When you decide to purchase a home, there are many steps in the process. Here’s an overview of what you can expect in rural home mortgage financing.
Prequalification
Getting prequalified for a loan is one of the first steps you should take when preparing to buy a home. It’s important to know that prequalification is different from a preapproval. Prequalification utilizes some basic income information, along with a soft credit pull to determine what you could be eligible for in a loan. Soft credit pulls do not impact your credit score. Being prequalified can help you understand what you can afford and focus your search on property that meets your budget.
Househunting
This is the fun part, but it can be overwhelming without a plan. Answering the following questions can help narrow down what features are most important to you and help make the search easier:
- How many bedrooms and bathrooms do you need?
- Do you want a newer home, or would you prefer an older one with historic character?
- Are there special features you must have?
- Is the school district a factor?
- Is commuting to work a consideration? If so, how far are you willing to drive?
- Do you have a preference on the style of home? What about color?
- Do you want a fireplace, pool or outdoor living space?
When touring homes in person, take photographs of key features that appeal to you. Save each home’s fact sheet and try to look at no more than three homes in a single day—it’s easier to focus on the details and avoid things blurring together.
Inventory of homes for sale can ebb and flow, so finding a home that meets all your criteria may take some time.
Preapproval
When you feel like you’re getting closer to finding your dream home, it’s time to secure a preapproval for a loan. Being preapproved can help you act quickly when you find the right property because you’ll know exactly what loan scenario you qualify for when making your offer. It also lets the seller know you’re serious about making a purchase by showing you’ve already applied for a loan. Your loan officer will guide you through the preapproval process and gather all the required documentation for approval such as bank statements and paystubs along with a hard credit inquiry.
Once you’re preapproved and have found the home of your dreams, you can begin the negotiation process by submitting an initial offer based on what you’re preapproved to borrow. Ask your real estate agent to show you the selling prices of similar homes in the same area (these are called comparables or “comps”) to help you make a fair offer. To compete in a hot market, your agent may advise you to consider offering a higher price (if it’s within your budget) or a larger “good faith” deposit to show your intention to complete the deal. It’s important to review all the terms and conditions in the offer contract before submitting your offer; if the sellers accept, the contract becomes binding.
Mortgage Application
Once you have an accepted offer, it’s important to get the purchase contract and proof of good faith deposit over to your loan officer as soon as possible. Knowing the property address and purchase price is critical information that must be added to your loan. Since you’re preapproved, you’ve already submitted several required documents and had an underwriter assigned to your loan. Here is where additional documents may be required, and any other items or information needed for closing will be requested.
Your credit score and credit history are important factors in qualifying for a mortgage. During the underwriting stage, it’s critical to pay all your bills on time and avoid opening any new credit accounts. Every 30-, 60-, or 90-day delinquency on a loan or credit card will reduce your credit score. Numerous credit inquiries, such as credit card applications, can also negatively impact your credit score. Talk with your loan officer before opening any new accounts during the loan process to ensure it does not impact your debt-to-income ratio.
Your lender will inform you of all the next steps in the process. They will also review the loan estimate with you once available. The loan estimate outlines the terms and costs of the mortgage application you’ve submitted.
Inspection, Title and Appraisal
While your loan application is being reviewed, it’s time to schedule an inspection of the home. Inspection findings can vary from minor cosmetic issues to major structural repairs and the results help you better understand the property you’re purchasing. Determine what, if any, repair requests you’d like to make to the seller. Your real estate agent can help you navigate this process and likely has an inspector they recommend.
After your loan application is approved and you’ve agreed on the terms and conditions, your Rural 1st® team will order the title work for the home. This ensures the property you’re purchasing is correctly identified and cleared of all legal liens. They will also order an appraisal to verify the home’s value and if a survey is required to determine property boundaries. The cost of the appraisal ,title work, survey, if applicable, and other charges may be included in your closing costs. Once the inspection, title work, appraisal and other pre-closing documents are received, reviewed and your loan is fully approved, you’re ready to schedule the closing.
Closing
A Rural 1st operations specialist will work with you throughout the process and reach out in advance to prepare your loan for closing. Before closing, you’ll receive the final closing disclosure for your loan, which lists all the final figures, credits and charges relevant to you and the seller, based on the terms of your contract. This includes exact closing costs, fees, taxes and your down payment. Compare this document to your loan estimate and confirm the rate and terms match. There should be no surprises at this point, provided the interest rate for your loan is locked-in.
Depending on the state where your new home is located and the amount of money required for closing, you’ll need to bring a cashier’s check or submit a wire transfer at the closing. Rural 1st offers the option to roll your closing costs into your loan to help lower out-of-pocket expenses when your loan to value allows for financed fees. Your operations specialist will communicate this process ahead of time, with all the necessary details you’ll need to know ahead of closing, so that closing day goes as smoothly as possible.
Before closing, you’ll have the chance to do a final walk-through of the property and confirm all agreed-upon repairs have been made and the home is ready for you to move in. If the repairs have not been made, your real estate agent may have additional negotiations with the selling agent to resolve any outstanding issues. Your final walk-through should be done before the final real estate closing documents are signed.
During closing, you should review every legally binding document carefully to confirm there are no typos or errors, the loan terms are listed as discussed and everything looks correct. You’ll have the opportunity to ask questions so you have a clear understanding of your financial commitment and make adjustments. Once you’ve reviewed and signed all the documents, your title company will take care of the rest.
Congratulations! With keys in hand, you’re now the legal owner of your new home. It’s time to prepare for moving day and start enjoying the next chapter of your life.
If you’re ready to get started on purchasing your dream home, reach out to us today.
