Phil: 0:00

Welcome to the loan pros podcast, where we help make you a more informed homebuyer. I am Phil and with me as Sarah and with our combined over 30 years of real estate and lending experience, we're here to help you navigate the home buying process with an emphasis on the lending side.

Sarah: 0:24

today, we'll be talking about the overall home buying process without getting too into the details. But first, a little bit about who we are. I've been in the lending and real estate industry for over 20 years in both real estate side to escrow and title, And finally to the lending side. And I'm currently an area branch manager.

Phil: 0:46

I've worked in residential and commercial real estate, as well as lending for just under 20 years. I'm a licensed realtor and a licensed loan officer. We're both very passionate about helping people become homeowners. And through the years we found that the informed home buyer has a lower stress and better home buying experience. Our goal here is to help you become that informed buyer. So let's start with the steps to home ownership and what you can expect from the process. We'll begin with just the basics and further episodes. We'll go into greater detail. Your very first step is you need to find a lender. Sarah, can you give me some ideas on the best way to actually find a lender to work with?

Sarah: 1:29

the best way is to go through your realtor. If you're already working with a realtor, you should start there

Phil: 1:37

Have them refer someone that they've done a lot of business with, because they're going to have a great relationship and that's going to help it go much smoother. If you don't have a realtor, if you know anyone that's bought recently asked them who they used, because that's also going to be a great recommendation.

Sarah: 1:54

you know, you could go to different Facebook groups., you could go online And and Google places, most of those are going to be paid ads. So you're not really going to be getting a real feel for the type of person that you're going to be working with.

Phil: 2:09

if you don't have anyone that you're comfortable working with, reach out to us and we'll help connect you with someone that we've worked with, that we trust and can help make sure that this is a nice, smooth transaction for you. The next step, is that you need to get pre-approved. In fact, you usually can't even go looking at home. Unless it's an open house without a preapproval. You're going to talk to your lender . What kinds of information, what kind of discussions are we actually going to have with that lender?

Sarah: 2:36

It's a pretty painless process. It takes usually anywhere between five And 20 minutes, sometimes longer, depending on, getting to know you. The basic information that they are going to ask you for is enough to be able to pull your credit. Your social, your, , to your address history, , your date of birth, what does your income look like? Are your taxes up to date? Have you filed them the past two years?

Phil: 3:02

It's not a painful process to do the initial discussion with a lender. They're going to go ahead and run your credit and give you an idea of what kind of, general number you're going to be approved for now to get a full pre-approval. What are they going to actually need?

Sarah: 3:18

So we're going to ask you for your two most recent paycheck stubs, your two most recent bank statements, checking in saving. different investment accounts that you're using to get qualified for.. It's not a lot of information upfront

Phil: 3:33

So these are all things that you probably already have copies of or easy to download a statement from your bank or from , your tax preparer. it probably only takes you about 20, 30 minutes to pull all this information together. The phone conversations may be five or 10 minutes to get that other information. And then they're able to tell you pretty much what you can qualify for. Once you have that, pre-approval, it's time to find a realtor. Sarah: You're going to want to That's going to be the best way because they're going to have the best working relationship and your best interest at heart., you can also go through a trusted friend who recently purchased a house or has a good friend. Who's a real estate agent. you want to make sure that when you do find your realtor, they're working full time as a full-time real estate agent. I think that's a great point. You want someone that's working for you and, have that conversation with them. You are going to be doing a lot of work with them and spending a lot of time. You want to make sure that they're working for you and that they have a similar mindset and understand what you're looking for. So ask them the kinds of questions about what types of homes have they helped people buy in the past? Are they the same types that you are in the market for? And you want someone that's local to your area that really understands the market itself because from city to cities, even zip code to zip code, the market's different.

Sarah: 4:55

Absolutely. You definitely need a realtor that understands the market.

Phil: 4:59

Now is probably the most fun part you get to go shopping. So what kinds of things should you keep in mind as you're looking for a home

Sarah: 5:08

This is why you need to get approved first, because you don't want to be looking at houses that aren't in your price range. You want to stay within your budget.

Phil: 5:18

You really have to keep your budget in mind, which is why you have a pre-approval, which has a max of what you should be spending.

Sarah: 5:26

You want to make sure that you'd let your lender know , , I found a property. I think I want to make an offer on it. Here's how much the HOA is. Here's how much the property taxes are. Are there any special assessments, let your lender know this so that they can try and get you an accurate payment and you want to make sure that one, that payment fits what you're qualified for as well as something that you're comfortable. with Also, you want to be If you were pre-approved three or four months ago, interest rates may have changed because they change on a daily basis. What the interest rate was last week, isn't going to be the same this week necessarily, and we want to be mindful of that and make sure that you still qualify.

Phil: 6:11

I think one of the things we touched on was that lender, realtor relationship, and this is something where a really good real estate agent is going to have that conversation with the lender before that offer is submitted to make sure that it still fits within your pre-approved amount. You found the perfect house. You've talked to your lender and they said, yes, you're good for this house. So you make an offer. Your real estate agent is going to have a discussion with you talking about a few different things, as far as price and terms, some of those things are going to be your earnest money. What the closing costs requests might be, whether the seller may help for that. If you're going to request for that, other costs like you're going to have to pay for possibly a home warranty or certain inspections. Are there any other things to kind of be aware

Sarah: 6:57

first let's start off with earnest money is earnest. Money is money that goes into what's called an escrow account or a holding account. And what that is going to do is that shows the seller. That, I'm serious about this house. Here's the amount that I'm willing to reserve this property so that we can go through this process and I can purchase this house.

Phil: 7:22

Just like a deposit. It's saying I am willing to put money into this. And in some cases it's refundable based off of certain circumstances. And in other cases it's not. What are the typical types of closing costs, requests that you see from an offer standpoint?

Sarah: 7:39

sellers can pay for some or all of closing costs, depending on what the market is doing., sellers can pay for, 1% of closing costs or we're just going to cover, , a home warranty, so it's very important that you speak to your lender And. that you guys are on the same page as to how much money you have for closing costs And for your down payment.

Phil: 8:05

In a seller's market, you're less likely to have any help on closing costs in a buyer's market. You have more leverage. So really make sure that you've got those discussions with your agent, with your lender to find out what is the best kind of offer and what kinds of requests you can put in there that are gonna help get your offer accepted. Congratulations. Your offer was accepted. Escrow is a non-biased third party, they will go ahead and notify all the people involved. That's going to be your title, your lender, your buyer's agent, the listing agent, anyone helping coordinate the transaction. They're going to coordinate all of the efforts. They're going to have a holding escrow account for any money that's transacted. What's something that you've got to do right away.

Sarah: 8:51

Typically in your contract, it's going to say that you need to get your earnest money into escrow within 24 hours. So in order to do that, you're going to typically go to your bank and have them wire funds to escrow. Escrow is going to give you instructions, make sure that you call and verify with the escrow company. That those instructions are correct before wiring anything from your account. There's so much wire fraud going on right now, and that's very important. Then your lender is going to get that contract. They're going to put it into their system and they're going to send out initial disclosures and order the appraisal.

Phil: 9:31

Now your offer has been accepted. You've sent in that earnest money. You wired it after you talked to the escrow person over the phone and make sure everything was accurate and the lender's going to send out initial disclosures and it's really just breaking down what the loan is and the various costs and your acknowledging them at this point. Correct.

Sarah: 9:52

Right. You're going to get, what's called a loan estimate And the loan estimate is going to give a breakdown of estimated fees. These fees will change, but these are an estimate of what it's going to cost you to buy this house. It's going to have your loan amount, your down payment, your estimated interest rate. If you haven't locked your rate, an estimated title fees and all of the fees involved in the transaction are going to be on this.

Phil: 10:25

The bottom line is going to tell you what amount of money you need to have in order to purchase this home when escrow closes.

Sarah: 10:33

You and your lenders should have already had a conversation about how much money you need in order to purchase the home. And that's going to show up on the loan assessment. It's also going to show up on other disclosures , that your intend to proceed that it's okay to submit your file into processing, all kinds of different housing disclosures that we are legally required to send you upfront.

Phil: 10:58

I think what's a really important part here is that this initial disclosure. Has to be signed before any of the backend loan processes can start. Waiting here can definitely delay your entire loan because it's the very first thing that has to be signed in order for everything to get started.

Sarah: 11:19

Absolutely.

Phil: 11:20

So You've signed those disclosures. The loan process has started. Now. It's time to take a look at the house a little bit closer and make sure that there's no issues that would keep you from wanting to purchase. You're going to want to get a home inspector and who is the best person do you think to refer you to find a home inspector?

Sarah: 11:38

Ask your real estate agent trust the trusted professional, ask them for. Their recommendation for a licensed inspector or a licensed contractor to do this.

Phil: 11:51

what kinds of things are they going to be looking for?

Sarah: 11:54

they're going to look at the roof and they're going to see if there's any issues with the roof. They're going to look at the heater and the air conditioning units. They want to make sure that those are in working order, especially in the summer heat or in the winter cold., they're going to look at the water heater, make sure that that's up and running. Any signs of water. Damage is going to be a big one. they're going to look at, every little thing that's wrong with the house.

Phil: 12:22

this can get overwhelming. You're going to get a 50 page document that lists every single thing. and I've seen these on brand new homes that have 50 pages filled out of little things wrong here and there. They're gonna find something in every house because that's what they're paid for. What you really want to make sure is take your time, understand what's in the report and talk to the inspector while they're there and have them walk you through any major things that they find that could be a deal breaker. in the end, it's about. You need to have that discussion. Now they're also going to point out things that maybe are required fixes for loans. So what kinds of things are required in many of the loans that an inspector's going to point out?

Sarah: 13:10

So on a water heater, it is required that you have two earthquake straps on the water heater. That's just the law that's for FHA and for VA and sometimes conventional appraisers., they'll put that in there as well, because it's a safety issue. broken windows, broken glass. is there a refrigerator in a working stove? Things of that nature.

Phil: 13:33

there's some more restrictive loans where if you have peeling paint, you have to have that fixed and you may not have noticed it. And that's one of the things that the inspector is going to be able to point out to you.

Sarah: 13:44

Or even missing roof tiles that happens to

Phil: 13:47

The inspectors there to help, you know, what you're getting into and they're going to do things like test every single outlet. They're going to make sure every smoke alarm and carbon monoxide detectors working, they're going to make sure that every faucet is working, things like that. the next thing that you get done is an appraisal and they don't go through and check for all those kinds of things. They check for the value of the home. So let's get a little bit into that. The appraisal is something that's ordered from your lender. They use a third party for that. So the appraiser, someone who's going to walk through the home and really based on the condition that features the size and comparing it to other similar homes that have sold recently and in the area are going to determine what the home's worth. If it's not worth what you offered, what scenarios play out there,

Sarah: 14:37

let's say you're purchasing a home for 300,000, but it only appraises for 290,000. Sometimes depending on the market, if it is a buyer's market, we can ask the seller to lower the price. And this is something where you're going to want a full-time real estate agent involved in your transaction. And someone who's really good at negotiating for you, because they're going to go to the listing agent and say, , this isn't an appraise at this price. let's make everyone happy and let's get this property sold and lowered to this amount. sometimes that works. You can also pay the difference in cash. some sellers won't come down, especially if it's a sellers market. They may not come down on their asking price., Phil: you end up having to the deal because the bank is not going to give you a loan on a house that isn't worth the loan amount. It's really important to make sure that you have a really strong real estate agent who is a strong negotiator. And that's one of the things you can ask them about in your interview with them is what have you had in the past situations where a house appraised low, what were the outcomes of it and listen to them and see what different things they've got experienced in negotiating. absolutely.

Phil: 16:00

the appraisal is going to get ordered right away, but it can take a couple of weeks until we actually get it back. So your appraisal is ordered and the appraiser's gone out, but it still can take a week or two until you actually get that back. But what's happening during that time is you're going into underwriting. And what that is is just a process where an actual underwriter reviews, all of the documents and really is ensuring that you can pay the loan and that you meet all the requirements of that loan program.

Sarah: 16:30

During underwriting, , a processor is going to submit the file to an underwriter, and they're going to be the third look on all of your documents. They're going to dot all of their I's and cross all of their T's and they want to make sure that you fit into that box. All of your documents are there, and they may ask you for additional documents. They may ask you for,, additional pay items, questions about previous addresses, don't let It scare you. It is very stressful, but you're going to have your lender, hold your hand the entire step of the way.

Phil: 17:15

It's a hard thing for people to talk about, but it's something that is really required in order to buy a home. So who's involved in the underwriting process.

Sarah: 17:25

your loan officer, their processor, who's basically your assistant and second set of eyes. And then the underwriter who the processor is going to submit all of the documents to in a pretty little package and make sure that everything is complete and anything that the underwriter might want to see is there. This is also why it's very important to be very honest with your lender upfront. If you're hiding anything, the underwriter is going to find it. They're going to run different reports and they're going to find all of your secrets. So be very upfront and very honest, and the underwriting process. will go. So, so smooth.

Phil: 18:05

They're going to look at your income and they're going to just make sure that everything looks right and there's no questions. There's always going to be something that they're going to request, because there's always things that come up. There's lots of those documents that you're going to have to get in there. And you're also going to have to explain any kind of issues on your credit, things like charge offs, or inquiries or old addresses. They're going to just want to understand what's going on to just make sure that everything is in place and packaged up beautifully so that your loan is going to go through as smooth as possible. It's a very stressful time.

Sarah: 18:40

Absolutely. They're going to look for large deposits into your bank. They're going to look at cash deposits. They're going to question a lot of different things. So it's best to be upfront And honest with your loan officer and listen to what they're instructing you to do and what not to do during this loan process.

Phil: 19:02

To sum it up, underwriting can be very stressful. They're going to be asking you for a lot of things. What I can't stress enough is get that documentation as fast as you can really just make sure you prioritize getting that back because the longer it takes you, the longer the process is going to be.

Sarah: 19:21

An underwriter will not talk to a buyer And an underwriter will not talk to a real estate agent, no matter how much they insist, it just does not happen.

Phil: 19:31

this is why that relationship with your loan officer is so important. Underwriting may seem like it's taking weeks, but really it's usually just a few days, once everything is cleared and approved, we have what's called a conditional approval.

Sarah: 19:48

a conditional approval is going to have items on it. so there might be some title items that we need. we might need, the appraisal because we still don't have that back yet. We might need additional documentation or a couple letters of explanation and when all of a sudden done and we get all of these items back in, we can go into what's called clear to close

Phil: 20:13

I love clear to close is my favorite three words. So

Sarah: 20:16

too. Clear to close is our favorite.

Phil: 20:19

So you've got the conditional approval and now we're sending out closing disclosures, which are going to include what kinds of information

Sarah: 20:26

In the closing disclosure, it's going to have similar numbers that we had with the loan estimate. When you signed your initial disclosures, it's going to have all of those final figures on it, and we have matched it with title and escrow and their numbers so that we can give you an even clearer picture of what you need to wire into title so that we can close. So once you get the closing disclosure or the CD, you're going to want to sign it immediately, once you've signed your closing disclosure, that starts the three-day period. On when you can sign your loan docs. So you're going to want to sign it immediately so that you can start that three-day period so that you can sign your loan documents

Phil: 21:11

it's really important to understand that when you sign those closing disclosure, That three-day window is your chance and really your last chance to say, I don't want this house. You've gotten your closing disclosure. You've gotten your clear to close. You now need to wire the rest of the money.

Sarah: 21:31

Your earnest money goes towards your down payment and closing costs. You're going to look at your closing disclosure, talk to your lender, have them verify with title that they balance, and then you're going to wire, whatever amount your lender gives you so that you can get funded as soon as possible.

Phil: 21:52

Let's talk about this last part here, because this is probably the most mysterious thing of all. You get these closing disclosures and you've signed them. You've got this clear to close, and now you have to transfer the rest of the money. Now this money is determined on these disclosures and what's going to happen is your wonders going to work with the title company and the escrow and everyone to just make sure that everyone is a hundred percent on this as the exact dollar amount we need, you're going to wire the same way you wired at the very beginning with your earnest money and the dollar amount is going to be what was determined there on those disclosures.

Sarah: 22:30

Different dates change how much money you need to bring into the table. So it's very important before you wire, these funds that you talk to your lender and you ask them exactly how much you need to wire so that they can give you that correct amount.

Phil: 22:46

What is next?

Sarah: 22:47

You get to sign your loan docs. Some lenders have a streamlined program where you're only signing a few documents at closing, and it only takes maybe half an hour. Other lenders send all of their documents to title for closing. Basically it was everything that you e-sign. And then, also a few additional things such as your deed of trust and your note. Your note is the most important item that you are going to sign aside from the final closing disclosure in the loan doc package your note. If you keep nothing else, keep your note. It's going to show you the first payment date. It's going to show you your loan amount. It's going to show you your interest rate. It's going to show you your last payment date. Keep that if you keep nothing else.

Phil: 23:39

you've gotten all of these docs signed and maybe it was streamlined it and only took a half hour. Maybe it was two hours and you did this at 11 at night. Now that all of that signed, what is next?

Sarah: 23:50

So you signed your loan documents. Escrow has them. They're going to package it up, send it back to us. The lender, we are going to look at everything, make sure you signed everything. And we are going to tell them, we are funded. We are going to send the wire for all of our funds. And once you receive this, you have permission to record recording means that with the county you are officially recorded as the homeowner. Typically it's online and they're going to scan in the documents to the county. And they're going to record the transaction. At that point. You are now a homeowner. Congratulations. You have finished the most stressful process.

Phil: 24:36

Now it's time to meet that realtor in front of the house. Get those keys and take a picture with that big oversized sold sign. And it is now your home. You are a homeowner.

Sarah: 24:48

Congratulations.

Phil: 24:49

I know we spent a while on this, but we really wanted to give you that overview of the whole process. And I really hope that this helped you get an idea of the things that are going to be expected of you, who you're going to be interacting with and maybe some tips and tricks on how to find the right people to work with. We're going to go into more detail in future episodes on every single one of these steps, because we want to make sure that you are an informed buyer.

Sarah: 25:17

Thank you so much for joining us and we hope that you continue to listen to our podcast.