Thinking about getting a loan to buy or build a home or to purchase land? Andrea Griffin, an agri-consumer lender with Carolina Farm Credit’s Albemarle branch, says that it pays to start getting your “financial house” in order before you even apply. Here’s what she recommends:
- Review credit reports – Before making a home loan application, review your credit reports. You get one free credit report each year from each of the three credit bureaus: Equifax, Experian, and TransUnion. Make sure your reports are as accurate as possible and that there are no surprises with your credit scores. If there is anything you need to address, go ahead and start the process. Andrea advises reviewing credit reports six months to a year before applying for a loan.
- Get your debt to income ratio in check. Pay down credit card debt. Start saving money. Your lender will look at documentation for this information. Andrea says that while the debt to income ratio isn’t as much of a factor in land loans as it is for home loans, lenders will look at credit scores and the amount of the down payment.
- Consider your goals and what you can manage. Decide how much money you want to put down and start saving for that. Think about how long you want to make payments: 15, 20, or 30 years. Consider what kind of monthly payment you can afford.
- Think about which attorney you would like to handle your real estate transaction. See part 2 in this blog series for Andrea’s recommendations on how to find an attorney.
- When it comes to getting a home loan there are three major phases: application, processing/pre-closing, and closing. Andrea says that as a borrower there are steps you can take to make the process go more smoothly. She shares these tips:
Application
- Provide complete information during the application process. Before your meeting to complete the application gather this information:
- Most recent checking and savings statements; you will need to know balances in each. A bank statement will be needed to show where your down payment is coming from.
- Most recent IRA and 401(k) statements.
- Amounts you owe on vehicles, other high-ticket items, and credit cards.
- Most recent 2 to 3 years of the complete set of tax returns, both state and federal, and the W-2 forms.
- Current employment record, such as pay stubs for the last 30-day period.
- Information about the property, the tax parcel ID number, the address, and any maps or surveys.
- If you are seeking a construction loan, in addition to the above, you will also need to include a perc test, bids and estimates for the construction, and your house plans.
“If the borrower can have all of these documents ready for us to copy when they come in, then we have a complete application and can go ahead and start working. It usually takes 30 to 45 days for the application so the more they can provide us on the application, the better off they are,” says Andrea. “The application will go much more quickly.”
Processing/Pre-closing
- If you haven’t already, select an attorney to handle your real estate transaction. See part 2 of this series for Andrea’s tips on finding an attorney.
- Whether you are purchasing or refinancing a loan you will need to have homeowner’s insurance.
- If you are purchasing, you’ll likely need to have a home inspection done during this phase.
- Your lender will also request an appraisal to ensure the property is valued properly. This usually takes a few weeks, often the longest part of the process.
- When the appraisal is completed, your lender will send the loan package to the attorney. It’s the attorney’s job to prepare and check documents such as purchase agreements, mortgage documents, and title and transfer documents.
- If you are constructing a home, the lender will ask for a builder’s risk policy.
Closing
Your attorney will let you know what to bring to closing. By this point most documents have been provided and you will just need to show up. You may need your driver’s license. Your attorney will advise you on whether a certified check is required, the amount, and who to make it payable to, or whether you will need to have the money wired. If so, your attorney will provide instructions for that route, which is more common now.
Typically, Andrea and other Carolina Farm Credit lenders attend closings to make sure a borrower’s questions are answered and everything goes smoothly. While it’s not necessary, it’s part of the Carolina Farm Credit customer service commitment. During the age of COVID, many attorneys are allowing only the borrower to attend the closing. “I let customers know that if they have questions or something is not clear, they can call, text, or e-mail me and we’ll get any questions cleared up. For the most part, the closings go smoothly.”
See Andrea’s tips on How to Find a Real Estate Attorney in part 2.
By Leah Chester-Davis