Buying a home is an important financial decision that should be considered carefully. The following information will help you become familiar with the various stages of the mortgage process and help you avoid any pitfalls that may delay homeownership.
Step 1: Get Pre-Qualified - Determine What You Can Afford
The first step of purchasing a home and getting a mortgage is to determine what you can afford. To do this, you should work with a St. Mary's Credit Union Lending Expert to get pre-qualified. A pre-qualification is an estimate of how much house you can afford and how much money a lender would be able to loan you. To get pre-qualified, you will need to provide documentation regarding your current financial situation including:
- W-2 forms from the last two years or federal tax returns if you are self-employed
- Pay stubs from the last month
- Bank account statements from the last two months
- Investment account statements from the last two months
With this information, we can get a good picture of how much new debt you can take on with a mortgage and empower you to confidently shop for your new home.
Step 2: Choose Your Loan & Apply
Once you have an accepted offer on a property, it's time to choose which mortgage product is right for you and complete a formal mortgage application. A St. Mary's Credit Union Lending Expert will be happy to help you decide which loan option is right for your specific situation. They will also work with you to determine your mortgage rate, estimated monthly payment amount and estimated closing costs.
Step 3: Receive a LE and CD Statement
Once you have applied for a mortgage, you will receive a Loan Estimate (LE) that will list the estimated costs of closing on your home. The LE will give you an idea of the expenses that you will need to pay at closing. These charges may include:
- Appraisal Fees
- Origination Fees
- Escrow Accounts
- Credit Reporting
- Tax and Title Services
- Recording Fees
- Attorney Fees
- Homeowner's Insurance
- Private Mortgage Insurance (PMI)
- Points (if you are paying extra to lower your rate)
Before you close on your loan, you will receive a Closing Disclosure (CD) Settlement Statement that will accurately list your final closing costs. In some situations, the total closing costs listed on the CD can differ from those listed previously on the LE. At closing, your attorney will walk you through each item on your CD.
Step 4: Close on Your Mortgage
At closing, you and your attorney will address all of the paperwork that is required to transfer legal ownership of the property over to you. This process will include:
- Signing Legal Documents — The agreement between you and your lender and the agreement between you and the seller will be spelled out in the following documents:
- Promissory Note: This document states your promise to repay the mortgage. It details the amount and terms of the loan and what the lender can do if you fail to make payments.
- Mortgage: This document is recorded at the Registry of Deeds to secure the note and give your lender a claim against the home if you are unable to fulfill the terms of the Promissory Note.
- Closing Disclosure (CD) Settlement Statement: This statement is a detailed record of your settlement costs. Be sure to review all of the documents carefully and resolve any issues before signing. Never sign forms that are blank or have extra spaces.
- Paying Closing Costs and Escrow Items — At closing you will be required to provide a certified or cashier's check to cover your down payment (minus your deposits), your closing costs, prepaid interest charges, prorated property taxes, prorated homeowner's insurance and other pre-paid items from the seller (oil remaining in the oil tank, etc).
Once you have completed the four steps above, the house keys are yours and you will have successfully bought your new home! Get started by contacting a St. Mary's Credit Union Lending Expert today at (866) 585-7628.