The home buying process can be a daunting and overwhelming process. We recently sat down with one of our loan officers, Shanna Landin on our podcast series to discuss the entire loan process from start to finish.
Who Should You Talk to First?
Before you ever talk to a realtor, it is important to determine what you can afford, or what your buying power is. It is also important to determine a monthly payment that you are comfortable with. These are all things you need to talk about with a lender. This puts you in a better position to talk to a realtor. Many times realtors won’t even want to start showing homes to a potential buyer before they have talked to a lender to ensure they know exactly what price point they should be looking in.
Once you talk to a lender, they will typically have you fill out an application which gives the lender a basis for the buyer’s numbers. We can render a credit report, analyze the numbers, and give the buyer an ideal ballpark of the purchase price. To confirm that, we will ask for a list of documents including 30 days worth of paystubs, last 2 years of W-2 statements, written verification of income, if you’re self-employed, we want at least 2 years of tax returns, any child support or alimony payments and any other proof of income or assets. Assets like a 401k can help strengthen the file, even if you aren’t using those assets for the down payment because it shows you have plenty of reserves. Reserves let the underwriters know that if something were to happen, that you have a certain amount in a “nest egg” that you can draw from if need be. It helps the underwriter quantify that you can repay the loan.
After the online application is complete and we have begun to analyze all the numbers and collect the necessary documents, we then transition into the processing stage. The processing stage is when we request info from third parties such as the IRS. We will request transcripts whether that’s W-2 or a full 1040 transcript, or if you’re self-employed it’s the 1065 form. At this stage, we will call your employer to confirm your employment.
We will also need your insurance information, so we will need to contact an insurance person to make sure the quote is where it needs to be. So during the processing stage, there is a lot of third party contact.
At this stage in the loan process, we send all the documents and everything we have been processing and analyzing, to the underwriters. The underwriters follow the guidelines outlined by Freddie Mac and Fannie Mae. They make sure that the ratios are where they need to be and that credit is where it needs to be sure. They make sure all I’s are dotted and T’s crossed. This is where they will look at your debt-to-income ratio as well, another indicator of if you will be able to repay your mortgage. The debt-to-income ratio also depends on the loan option you choose as it can be different for VA, FHA, and any other type of loan. Ratios may be more flexible for certain loans.
Typically an average timeline for this entire process is 30 days, but the process can go as fast or slow as you would like. If you can get us the necessary documents quickly and the lender can review them quickly, then we can speed up the process. But it all depends on how quickly you need things to happen, and how fast you can get us the necessary info.
This process can be scary and overwhelming, especially for a first-time home-buyer. That is why at The Mortgage Company we strive to educate our clients and help them step-by-step through the home buying process. If you have any questions regarding a mortgage or possibly purchasing a home, reach out to us and we would be happy to help you or answer any questions you may have.
Once you have all the necessary documents and have gone through all the necessary steps, the next step is approval, and time to go shopping. Next week we will discuss the loan process, once you are approved. If you have any questions about the home-buying process, reach out to us at any time and we would be happy to answer any questions you may have.
Shanna Landin has been in the banking and financial industries for 30 years. Before receiving her Certified Public Accountant credentials, Shanna graduated with honors with a Bachelor of Science Degree in Accounting. From becoming a Controller of a multi-million dollar business at age 27 to running her own consulting company for 13 years she has gained vast experience which she now uses to serve her clients as a mortgage banker. Shanna currently resides in Englewood, CO with her husband and their children aging from 17 to 25 years.