So your offer was accepted…now what?
PLEASE BE ADVISED THAT DUE TO CHANGES BEING INSTITUTED ON OCTOBER 3 FOR TILA-RESPA INTEGRATED DISCLOSURE RULE IMPLEMENTATION IN ADDITION TO THE ‘KNOW BEFORE YOU OWE’ RULE, THERE ARE SOME MODIFICATIONS TO THE PROCESS OF OBTAINING A MORTGAGE WHICH BENEFIT BUYERS. IN ADDITION, THERE ARE NEW DISCLOSURES AND CLOSING DOCUMENTS.
All information contained on this page has already been updated to reflect these new changes. Should any information displayed here need to be modified, we will highlight those changes on this page.
After the contract is fully executed and a copy is provided to the buyer and seller, the attorney review period commences. You typically have three days from receipt of the fully executed contract to have an attorney review the contract and disapprove of it. At this stage, either party can disapprove of the contract and render it null and void. If the contract is not disapproved within the attorney review period, you are bound by the contract as written. Therefore, it is important to contact an attorney immediately.
An attorney will advise you of your rights and recommend certain modifications to the contract that may be appropriate. If there are certain changes to be made to the contract, the contract is disapproved and the modifications provided to the other side for consideration. After all modifications have been considered and agreed upon by both sides, the attorneys issue a statement declaring that the attorney review has concluded, upon which time, the contract is now binding.
Loan Application and Loan Estimate Documentation
The application process typically begins after your offer is accepted and at the end of the attorney review process.For a toolkit about the home loan process, click CFPB-Home-Loan-Toolkit
It typically begins with a Loan Estimate. Lenders must provide Loan Estimates within three business days after you have provided your lender with:
- your name
- your income
- your Social Security number (so the lender can check credit)
- the address of the home you hope to purchase
- an estimate of the home’s value (typically the sale price)
- the amount you want to borrow
The lender must provide the Loan Estimate within three business days, but there is no set time frame for you to receive it. If the lender mails the Loan Estimate, you may receive the Loan Estimate more than three days after your application. Review information on how to read the new Loan Estimate here.
Issuing a Loan Estimate does not mean that the lender has approved or denied the loan. By issuing the Loan Estimate, the lender has committed to honoring the fees described in the Loan Estimate as long as the loan is later approved without any changes in circumstance affecting the loan application.
This is the step in the process where you can compare various lenders and find the one that best suits your needs. Make sure you shop around!
Intent to Proceed Notice to Your Lender
Once you have compared Loan Estimates and determined which loan best meets your needs, you need to let the lender know. If you are silent, the lender cannot assume an intent to proceed. Lenders likely have different requirements for what you need to do to indicate your intent to proceed, so please make sure you ask.Generally, lenders won’t move forward with an application without a clear indication from you that you intend to proceed.
And after 10 business days without that indication, the lender is no longer required to honor the terms initially offered in the Loan Estimate. If the lender closes an application because the application remained incomplete, you will most likely need to start over from the beginning.
Until you indicate your intent to proceed, lenders can’t charge any fees in connection with a mortgage application, including an application or appraisal fee. The only exception is a reasonable fee for the credit report.
Payment information for appraisals, etc. can be obtained only after the lender provides the Loan Estimate and you have expressed your intent to proceed.
Because lenders cannot collect payment information in advance, lenders may require you to provide payment for an appraisal, application, or other loan processing fee immediately after or as a part of confirming the intent to proceed with the application. Lenders may require payment before beginning the appraisal, processing, verification or underwriting processes. Please make sure you check with your lender about their requirements.
Inspections & Appraisals
A home and termite inspection will be made along with a radon test and a sweep for underground oil tanks, if applicable. You will also have a chimney inspection if there is a fireplace. You will Home inspections are not a tool to renegotiate the sales price but are designed to protect you if a house has significant defects. Please be warned: inspection reports can be more than 20 pages in some cases. Don’t be alarmed; stay calm.
Team Ellenbogen along with your attorney will point out the issues that are most important. Remember, this is your DREAM home…you don’t want to miss out on living in it for minor issues. Follow the advice of Alan and Nancy and your attorney.
The mortgage company will conduct an appraisal. Mortgage lenders require an appraisal on your home before they’ll provide a loan for the simple reason that the property is the underlying asset that serves as collateral for the loan. If for some reason you run into financial difficulties and lose your home to foreclosure, your lender would need to sell the property to repay the loan. A lender will only approve a loan for a property that appraises for the full sales price of the home — or more. You will need to pay the mortgage company a fee for the appraisal and you will receive a copy of the report. Should the appraisal be lower than the sale price, you do have options available to you that Team Ellenbogen will discuss with you.
Revised Loan Estimate
A changed circumstance may mean a revised Loan Estimate. A lender is responsible for providing accurate pricing information for the loan requested, based on the best information reasonably available to the lender at the time the disclosure is provided. However, if the information about you, the proposed loan, or the property was incorrect or changes, a revised Loan Estimate may be issued. This can be referred to as a changed circumstance. A new Loan Estimate can reflect changed rates and terms caused by the new information.
Not all changes require the lender to issue a revised Loan Estimate. Minor changes do not require the lender to issue a revised Loan Estimate. For example, when the seller agrees to pay for a specific cost not included in the original agreement, a revised Loan Estimate is not required. Significant changes most likely do.
Common reasons why a Loan Estimate may be revised include:
- You decide to change loan programs or the amount of the down payment
- The appraisal on the home came in higher or lower than expected
- Your credit status changed, perhaps owing to a new loan or a missed payment.
DO NOT, WE REPEAT, DO NOT BUY A NEW CAR, APPLY FOR A NEW CREDIT CARD, OR HAVE ANY ACTIVITY THAT WOULD BE REFLECTED ON YOUR CREDIT REPORT. ANY CHANGE TO YOUR CREDIT COULD ADVERSELY AFFECT YOUR CHANCES OF OBTAINING YOUR MORTGAGE.
- The lender could not document overtime, bonus, or other income provided by you on your application.
If changes occur later in the mortgage process, lenders may need time to respond. For example, if you request a different loan program late in the process, an appraisal or underwriting step may need to be repeated.
Second Deposit & Mortgage Commitment
Do not forget to send your second deposit to your attorney; your attorney will forward it to the seller’s attorney. You could be considered in breach of contract if you miss your second deposit.
A mortgage commitment is a legal document issued by a lender stating that they have agreed to issue the borrower the funds requested.Most lenders issue conditional loan commitments once the loan has been approved. The conditional commitment is only binding as long as the borrower meets all the conditions stated on the commitment issued by the lender. An example of a condition that might be listed on the commitment is a copy of the borrowers most recent pay stubs, and an appraisal report stating a specific value on the property. Once the borrower has met all the stipulations on the conditional loan commitment, a final mortgage commitment is issued along with authorization to close the loan.
The final commitment is a binding legal document; once it is issued, the lender is obligated to close the loan, unless the borrower backs out of the loan. This document can also be used as proof to a seller’s real estate agent and the seller that a potential home buyer is approved for funding.
After you have obtained a mortgage commitment, review it carefully. Make sure the rate and terms are correct before you sign the commitment and return it to the lender. There may be certain conditions that must be satisfied prior to closing. Be sure to provide your attorney and Alan with a copy of your commitment and conditions. In addition, lenders have specific requirements that need to be met prior to closing a loan. Your attorney will usually obtain the requirements directly from the lender and ensure these requirements are fulfilled.
Survey and Title
A survey is generally required by the title company and lender. The purpose of the survey is to ensure that you are purchasing the proper parcel and to determine if there are any encroachments, easements or zoning violations. You may not have to perform the survey if the seller has one available. Check with your attorney about this requirement.
A title search is usually ordered by your attorney after all inspections are resolved and you have received a mortgage commitment. Your attorney will review the title search to determine the chain of title and the status of the property (i.e., liens, mortgages, easements, taxes, etc.). The title company that performs the search will also provide title insurance to you which is required by the lender. This insurance protects your interest and your lender’s interest in the property. In many cases, there are title issues that need to be resolved prior to closing.
Home Insurance Policy and Closing Disclosure
You must obtain a fully paid home insurance policy for one year, effective the day of the closing.
You must receive a Closing Disclosure at least three business days prior to closing. This document will outline all mortgage fees that will be accessed and a a summary of the final loan terms.
These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan, including inspections, title insurance, taxes, and other charges.
The Closing Disclosure can be compared with the information contained in the initial or a revised Loan Estimate. Learn how to review the Closing Disclosure here.
Flexibility has been built into the rule to accommodate small, last-minute changes typical of purchase transactions. However, when changes to the transaction are significant, a new three-business-day review period is required. Since large, last-minute changes should be rare, an additional review period should also be rare. Review the ONLY three instances where a new three-business-day review period is required here.
To provide a Closing Disclosure three business days before the closing that reflects all of the terms of the transaction, settlement agents and creditors need as much information from you, the seller and the agents about the transaction as far in advance of closing as possible.
At the same time, most settlement issues, such as adjustments to seller credits to account for repairs, that are currently addressed as late as the day of closing, can continue to be handled at closing without requiring a new three-business-day review period.
In real life, entries may still be coming in a few hours before closing. Most buyers and sellers study the statement on their own, with their attorneys, perhaps with their real estate agents and/or with the settlement agent.
Have a smooth transition to your new home…
Here are some things to consider as you make the move to your new home. Team Ellenbogen can suggest local professionals for many of these services.