Updated: Jan 13, 2020
Once your offer has been accepted, the fun begins. In the previous post, we discussed the inspection. Simultaneously, you will also need to be doing a few things - one of those things will be making formal loan application with your lender.
Before you started looking for your home, you talked to the lender and they pre approved you for a loan. But now the lender will want you to make formal loan application. At this time, you will want to lock in your interest rate! That means that when you lock in your interest rate, no matter what happens to interest rates before you close on your house, the interest rate you locked in at the time of formal loan application will not change! If interest rates go up - you are protected! And if interest rates go down - most likely, your interest rate will not change!
In addition to locking in your interest rate at the time of loan application, the lender will also ask you to pay for 2 things up front: a full credit report from the credit bureaus as well as the appraisal!
There are some things to keep in mind:
Formal Loan Application - you have 7 calendar days from date of contract ratification to make full loan application & lock in your interest rate!
Appraisal - the lender must order the appraisal within 15 calendar days of contract ratification! The appraisal does not HAVE to be done within that 15 days - just ordered!
What will the lender do once you have made your formal loan application?
They may request additional paperwork from you - make sure you comply with all of the lenders requests in a timely manner!
They will verify your employment - make sure you let your company's HR department know that you are buying a house and that they may get a request for your employment verification from your lender!
They will verify your credit - the lender will run a full credit report and will want to pull your credit from each of the major credit reporting bureaus (Experian, Equifax, Transunion). If you have locked your credit report, you may need to go in and unfreeze your credit report so that the lender can get that information!
They will verify the cash you will need for closing - they will want to see your bank statements as well as the statements for any assets and savings accounts. If you will be getting gift funds from a parent or other relative, you will need to have a gift letter sent to the lender stating that they do not require any repayment. You should try to get the gift funds added to your bank account as well. If you are getting funds from an IRA or 401K, you may need to do whatever you need to do to get the money from those accounts!
They will order the appraisal - the appraiser is an independent third party who will determine what the value of the house is that you are buying! If the house does not appraise for purchase price, then we will know and you will probably want to try to get the seller to reduce the price to appraised value! The appraiser will also note if there are any repairs that may be needed - BUT THIS SHOULD NOT BE TAKEN AS REPLACING THE INSPECTIONS! If the house appraises for purchase price and there are no repairs noted, then you will be good to go!
Finally, the underwriter will issue loan commitment - the underwriter will review the entire file and if they are good with everything, they will issue a loan commitment, which is the bank's way of saying that they are committing to loan you the money to buy the house at a certain interest rate and loan type!
Much of this you won't really know about because it is being done by the lender while you are doing your inspections and other due diligence!
If you are thinking of buying a house and have questions, don't hesitate to call me at 804-869-1191 - I am happy to help!