Understanding the Home Buying Process
Buying a home may seem intimidating. As a potential home buyer, you may have questions on the process. RBFCU is here to help by providing you with useful information to ensure you are equipped to successfully apply for and secure a mortgage.
Click through the sections below for common mortgage-related questions. When you are ready, apply for a mortgage online or contact our Mortgage Lending Representatives to start the process.
What should I do before applying for a mortgage loan?
There are a few steps you can take to make sure you're ready to buy a home.
- Check your credit. If you're planning to apply for a mortgage, the most important thing you can do is make sure your credit score and credit information is in good order. You can access your free credit report each year from annualcreditreport.com. If you are planning on applying for a mortgage, you may wish to wait before making any other changes to your credit, including applying for or closing credit cards, or other lines of credit.
- Determine what you can afford. Take a close look at your budget and household finances as you begin the homebuying and mortgage approval process. Be sure to factor in the additional costs that come with owning your home rather than renting, including homeowners insurance, repair costs and more. Once you determine a monthly payment that fits your budget, you can use that number to decide what the total mortgage amount that's affordable for you.
- Save for a down payment and closing costs. Even though you are applying for a loan for the bulk of your home payment, you will be required to have funds available to pay for some expenses associated with your home purchase.
- Make a checklist (likes & don't likes, wants, etc.)
Is it better to rent or buy a house?
There are a number of considerations you must make when making this decision. Renting and buying both present a number of pros and cons, and your own financial situation may be the biggest factor of all. The advantages of renting a home include less responsibility and commitment. So you have to ask yourself if you're ready for the responsibility of homeownership. But with homeownership you can build equity, take advantage of tax breaks and you may save money as rent cost are steadily increasing. Really, the decision is based solely on what your situation is, both financially and situationally.
How much house can I afford?
This is a very important question to ask.
Is it better to buy a pre-existing home or new home?
To answer this question, you'll need to make an extensive wish list for your next home, including identifying both your needs and your wants. If you're dead-set on brand new floors, an open concept floorplan and a brand new kitchen, a new or newer home might fit your needs better. If you like the character of an older home and don't mind repairs and updating, an established home may suit you better. Keep your options open, make a detailed list, and have your REALTOR take you to see lots of different options to help you narrow your search.
Should I use a real estate agent?
There is an advantage to using a real estate agent when buying or selling a home. The agent can bring you a wealth of knowledge that you may not have, and help you with negotiations, home market analysis and comparables to ensure you're getting your new home at the best price possible.
What's the best way to find homes for sale?
By working with a real estate agent, you will have access to the MLS (Multiple Listing Service), which will provide you the most up-to-date information on all homes listed for sale in your price range and desired area. They can help you narrow the scope of your search by focusing on specific criteria on your wish list.
When is the right time to sell my house?
Many different factors should be considered when determining whether to buy or sell a home. Each different market or community is unique, depending on current job opportunities, the number of homes currently for sale in each area and the appeal/marketability of your specific home. All these factors and more contribute to whether you will be selling your home in a ‘buyer's market’ vs. a ‘seller's market’ – and all could affect the sales price, length on the market, and flexibility with contract negotiations.
- What are the steps involved with buying a new home?
- What are the steps involved with selling a home?
How do I make an offer on a home?
If you are using a REALTOR to purchase your home, they can assist you throughout the homebuying process, including making an offer to the seller. They can help you determine the offer price based on comparables that have recently sold in the area and walk you through the contract to help you understand important deadlines and commitments.
What up-front costs do I need to consider when buying a home?
The typical up-front costs to take into consideration if you're looking to buy a home usually include a down payment and closing costs associated with your loan. A down payment is usually a percentage of the selling price, and you should be prepared to pay 5% at minimum. You'll also be responsible for closing costs associated with your mortgage loan on the day you purchase your home.
What does being pre-qualified mean?
Getting pre-qualified is the initial step in the mortgage process, and it's generally fairly simple. You supply your lender with your overall financial picture, including your debt, income and assets. After evaluating this information, the lender can give you an idea of what you might qualify for.
What does being pre-approved mean?
Once you're approved, you get a letter of commitment (known as a pre-approval letter) on how much the lender will fund. A pre-approval letter typically accompanies a purchase agreement. You get the pre-approval letter after you have applied for loan, and income and employment has been verified. Whenever you're ready to make an offer, it's best to have the pre-approval letter, which will help increase your negotiating power.
- How can I apply for an RBFCU mortgage loan?
What are the different loan types available, and how do I know which mortgage is right for me?
Borrowers have a few options when it comes to what type of mortgage they apply for.
How long does it typically take to get an answer from underwriting on loan status?
Once you have applied for a mortgage, our team of underwriting specialists will need time to make a decision regarding all aspects of the loan. This process typically takes up to 36 hours. During this time, they will verify information that you have provided, including employment history, debt-to-income ratios, previous mortgage or rental history and other information. During this portion of the process, they may ask you for additional documentation, and your timely response to these requests will help to facilitate the process.
How long does the mortgage loan process take to close?
Typically, the mortgage loan process takes 45 days from start to finish – from application, underwriting, processing to funding/closing.
What documents/information should I gather before applying for a loan?
In order to apply for a mortgage loan with RBFCU, you'll need to have several documents available. Download our convenient Mortgage Application Checklist to make sure you're covered when it comes to your mortgage-related documents.
What is the minimum down payment for conventional, FHA, and VA loans?
Different types of mortgage loans may require different down payment amounts.
What is a rate lock? What is the difference between “locking” and “floating”?
Whether to lock or float a mortgage rate is a crucial question for borrowers. All interest rates are subject to risk due to market fluctuations. If a rate is locked, that risk is transferred from the borrower to the lender. If mortgage rates then rise, the borrower still gets the promised lower rate. Some borrowers lock a mortgage rate as soon as possible. Floating is riskier for homebuyers who need a new loan to close their home purchase than it is for homeowners who can choose to refinance, but a float allows the borrower to get the better rate if they drop. The decision to lock or float should be about risk, but talk to your mortgage lender about the best options for your situation.
When should I lock in my rate?
Your mortgage loan officer can advise you regarding the best time to lock in your rate. By locking in a mortgage rate, you protect yourself from fluctuations in the market that could affect the final interest rate you receive on your mortgage loan. Typically, borrowers are required to wait to lock in their loan rate until they have found the home they would like to purchase and have had their offer on that home accepted.
What is the closing process and how long does it typically take?
Closing your mortgage is the final step in making your new home purchase official. At the closing, you'll be expected to:
- Sign and review loan documents
- Provide evidence of homeowners insurance and inspections
- Provide a cashier's check for any required funds (down payment, closing costs, taxes and insurance, etc.)
What is an origination fee?
An origination fee (typically 1% of loan amount) is a fee charged by the lender when entering into a loan agreement. This fee is used to cover the cost of processing or ‘originating’ the loan. Your origination fee is collected at closing, along with other closing costs.
How much money will be required at closing?
The amount of money required at closing can vary greatly. The funds you will need to bring (via a cashier's check) may include:
- Down payment
- Closing costs
- Prepaid property taxes
- Funds to establish an escrow account
Will homeowners insurance be required at closing?
When you're making a large-scale investment like buying a home, homeowners insurance is a wise and responsible choice. To complete a mortgage loan with RBFCU, you'll need to secure a homeowner's insurance policy prior to your closing.* If you have questions regarding homeowners insurance options, Randolph Brooks Insurance Agency (RBIA) can be a great resource for free, no-obligation price quotes.
What is the difference between private mortgage insurance and homeowners insurance?
When you secure homeowners insurance, you're protecting yourself from damages/hazards that may affect your home. Private Mortgage Insurance (PMI) protects the lender from the risk of default on your loan. PMI is typically required on loans in which less than 20 percent of the mortgage is covered by a down payment.
What is title insurance?
Title insurance protects you and your lender if someone challenges title to your property because of title defects that were unknown when you bought the policy. Unlike other insurance policies that insure against ‘future’ losses, title insurance protects the insured from an event that occurred before the policy was issued. For example, if a previous owner had hired a contractor to make updates and paid via a lien on the house, you might be liable for these expenses if you do not secure title insurance on your home. Our affiliate RB Title can assist with providing title insurance on your property purchase.
Is purchasing title insurance mandatory?
It is if you need a mortgage. Most lenders require such protection for an amount equal to the loan, and lasts until the loan is repaid. As with mortgage insurance, it protects the lender but you pay the premium, which is a single-payment made upfront. If you have questions regarding title insurance, your mortgage officer or a member of the RB Title team can help.