The Dept of Housing (HUD) recently drafted a 49 page booklet to replace the pamphlet that is currently included with every San Mateo home buyer’s loan application. It was created to accompany HUD’s new Good Faith Estimate that will go into effect on January 1, 2010 and to help consumers navigate the new Good Faith Estimate.
Purchasing Time-Line – Where HUD Went Way Wrong
On page four, they have a “Purchasing Time-line” diagram which lays out the steps to buying a home in San Mateo. Or, what they claim to be the steps to buying a home. I’d like to go through the steps in detail and point out where HUD went wrong.
Step #1: Determine What You Can Afford
This is the best first step. Do some research online via blogs like SanMateoMortgageBlog.com to find out what today’s lending market is all about. Check out posts like Mortgage Loan Affordability Estimator or FHA Mortgage Affordability Estimator to get a quick estimate of what you may be able to qualify for given your income. (Remember, these charts have their limitations as they are only estimates.)
Also, use mortgage calculators (like the one in the sidebar of this website) to get a sense of what your mortgage payment will be. For a lot of people, this number can be quite a shock and take some getting used to. And, no matter how much money a lender will loan you, you have to be comfortable making the monthly mortgage payments. I would never recommend to someone to buy their max if they are not comfortable making the payments.
Step #2: Find a real estate agent
This step should be replaced with find a San Mateo Mortgage Advisor. As we’ve mentioned several times before, the golden rule of San Mateo home buying is “Find a Loan First, then Find a Home.” The worst thing you can do is start looking at homes you aren’t even sure you can afford before you get your loan details arranged.
Step #3: Find a house and negotiate contract terms
Whoa! How can you find a house and negotiate contract terms if you don’t even know if you qualify for a mortgage? On top of that, part of negotiating contract terms includes the terms of your loan which you won’t know.
Step #4: Shop for a Loan – Compare Multiple GFE’s
This should be Step #2. You need to know the terms of your loan, how much it will cost to close your loan, your monthly payment, how much you’re going to put as a down payment and all of the other terms of the loan (except the interest rate, of course, since you can’t lock this in until you have an accepted contract).
If you select a Multi-Platform lender, like Mortgage California, who is a Mortgage Broker, Mortgage Banker and Direct Lender, you will have access to the most number of loan programs possible. By selecting a Multi-Platform Mortgage Advisor they truly can do the shopping for you and present different loan programs that will be appropriate for your current financial situation.
Step #5: Choose the best loan for you
Should be Step #3. Once you have selected your San Mateo Mortgage Advisor, they should present loan programs that would be a good fit with your current financial situation. Armed with this information, you can make a decision on which loan program is best for you.
Step #6: Loan originator processes loan
This actually starts back at Step #2 when your Mortgage Advisor takes your loan application. Our loan processor begins getting your paperwork in order and taking the steps necessary to process your loan from day 1. The more we can do before you find a house and get in contract, the more time we’ll have to focus on getting the property approved. With new financing guidelines and regulations, we need to front load as much of the loan process as possible.
Step #7: Have house inspected
This should be done immediately after your contract is accepted. If there is something you find in the inspection that is a deal breaker, why pay for an appraisal?
Step #8: Shop for other service providers (escrow and title)
With all of the Realtors I work with, they do the shopping for you so you can concentrate on other aspects of your transaction. They also know exactly who to contact and the questions to ask, so it is usually better to work with a Realtor that will handle this part of the transaction. (If you need a referral, I can recommend some to you.) If you’d like to do the shopping, this should be done before you find a house. You should have all of your professionals in place before you find a home.
Step #9: Loan is approved
I think what HUD is talking about here is the final loan approval, which happens after you’ve found a house, selected a loan and locked the rate. All conditions have been satisfied and the lender is ready to fund the loan.
Step #10: Get insurance and do final walk through
You should shop for an Insurance Agent at the latest when you have an accepted contract. Homeowners insurance is not a guaranteed thing and you need to secure it as soon as possible.
Step #11: Go to Settlement
This is where you sign your loan documents and it usually happens about a week before your official closing date when you buy a home in San Mateo.
Step #12: Move in
What are the Steps of the Mortgage Loan Process?
For what the home loan process should look like, check out my previous post Steps for Getting a Home Loan from Applying to Approval.
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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