot down the road.
Once the property inspections are completed, you will review and sign the purchase contract with your attorney. It is important that you provide your attorney with a copy of the binder so he or she can incorporate all conditions of the binder into the contract. They will also order a title search and title insurance to ensure that you have clear a marketable title. They will also order Municipal Searches for the property. This is to make sure all municipal paper work for the property is in order. It will ensure that building permits and certificates of occupancy were properly obtained and executed. If there are any right of ways or other encroachments on the property, they must be properly written into the deed.
Once all parties have completed their work, it is time for a closing. At the closing the seller turns the property over to the buyer. You sign the mortgage and the note and give the proceeds of the loan and your down payment to the seller. They give you the keys. Any final adjustments are completed. Taxes are paid and/or put into escrow. You pay any remaining closing costs and you are a homeowner.
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