Even if you are just thinking about buying a home read this post.
Wondering what’s going to happen next? Don’t worry, our post will explain each step so you won’t be surprised.
What To Expect During The California Mortgage Process
These six steps cover the entire California mortgage process.
1. Get Pre-Approved
Home sellers often get several offers. Don’t get left behind by other buyers who got pre-approved mortgages (home loans) that sellers prefer. If you haven’t contacted a lender, do it now to apply for pre-approval.
This gives you an advantage in a hot real estate market. Sellers do not want to waste time and lose money by accepting an offer from a buyer who can’t qualify for the mortgage.
Lenders will pre-approve you after asking questions about your finances and viewing your credit report. Your credit report contains a record of your credit accounts, payments history, and an estimate of your creditworthiness called the credit score.
After reviewing this information, your lender will know how much you can afford to pay for your new home. This is based upon your income, expenses, and credit.
Knowing what you can afford saves you time by focusing on homes in your price range.
2. Making an Offer
Make copies of your pre-approval letter to give to Realtors and sellers when you visit homes.
Find an experienced, highly regarded Realtor to help you find your new home. Our unique RealScout program links to the current greater San Diego Multiple Listing Service (MLS) of homes for sale. What makes it unique is the ability to type in your criteria of a home fitting your needs.
That’s right, our local MLS only provides basic details about their homes for sale. Knowing the sales price, size, number of bedrooms and bathrooms, and neighborhood is a start. But, you need more information than that!
Read our post about our RealScout program and how it helps San Diego buyers find their dream home faster. RealScout Comes to San Diego to Help Home Buyers 2021.
When you find THE ONE, our Realtor will help you arrange an offer that appeals to sellers. Your offer will include the pre-approval letter and how much you plan to deposit as Earnest Money to secure the seller’s cooperation. It will also include your down payment and how much financing you will obtain.
Your earnest money deposit (with an escrow or title company) is typically 1% to 3% of the sales price. The funds remain in a special escrow account and apply towards the down payment when the purchase finalizes (called the “escrow closing”).
Offers include “contingencies” (conditions) like the timing for home inspections and financing (mortgage) approval, and the closing date.
When the seller accepts your offer a formal purchase contract is prepared and signed by the parties. Make sure you read it carefully and consult with our Realtor to understand it before signing.
3. Applying for the Mortgage
Once the purchase agreement is signed you are free to use any lender you like. You don’t have to use the pre-approval lender. Our Realtor can help you with selecting a qualified, reputable lender.
Your lender will ask about your assets, employment, income, and debt. Be ready to provide your W-2s going back several years, and your current bank statements (savings and checking accounts). Be ready to explain any credit history discrepancies like late bill payments, collection agencies notices, or bankruptcy.
Different types of mortgages exist to choose from. These include government (FHA, VA, USDA), conventional loans, and whether fixed or adjustable-rate mortgages. Your lender can help you to understand the options and which one is the better fit.
Your lender will provide a Loan Estimate (within three days of your application) that summarizes:
- The terms of your loan;
- Estimated escrow closing costs;
- Interest rate; and
- Monthly payments based on (the principal, taxes, interest, and insurance).
Learn more about getting home loan approval by reading our post, “Improve Your Chances For Home Loan Approval”.
Likewise, get some financing tips with our post, “Financing Tips for First Time Home Buyers”.
4. Mortgage Processing and Underwriting
Moving forward with your mortgage involves many behind-the-scenes activities. Loan processors working for the lender gather documents and information about you and the property assembled into a “loan package”. This is sent to the underwriter.
Underwriters decide to accept or reject loan applications. They double-check the accuracy of the loan package. Also, they match the eligibility of the property type with the loan product.
After reviewing everything, the underwriter approves or rejects the loan. In addition, they may accept the loan with specific “conditions” such as requiring an explanation for debt collections or late credit payments.
Once approved, the lender notifies you and sends the loan file to the escrow company for closing. To explain the paperwork, a finalized version of the Loan Estimate is included in the Closing Disclosure. View the 2021 State of California explanation of Closing Disclosure Information.
The Closing Disclosure contains all the fees and costs of the closing along with all the fees associated with your mortgage. You will receive this a few days before the closing. Read it carefully and if you have questions ask your lender and the escrow officer for explanations.
If buying a home in San Diego County, view our post explaining the types of fees and costs expected of buyers titled, “San Diego Real Estate Closing Costs“.
Tip: Arrange a walkthrough of the home 24 hours before the closing to verify all the seller’s promised repairs, maintenance, and items left for you were done.
Finally, you are ready to go to the closing to sign all documents making you the new owner of your dream home. Don’t forget to bring two forms of ID with you and set aside time to meet the escrow officer to discuss the documents and the after ownership process.
Important documents included with a typical property closing include:
- Closing Disclosure (Settlement Statement) which you received a few days earlier;
- Promissory Note for the mortgage showing the loan amount and loan terms;
- Deed of Trust that secures the promissory note for the lender and acts a lien on your home until paid fully; and
- Certificate of Occupancy (for a newly constructed property allowing you to move in).
If you did not send a bank wire to the escrow company ahead of the closing, you will need to bring a cashier’s check for the balance.
After you (and the seller) sign all documents, the escrow company records the title deed making you the official new owner.
An important thing to know is the California buyers’ escrow closing costs in 2021 including:
- Escrow (settlement) fee;
- Title (deed) recording fee;
- Loan origination fee;
- Title insurance;
- Title search;
- Credit report;
- Homeowner’s insurance;
- Condo or HOA fees;
- Property tax (prorated); and
- Miscellaneous (courier fees, government certifications, etc.).
If you intend to buy a home, read our post for more information titled, “How To Successfully Buy A Home”.
What To Expect During The California Mortgage Process – Conclusion
We hope our “what to expect during the California mortgage process” answers most of your questions.
The six steps below are the most important during your California mortgage process:
- Get Pre-Approved;
- Making an Offer;
- Applying for the Mortgage;
- Mortgage Processing and Underwriting;
- Pre-Closing; and
Before Looking for a New Home in San Diego County
Consider Big Block Realty as your Realtor to help you find your ideal new home.
Contact Us now so one of our Realtors can help you with answering questions about:
- Home seeking;
- Making an offer;
- Understanding a purchase agreement;
- Escrow process; and
- Other questions about buying your home in the greater San Diego area.
Steven Rich, MBA – Guest Blogger
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