- Pre-purchase: What’s your pain?
- Pre-purchase: Initial consultation
- Pre-Purchase: Pre-approval
- Pre-Purchase: Shopping for a property and making an offer
- Pre-Purchase: Buying a property that’s a “distressed sale”
- You’re under contract!! Congrats, but now what???
- Formal application for your loan
- Appraisal & Preliminary Title Report
- Locking in your loan’s rate, fees and terms
- Loan documents – Preparing for the last steps
- Signing (aka ‘closing’) and money
- Funding and Recordation – it’s yours!!
Pre-purchase: What’s your pain?
Let’s face it – nobody wants a mortgage! We either have goals we’re trying to reach or- pain we’re trying to relieve. What’s keeping you up at night? Tired of renting and want a back yard for the kids and dog? Getting married (or divorced)? Need to move up, down or simply to a different part of town? Want to access your equity to send a kid to college –or- use elsewhere? This first step is the MOST important part of the Tucson mortgage loan process since fully understanding your incentive will help me help you!
Pre-purchase: Initial consultation
We get together, preferably in person but via phone or video conference is good, to discuss your present financial situation. My job is to actively ask in depth questions and then LISTEN to your answers to uncover the strengths and weaknesses in your financial profile. No one is perfect and everyone has an issue (or two) somewhere. Best to air it out now because it’s easier to deal with up front. Trust me when I say, it will come up and the earlier its dealt with the easier it will be on everyone!
Great! We know you’re strengths and weaknesses so we’re set to delve deeper into what I call “ALICE” – Assets, Liabilities, Income, Credit (scores), and Employment. These 5 areas encompass the total financial picture needed for your Tucson mortgage. With this information I can not only issue you formal pre-approval, I can tell you how much cash you’ll need, how much home (price-wise) you can afford, what your monthly payment will be… as well as offer you various financing options to fit your needs. Many lenders offer “pre-qualifications” but I don’t believe in these since they are not based in fact – my pre-APPROVALS are issued only after reviewing detailed documents including Tax returns, paycheck stubs, bank statements, full credit reports and then running them through the appropriate Automated Underwriting System. In some cases I speak with an Underwriter face-to-face to address your unique situation.
Pre-Purchase: Shopping for a property and making an offer
Fabulous! With your Pre-Approval in hand you start shopping for a home and decide to submit an offer. The next step should be to contact me. With a specific property and offer price in mind, I will not only customize all of the figures for THAT specific property, I will also custom tailor a Pre-Approval letter for your Specific offer. Just because you’ve been pre-approved for a generic $200,000 purchase price is none of the Seller’s business if you’re only planning on offering $185,000. I’m on your team, looking out to help you meet your goals!
Pre-Purchase: Buying a property that’s a “distressed sale”
There are two types of distressed sales: the first, called a “short Sale” is where the Seller owes more than the property is worth. Unless the Seller is able to pay the shortage at closing, the current Lender will be asked to forgive the balance, and therefore is the 3rd player in the process. The second is called a “Real Estate Owned” (REO) property, there the lender has acquired the property from the owner and is now reselling the property. Typically, but NOT always, the property is in less than habitable condition which can be an issue for the new Lender being asked to finance the property. Pre-occupancy repairs may be required.
You’re under contract!! Congrats, but now what???
As a Buyer, your next step is to proceed through your “Due Diligence” period whereby you’re checking out the mechanical, legal, physical and other important consideration regarding the subject property. Simultaneously it is also time to start the process of formal application for your loan. Typically during this period you can cancel your contract –or- request repairs and/or adjustments to the contract from the Seller.
Formal application for your loan
Remember the Pre-approval process you went through up front? Now we’re gathering any updated and/or remaining documents needed to complete the FINANCIAL portion of your loan approval. This includes items such as but not limited to “TWO”s (as we call them: TWO federal tax returns, TWO most recent paycheck stubs, TWO bank statements … plus any additional financial documents unique to your specific situation.
Appraisal & Preliminary Title Report
Together these two items represent the physical and legal aspects of your property:
Appraisal – contrary to what most people believe, the goal of this document is to determine whether the Buyer is paying “fair market value”…NOT to actually set value. The Appraiser will look for comparable sales – those properties of similar size, age, amenities, within 2 miles of the subject property that have sold within the last 3 months. The result will be the assigning of a value within that range. Additionally, the appraisal report will identify any clear “health and/or safety” issues with the property that must be corrected.
Preliminary Title – this document will show the current owners, underlying liens in addition to any other property specific data including items like “road maintenance” or “Shared well agreements” as required. It will also identify whether there are any mechanics liens, judgments or other liens which could be “clouding” the ownership interest of the Buyer –or- the clear 1st lien position of the new Loan (us!).
Locking in your loan’s rate, fees and terms
This step can be the most stressful step in the loan process because of its effect on the monthly payments for years to come. While everyone wants “the best deal” the fact is that unless you get a 0% rate, there is ALWAYS a number that’s lower than you’ll get!! Instead of stressing out, the best plan is to determine how much of a gambler you REALLY are and then follow the advice of your Mortgage Professional. Remember that a .125 change in rate may have a minimal effect on your payment each month. NOTE – you MUST compare and consider both the Rate and the cost in points/fees to acquire that rate when preparing to make your decision. The decision of Par rate with no points, buying down the rate (with cash) or buying up the rate (through a credit at closing) should be a FINANCIALLY based decision. Again, discuss and listen to your trusted & Licensed Mortgage Professional – they will help you analyze the figures and make a wise decision for you and your family.
When both halves of your loan package are complete – the Financial (containing “ALICE”) + the Property (containing the appraisal and preliminary title report), the file is reviewed by the Underwriter to determine the Borrower’s ability to make the required payments, and the acceptability of the property for collateral purposes. Under most circumstances the Underwriter will request some clarifying and/or additional documentation based upon the outcome of their analysis. Called “conditions”, once met the file will receive a “Clear to Close” designation.
Loan documents – Preparing for the last steps
OK! The next step in your Tucson mortgage loan process. You’re “Clear to close” and we’re rounding 3rd base! In order for us to create your final loan documents one last item remains: Home Insurance. If you’ve not already done so we need to have an “Evidence of Insurance” from your Agent. If you’ve not yet called them to arrange for this, now is the time. Not only does this show that the property is covered, but it also shows the final premium and effective date which affect the total cash required at closing AND your total monthly payment. Once your loan documents are delivered to the title company, they will prepare the initial settlement statement called a HUD-1. We will then review and approve the HUD-1 prior to your signing. This document will tell you how much cash you need to deliver to the title company or how much cash you will get back after closing. When approved, this report will be released to all parties of the transaction.
Signing (aka ‘closing’) and money
Since Arizona is one of nine “Dry Funding States” meaning that the Buyer does not get title or access to the subject property on the day of the signing (vs. “Wet Funding” where the Buyer’s get the keys while the signatures on all documents are still “wet”). You will typically sign your documents in the office of the Escrow company 1-3 days before the recordation occurs. Arizona is also a “Good Funds” state meaning that your funds must be on deposit in the Escrow company’s bank account before they will record the ownership transfer. The BEST way to accomplish this is to ELECTRONICALLY WIRE your funds directly the Escrow Company’s account. The second best way is to deliver a cashier’s check from a major (or local) bank… but even these funds will be held 1 or more days to clear. Under no circumstances will cash –or- personal checks be accepted.
Funding and Recordation – it’s yours!!
All conditions met, all loan documents signed, all I’s dotted and all t’s crossed, good funds on file… In the next step of the Tucson mortgage loan process, the Lender (us!) will wire the funds for your loan directly to the Escrow Company. As soon as they are received the Deed for ownership transfer and the Deed of Trust for your new loan will be released for recordation in the County Recorder’s office AND THE PROPERTY IS YOURS!!!!
We’re All done and you’re New Home Owners – CONGRATS!!!