Step 5. Processing the Mortgage Application

Contract or Escrow Stage

Most home buyers are nervous during this stage because they did not follow a road map similar to this step-by-step plan.  Fear of the unknown is what causes the stress yet few people slow down and think about what they are doing.  Most buyers spend ten times if not a hundred fold more time looking at homes than they do planning the transaction or how they are going to pay for it.  They spend even less time (zero minutes) optimizing their financing package. 

Buying a home is the single largest financial transaction most people do in a life time yet they spend only 30 or 45 minutes actually discussing financing options, goals or exit strategies with their loan officer.   People are shocked when I ask if they have an exit strategy.  They are so focused on getting in they give no thought to getting out.  

Not the Case When You Have a Plan

Approaching the process step-by-step removes the stress because it promotes understanding thus eliminating the bad feelings that spout from the fear of the unknown.  If either party, Buyer or Seller, is better informed than the other party the outcome of the transaction will probably end up in their favor.   

As a Buyer, you owe it to yourself to understand every step.

Several things happen in this stage. 

In this Order:

Lock the Interest Rate

Home Inspection

Pest Inspection

Appraisal

Title Report

Cross Checking & Verifications

 

 

 

 

Lock the Interest Rate

Locking the Interest Rate – First Thing to do in Step 5 This is not an automatic event.  The borrower should be an active participant when it comes to locking in the interest rate. The loan officer should offer more than one rate option. All lenders have multiple options when it comes to interest rates. …

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Home Inspection

After locking in the interest rate it is time to arrange a home inspection. Your Realtor will know an inspector that is trust worthy.  Some Buyers insist on finding their own inspector, nothing wrong with that but it usually isn’t necessary.  An experienced Realtor has worked with more than a few good inspectors.  Here is …

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No Bugs Please

Pest Inspection

Some mortgages require that the property being financed to have what is called a pest inspection.  This report is just as important if not more so than a home inspection.  Kentucky has termites.  Make sure the house you are buying does not. This inspection is often done at the same time as the home inspection.

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Appraisal

When to Order the Appraisal As with everything in the mortgage process there is a logical order for ordering an appraisal.  Federal guidelines require that the appraiser is paid when the appraisal is ordered. They are not cheap therefore should not be ordered until after the home inspection and pest inspection have been completed. Timing …

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Title Report

Review the Title Report No one ever reads their title report! You should, it shows what you are buying.  Twice in the last year I found discrepancies between title reports and purchase contracts. Both of these were foreclosures and the lender selling the property did not yet have title in their name. If you think …

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Cross Checking and Verifications

Mortgage Application Integrity One of the trickiest tasks to successfully processing a loan application is to get everything to match up.  The integrity of the data in the application is vital when it comes to hitting the closing date on time. This issue causes most of the problems during the processing stage. If a number …

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