Being in the market for a new home means you must go through the buying process. In this regard, there are two routes: a mortgage loan or cash. Paying your new home in cash is the simplest process, but not many people can afford it, which is where the mortgage comes into play.
Most mortgage laws are on a country level, meaning they’re similar across the US. With that said, there are some differences between each state, meaning that if you want a new home in California, you’ll need to look at the regulations locally.
Most people know the home-hunting process. You think about your budget and find homes that fit in it. The process is the same anywhere in the world. Once you have that, you’ll need to start thinking about the mortgage, so read on to see how things are done in California.
In all fairness, it’s pretty similar to other states in the country.
Getting a Pre-Approval
When looking at a property, it’s important to know that you’re probably not the only one considering it. Sellers will get multiple offers, and getting pre-approved is a good way to stand out from the crowd.
You can think of it as a resume for a job application. It shows the seller that you’re qualified to get the mortgage and will consider you a potential buyer. The best part is that a pre-approval letter won’t cost you anything, although in a worst-case scenario, there could be a small fee.
Make an Offer
With the pre-approval paper in your hand, it’s time to make an offer to the seller. You can do this yourself and prepare all the documentation, or hire a realtor to set everything up. Since you’re asking for some service, you can expect to pay a fee for it.
The offer should outline several main things. Apart from the pre-approval letter, you must also outline the down payment amount. Remember, some loans require a down payment, and there’s a minimum, but you can go over that if your budget allows. You should also outline some conditions, such as inspections, financing details, approvals, and the closing date.
Once you make the offer, the seller decides. If you get a positive answer, it’s time for the next step.
Apply for a Mortgage
The mortgage application process in California is similar to most other states, where you’ll need to supply the lender with multiple information. You must provide bank statements, W-2s, credit history explanations, and more. Once you submit the information, the lender will get back to you with the loan conditions.
There are multiple types of mortgages, and you’ll work with the lender to understand each option. The lender will make an estimate where you get the information about the mortgage rates, closing costs, monthly payments, and all the remaining loan terms.
This doesn’t mean your loan is approved, though. If the terms work for you, the application process continues. The lender works with a processor to gather all the information for the application and hand it over to an underwriter. This person reviews the application and decides whether you get the loan or are rejected.
In most cases, it’s either a yes or a no answer, but in some instances, certain additional conditions may be attached. Most of these happen with applicants who have a history of late payments or debt collectors, both of which are red flags to lenders.
Pre-closing Procedure
As soon as you get the green light on your mortgage, the pre-closing stage starts. This is the part where all the documentation is gathered after the approval. The lender will notify you and send the file to an escrow company.
You’ll receive everything a few days in advance, giving you enough time to review all the details, such as dates, conditions, fees, etc. Having a few days means you can review everything and contact the escrow officer or the lender for additional explanations if needed.
It’s also a good idea to walk through the property and check that the seller completed everything outlined in the contract.
Closing Procedure
The last step before becoming a homeowner is the closing procedure. Here, everything is set, the agreements are done, and all you need to do is sign. One thing you should know is that, apart from the down payment, there are some fees associated with this step.
Unlike some other states, the closing costs in California are among the lower in the states. They are roughly 1% and include escrow and title fees, title insurance and search, reports and any other documentation and preparation during the entire process.
As soon as everything is signed and the closing costs are paid, you get the keys and a paper that makes you the new and proud homeowner in California.
