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Loan Approved!

Congratulations… You’ve had your application for a mortgage loan approved!

A lot of things that you may never have experienced before are going to happen now.  It’s not about loading up a U-Haul truck and heading for your new home.

There is quite a bit that needs to happen now!

The process that now occurs is designed to make sure all of the interests in your new property are treated exactly as specified by the various contracts…

… Such as your lender, any real-estate agents/brokers, the seller and various other parties to your transaction.

Everyone must get the money and/or perform the services and/or functions that are specified in the various contracts resulting from you buying your new home.  In most places in the United States today a company that is called a Title Company handles the contract enforcement function.  However, in many more remote places, a local Attorney may handle this function.

The following list is what you are about to go through.  Please recognize that your individual situation may be slightly different than what is listed below because of where you live and the local laws and real-estate customs and traditions.

There are actually two situations that I’ll be discussing below…

… Pre-approval where you have been pre-approved for your mortgage loan before you have actually selected the property that you want to buy.  And,…

… Traditional mortgage home purchase where you select your home and then apply for financing.

Pre-Approval Situation

When you have been “pre-approved” for a certain amount it means that you can buy a home that meets the terms and conditions of your pre-approval contract.  You will still need to come up with the down payment and any other money that your contract says that you are responsible for paying.

Here are, in general, what you will need to do before you do the “Closing” in a pre-approval situation:

  1. Review and fully understand what your pre-approval contract actually means.  Be sure that you completely understand the things that you are responsible for doing.  It would be an excellent idea to get an attorney who specializes in real-estate law involved here.
  2. Find the house that you want to buy.  You should work with a real-estate professional here.  As long as you recognize that they tend to make decisions from a “vested self interest standpoint” they can be extremely valuable in helping you find the home of your dreams.
  3. Give the owner of the house you want to buy an offer in writing stipulating how much you want to pay and any specific conditions and terms of the sale.  Your real-estate agent will probably handle the paperwork and the physical presentation of the offer to buy. 

    If you don’t have a real-estate agent/broker, we strongly suggest that you pay a lawyer to do that.

    At a minimum, make sure your offer to buy is contingent upon appraisal and financing being acceptable to you and your lender.

    You will probably also be required to provide a bond for the down payment or the actual down payment along with your offer to buy. Make sure that cashing of your check for the down payment may only be done after the present owner of the house has accepted your offer to buy. 

    Normally, the real-estate company will have a standard form for your offer to buy.  They will also have a escrow account that they can deposit your check for any down payment into.

    If the real-estate firm does not have an escrow account get a lawyer involved immediately.  Be sure that YOU choose the lawyer in this case.  NEVER use a lawyer recommended by the real-estate agent. And, NEVER, give anyone, including your lawyer money that is not going into a legally sanctioned escrow account.

  4. The home owner will accept or reject you offer to buy.  The home owner may give you a counter-offer that you will need to accept or reject formally.  You may need to go through steps 2 through 4 several times before you get an offer that will let you proceed to the next step.
  5. Notify your lending institution and provide them with the paperwork required under your pre-approval contract.
  6. The lender will appraise your property and make sure it conforms to the underwriting standards of the type of mortgage for which you have been approved.
  7. If the lender disagrees with the value of the home you wish to mortgage, you may be required to put more money into the deal or will need to find a different home.
  8. If the lender agrees with the home’s valuation, title searches will be ordered, title insurance will be issued and final documents will be prepared.  Go to Step 1 under the Traditional Mortgage Home Purchase Section below.

Traditional Mortgage Home Purchase

If you have a traditional mortgage home purchase, then you have gone through everything that is listed in the Pre-Approval Situation above.  And that everything is ready for the closing.

  1. The closing is where you sign the final papers and money is exchanged.

    At this point, title searches have been done, title insurance is prepared and you may be required to produce more money to cover the closing costs or other fees and charges for which you are responsible if you have not already done so.  You will also be required to produce proof of insurance and other documents required by your purchase agreement and your mortgage contract.

    Normally, as a part of the closing process you will be required to escrow certain monies such as the first year’s insurance payments, taxes and other charges for which both you and the seller are responsible for.  The seller will pay applicable monies from the proceeds of the sale unless a “short sale” is involved.  If there is a short sale involved the seller’s mortgage company will provide any money that is required to complete the transaction successfully.

    A short sales is a sale where the seller made an agreement with their mortgage company that allows them to sell the property that you are buying for less than the amount owed on their mortgage. It should never affect you directly. But, if it does, get your Attorney involved, immediately!

    The title company will receive all moneys paid at closing and deposit them into the title company’s escrow account to the benefit of your transaction.

  2. The paperwork is processed.
  3. The deed is recorded at the county or appropriate jurisdiction’s deed repository.  In the United States, this is usually called the “County Recorder,” or equivalent.
  4. Money paid at closing is actually disbursed from the escrow accounts.  This is usually done by the title company unless some other agency/company actually handled the closing.
  5. You and other interested parties will receive your copy of the paperwork.  Although there are other copies of the paperwork that you will receive, we strongly recommend that you obtain a lockbox at a local bank or other financial institution that is easy to get to and keep the documents there.
  6. Once the day that your contract said that you could take possession of you home arrives… move in.
  7. Enjoy your new home!

Warning

 
Sometimes the present owner can’t or won’t get out of your new home on time and you will need to deal with that. 

It doesn’t happen often but it does happen… someone gets sick, there is a death in the family, you bought your property at a Sheriff’s Sale and the previous owner refuses to move out, etc.

Like I said, it doesn’t usually happen but it can happen… So be prepared if it does.  Immediately seek the counsel of the Attorney that you retained (or should have retained) to handle the legalities of your transaction.

Although I am not an Attorney, I can not stress the follow too strongly:

DO NOT ATTEMPT TO EVICT THE PREVIOUS OWNER YOURSELF. MOST STATES HAVE HOMESTEAD-TYPE LAWS SPECIFICALLY DESIGNED TO PREVENT PEOPLE FROM EASILY LOSING THEIR HOMES. AND, DEPENDING UPON WHAT YOU DO, YOU COULD BE SUED OR BE ARRESTED AND CHARGED WITH A CRIME.

NEVER, NEVER, NEVER THREATEN THE PREVIOUS OWNER OF THE PROPERTY WHEN ATTEMPTING TO TAKE POSSESSION OF YOUR PURCHASE.

LET YOUR ATTORNEY AND THE PROPER LEGAL AUTHORITIES HANDLE THE SITUATION… NO MATTER HOW FRUSTRATING IT MAY BECOME.