Pre-approval

Obtaining mortgage "pre-approval" means that you have your financial institution's written commitment to put together a loan for you. Before you purchase a home based on your pre-approval, the particular house you want to buy must pass your financial institution's appraisal.

I highly recommend being a pre-approved buyer. It puts you in a strong position with sellers. In general, if the buyer does not have pre-approval, the seller's home is tied to some sort of contract while waiting to see if a would-be buyer can obtain financing.

When getting pre-approval, make sure that you have shopped for the best financial institution with the best rates, and you are happy with the personal relationship you have cultivated with your lender. There are charges involved in getting pre-approval (i.e.: verifying employment, income, assets, etc.) and if you decide to change lenders midstream, you'll have to go through the process again with your new lender — and pay those same administrative charges all over again.

Requirements for your Loan

If you are pre-approved, your lender will have processed much of your application already. As an overview, the following is a list of documentation required in order for your lender to further process your application:

• Confirmation of your earnings. You will be required to provide a signed letter from your employer if you're on salary;
• three years' tax returns if you earn your living via commission; or
• three years' tax returns and financial statements if you are self-employed;
• Confirmation of your down payment amount. This will entail providing bank statements or other evidence of accumulated savings. If you are selling your current home and buying a new one, quite often the net proceeds of that sale will constitute part or all of your down payment. Your financial institution will require a copy of the sales contract to confirm the amount of the net proceeds;
• When it becomes available, a copy of the purchase agreement for your new home will also be required. This verifies the terms and purchase price of your new property;
• A copy of the property listing containing all the physical, location and financial details of your new purchase. If you are buying or building a new home, the building plans will be required along with any other permits; and
• Your credit report, or consent by signing that your lender can obtain your financial history.

What 'Possession Date' really means.

So it's your possession date. The day on which you get to gain access to your new home. In order for this to happen, your lawyer would have passed on the 'cash to close' to the Sellers lawyer. The Sellers lawyer then contacts the Sellers REALTOR who in turn contacts us, the Buyer REALTOR. At this point we meet and walk through your new home. Thus, the day you take possession of your new home does not necessarily mean that the Seller has received all of his/her money. The seller does not get the equity of their home until the title 'clears' through Land Titles office. This process of land titles transfer can take anywhere for 5-21 days depending upon various factors.

• Delays at Land Titles (if they are busy, naturally it takes longer), and
• Your lawyer's real estate experience. If your lawyer does not submit documentation in a timely fashion, delays are bound to occur. Fortunately, in Southeast Texas the majority of lawyers are quite efficient.

Closing Costs and Fees

Once we have estimated your maximum purchase price and mortgage loan, you can plan for the additional costs that are typical of the home-buying process. These extra costs and expenses can amount to between 2% and 4% of the value of your home. We can help you identify and plan for these costs so there are no unwelcome surprises. Some of the additional costs may be any or all of the following:

• Mortgage Application Fee
• Mortgage Loan Fee
• Survey
• Home Inspection Fee/Real Property Report
• Home Insurance
• Prepaid taxes, and Prepaid Insurance
• Motagee Title Insurance
• Legal fees
• Appraisal fee
• Termite Inspection (WDI Certificate)
• Home Warranty Policy
• Additional Expenses (Phone hookup, Utilities, Moving Expenses, etc.)

Some Final Points

It's important to keep a copy of your "Contract of Purchase and Sales agreement" for future reference. It's especially important to keep a copy of your closing (settlement) form. You'll find it very useful for reference purposes when you file your taxes, (this applies if you have a suite that generates revenue, otherwise, interest charges are not tax deductible) or should you decide to sell your home in the future.

It's a good idea to keep all your records in a safe place. You may store them in a safety deposit box or a bank vault in addition to keeping a copy of them in your home. It is also a very good idea to shoot a video of the interior and exterior of your home once you get settled in for insurance purposes. Store these videos 'off site.' In the event of a claim it is much easier to preview a video tape than to try and recall everything while under the stress of a fire, burglary etc.