Hoping to become a homeowner? Whether you have fantasies of a pool and pink flamingos or simply want a place you can call your own, we can help you get there. Follow this step-by-step guide to making one of the biggest purchases of your life.
Before you start visiting open houses and making offers, it helps to understand the lingo you may encounter along the way. Let’s go over a few terms that are good to know:
- Adjustable rate mortgage (ARM): Loans that start with a fixed rate for a set number of years, but then fluctuate up or down in the remaining years of the loan.
- Annual percentage rate (APR): The yearly cost of a mortgage including interest and expenses, such as private mortgage insurance and points.
- Appraisal: An estimate of the property’s current market value.
- Closing: The last step of a real estate transaction when the homebuyer and lender sign the mortgage loan and the loan funds are turned over to the homebuyer’s closing agent.
- Escrow: A financial arrangement in which a third party holds funds pending the closing of a home sale.
- Grantee: The buyer of a piece of real estate.
- Grantor: The seller of a piece of real estate.
- Mortgage loan officer: Also known as a mortgage loan originator, this registered individual works for a financial institution and helps borrowers get matched with the proper mortgage for their needs. Mortgage loan officers accept and process mortgage applications.
- Points: Also known as mortgage points or discount points, these are fees paid to the lender at closing in exchange for a reduced interest rate. The more points paid, the lower the interest rate.
- Principal: The balance, without interest, left on a loan.
- Private mortgage insurance (PMI): Insurance that protects the lender against loss if you were to default on your mortgage. It’s usually required if your down payment is less than 20 percent of the purchase price.
- Title: Legal ownership of and the right to use a property.
- Title search: Inspection of records to make sure that the seller has a legitimate title to the property and there are no claims against the property.
- This is also the time you’ll want to get a rough idea of your budget. By using our online calculator, you can start planning before you’ve even applied for a mortgage.
Before speaking to a lender, you can make the process quicker and easier by preparing several documents ahead of time. You’ll want to assemble the following:
- Pay stubs (two most recent) and award letters for pension, Social Security or other sources of income
- Tax returns (from the past two years)
- W-2 statements (from the past two years)
- Bank statements for all accounts (from the past two months)
- If you currently own property, bring applicable lease agreements, mortgage statements, property tax bills and proof of homeowner’s insurance
- Valid government-issued identification and a Social Security card
Please note that you’ll need to provide additional documentation once you submit your final loan application.
You’ll also want to view your credit score and credit report. A low credit score could disqualify you from some loans and interest rates, so you’ll want to know if you need to improve your score or correct any mistakes. Similarly, your credit report will be viewed by lenders, and you’ll want to view yours from one or more credit bureaus before any lenders do. This will give you an opportunity to correct errors and learn if there could be complications when you apply for your loan.
At this point, you're ready to partner with a mortgage loan officer at your local Orlando Credit Union. This person will be your expert guide to finding and applying for a home loan. They will ask questions to understand your goals and financial situation and help you complete all forms accurately and quickly.
As you work with your mortgage loan officer, you'll go through the process of pre-qualification. This is the first official step of securing a mortgage. You'll provide your lender with an overview of your finances, including information on your income, assets and debt. The lender will evaluate the provided information and provide you with an idea on the loan amount you may qualify for.
It may seem like you're ready to search for a home and make an offer now. But there's a difference between pre-qualification and pre-approval.
- A simple process with few requirements
- Possible to do in person, over the phone or on the internet.
- Not an evaluation of a borrower's credit report.
- Not an in-depth analysis of the borrower's ability to purchase a home.
Pre-approval, on the other hand, is:
- The completion of an official mortgage application.
- A comprehensive submission of required mortgage documents (listed in step 2)
- An extensive evaluation of a borrower's credit and financial background.
In most cases, if you're pre-approved you'll receive a conditional pre-approval letter, stating the exact loan amount you're qualified to take out.
While there are plenty of home-searching options available via websites and apps, you can save a good amount of time and effort by working with a real estate agent who can take on a bulk of the work. Ask friends and neighbors and browse online to find a local agent. You'll want opinions from recent clients who will express their opinion on the sales price and the ease of working with the agent. You should also do your due diligence on checking for licensure and relevant credentials.
As you prepare to meet with your real estate agent, you'll want to determine your "must-haves" and "would-loves" of your new home. Does it need multiple bedrooms? Should it be close to school or work? Is a big backyard important to you or could you live with a small patch of land? Providing your real estate agent with all of the details of your ideal home will help them better find the right house for you.
Have you fallen in love with a house? Then it's time to work with your real estate agent to submit an offer to the seller. You and the seller may have to go back and forth a few times with offers and counteroffers before an agreed-upon sale price is reached. Next, a real estate purchase agreement will be drafted, spelling out how much you'll pay, when you'll pay it and what conditions would break the deal. The details of which party pays what in the agreement may require some negotiation. But once everyone is aligned and signatures are signed, you can celebrate that the home is (essentially) yours. All that's left is a final home inspection and closing the sale of the home with your lender.
Your real estate agent can help you arrange for a home inspection. This inspection is a thorough check of the property and involves examining the foundation, plumbing, electrical system, roof and insulation. The inspector will look for signs of damage or defects and provide a report to you and the seller. If anything serious is found during the inspection, you have an opportunity to renegotiate your offer or withdraw it.
Orlando Credit Union will take care of the final paperwork. On closing day, you'll meet with the title company to sign your documents. Once the title company and Orlando Credit Union process the paperwork, funds will be disbursed to the seller. With that, you'll officially become owner of your new home.