Home Buying Process in Albany NY Area

Mortgage Pre-Qualification or Pre-Approval

Pre-Qualification

Loan officer takes your application and runs your credit to make analysis of whether you qualify for a mortgage loan and to determine what loan product is the your best option.  This is typically done over the phone and take on average approximately 20-30 minutes to complete.  If there is any confusion about your personal information, the loan officer should request copies of your personal documents to be certain of your qualification status.  Once the loan officer has accurate information, a full application with a credit report, her or she can then issue a pre-qualification letter to you and your real estate agent if you are working with one.

Pre-Approval

The is just a more thorough version of a pre-qualification.  A pre-approval is where the loan officer collects all of the customer’s required personal documentation and puts a file together for underwriting.  The bank will have an underwriter review all the docs, and, as long as there are no issues, the bank will issue a pre-approval.  This is not as common as a pre-qualification because it take much more time to get qualified for a pre-approval.

Documents/Information Needed for Mortgage Qualification

• last two years W2’s
• last two years tax returns (e.g. if you are self-employed or have un-reimbursed business expenses)
• most recent months worth of paystubs showing YTD income
• most recent two months worth of bank statements
• last two years of housing history
• social security number for pulling credit report

If you would like a mortgage pre-qualification or mortgage pre-approval click on talk to a loan officer.

Home Market Search

Working with a real estate agent

Unless the real estate agent signs a buyers agent agreement with you, they’re fiduciary duty is to the seller.  Find a real estate agent that you like and trust and stick with that person for your home search.  They can show you any house that’s in the multiple listing system (MLS).  If you end up finding a house that’s listed with a real estate broker that does not co-broke, then you will have to go through the real estate broker that has the listing.  Most real estate offices belong to the MLS and list their properties there.

Finding the right home

A good real estate agent can help you with your home search needs, but it’s also important to know what you can afford.  Which is one of the reasons why it’s important to get a mortgage qualification first.  The most basic and best advice: take your time, look at several properties, make sure the home is in good shape (home inspection), and make sure you can afford and are comfortable with the mortgage payment.

Purchase Offer and Seller Acceptance

Most of the time a pre-qualification letter will have to accompany your purchase offer.  The listing agent is going to want that to protect their seller from buyers that do not qualify for a mortgage.  There is no need for a seller to waste their time entertaining offers from buyers who cannot obtain a mortgage.  And it really makes no sense for the buyer to put in an offer if they’re unsure whether or not they qualify for a mortgage.

Earnest Money Deposit

It is typical for the buyer to give a deposit with their offer.  The amount of the deposit could be a factor in whether or not an offer is accepted, especially if more than one offer is presented to the seller.  Sometimes there will be two earnest money deposits: one during offer and another during signing of contract.  Earnest money deposits are generally held by the listing broker, selling broker, or the attorney representing the seller and must be maintained in a separate escrow account to prevent commingling of funds. Tip: don’t give cash for the earnest money deposit. Your mortgage company will need to see evidence of payment in order to give you a credit for that money at closing. If you have any questions talk to a loan officer.

Contract Preparation

The actual procedure used for preparing the sales contract is typically determined by local customs and practices.

In upstate New York, the real estate agent puts the contract together.  They use a standardized sales contract form that has been approved by a recognized Bar Association in conjunction with a local board of Realtors® as long as it meets certain criteria.

In downstate New York, the real estate agent working with the buyer puts together a binder, usually a one page form that contains most of the important information that will go in the actual sales contract.  Once the seller accepts the offer, the binder gets sent to the attorneys to write up the official sales contract.

Contingency Removal

A contingency is anything that the contract is dependent upon that could void the contract if the contingency is not met. A contract could be contingent on many items but the most common would be attorney approval clause, home inspection, repairs, and mortgage financing.

Attorney Approval Clause

One of the first contingencies in the sales contract that gets addressed is the attorney approval clause.  This is where the attorney has a chance to make sure the contract is in their clients best interest.  Usually the attorney approval clause is for 5 business days.  Once this contingency is removed, the buyer can schedule the home inspection if they choose to have one done.

Home Inspection

Once the home has been inspected by a licensed home inspector and comes back with nothing beyond what the seller and buyer have already discussed and agreed upon, the home inspection contingency is removed.  If the home inspection comes back with problems that are unacceptable to the buyer and are out of the scope of what was already agreed upon in the contract, then the contract can be voided.

Mortgage Application

Usually the sales contract will stipulate the buyer has to make application with a mortgage lender within 10 business days.  However, the buyer typically has already gone through filling out an application with a mortgage loan officer during pre-qualification.  This part of the home buying process really refers to the buyer submitting all of their personal documents and paying for the appraisal.

Appraisal

The appraisal gets ordered after the attorney approval clause and home inspection contingencies have been met.  An appraisal for a single family home typically costs right around $400.  The buyer can write a check to the bank or pay with a credit card.  The appraisal gets assigned to an appraiser through an appraisal management company.  There are a lot of different appraisal management companies out there.  An appraisal can take a week or more, from the time of ordering it to completion and submission to the bank.

Loan processing

While the appraisal is being ordered, and in most cases during the attorney approval and home inspection, the buyer and mortgage loan officer will work together to get all necessary personal documents submitted to the processor.  It’s important for the mortgage loan officer and processor to have a thorough understanding of underwriting guidelines, so as to make sure they’re collecting everything upfront from the buyer.  Here is a list of typical underwriting conditions for mortgage borrowers:

• last two years w2’s
• last two years tax returns (e.g. if you are self-employed or have un-reimbursed business expenses)
• most recent months worth of paystubs showing YTD income
• most recent two months worth of bank statements
• explanation and verification of any large deposits (large deposits are usually anything over $1,000)
• copies of driver’s license and social security card
• source of funds for earnest money deposit
• cancelled checks and bank statement to show earnest deposit money has cleared
• water test (if property has a well)
• well has to be 50′ from septic tank, 100′ from leach field, and 10′ from property line (if property has a well)
• fully executed sales contract
• home owners insurance with mortgage clause and loan number (coverage has to be at least the loan amount)
• letter of explanation for any credit inquiries within the last 90 days
• title

This list is just to show home buyers and real estate agents the most common mortgage conditions.  There may be additional conditions depending on buyer’s documentation, property condition, appraisal, loan program, and underwriting guidelines.

Underwriting

Once the processor has a complete file—all of the required documentation from the home buyer, loan conditions, and the appraisal—the file gets submitted to underwriting.  Most banks will not underwrite a file unless it is complete.  They do not want to waste their time with documents coming in one at a time.  By the time the appraisal is done, the processor should have a complete file.  Underwriting turn times—file gets submitted, goes into the underwriting queue, underwriter reviews file and makes decision—can vary from mortgage company to mortgage company.  Underwriting turn times are typically anywhere from two business days to 14. Underwriting may come back with more conditions after review depending on the circumstances in the file (e.g. unexplained large deposits in bank statements, appraisal concerns, missing documents, etc.).

Mortgage Commitment

After an underwriter has completely reviewed the borrowers file and the loan is approved, the bank will issue what’s called a commitment letter.  Many times it will be a conditional commitment letter, meaning that there are still conditions that have to be met (e.g. title) before the mortgage lender can clear the file for closing.

Mortgage Contingency

It is recommended that the sales contract give the buyer a minimum of 45 days for a mortgage contingency in the sales contract.  The mortgage contingency is the amount of time the buyer has to obtain a mortgage commitment.  If the buyer does not meet this date the seller could void the contract.  The reason for the 45 days is because it typically takes roughly 30 days to get to mortgage commitment, and at least this way there is some time to spare for the unexpected.

Abstract Update & Title

Once the buyer’s attorney has mortgage commitment, he or she will have the seller update their title abstract (if necessary) and then will order the title search.  Depending on the attorney and municipality, this can take anywhere from a day or two to a week or two.  Most of the time the buyer’s attorney will take care of title.  The title company may request a survey.

Clear to Close

When all of the conditions on the commitment letter, including title, have been met, the mortgage company will clear the file for closing.  Home owner’s insurance is usually the last condition to be met, because the insurance agent needs to have an idea of the mortgage closing date.  The home owner’s insurance has to be paid for a year in advance.

Package to Bank Attorney

The bank attorney reviews the closing package and sends the settlement statement to the buyer’s attorney.  The buyer’s attorney will then go over the closing figures with the buyer.  The attorneys will schedule the closing date.

Final Inspection

The buyer will do a final walk-through to make sure the property is in the same condition and that things have been cleaned out.

Closing

Congratulations!  You made it to a real estate closing.  It typically takes anywhere from 45 to 60 days to close a real estate purchase.  It can be done in less time but it’s better to set your expectations for 45 to 60 days.

The information in the home buying process is for basic education purposes only.  It is not legal advice and in no way, shape or form does it take the place of any legal advice.  You should always consult with your attorney about contractual matters.  This information will help you know what to discuss with your real estate agent, mortgage loan officer, and real estate attorney.