What is the procedure for getting financing for the purchase of a home, first time buyer, not perfect credit. Home already selected,no realtor,owner selling?
Your best first step in any transaction is to get professionals involved. Professional realtors and loan officers have done literally hundreds of transactions and know the pitfalls that might be involved in the process and how to overcome obstacles when they occur.
A realtor will help you with the terms of the purchase contract and make sure you're not putting yourself at risk. A contract is a legally enforceable document, and what you sign is important.
The title company will help ensure that the seller has clear legal title to sell you the property.
A loan officer will help you with the financing. Even with imperfect credit, you may qualify for a loan. If you don't qualify, they'll be able to tell you why and what steps you may be able to take to qualify in the future.
Here's the basic steps:
Apply for the loan. Get credit approved. Have the appraisal ordered (by the lender) and completed. Get insurance lined up on the property. Close on the sale at the title compay. (Like I said, basic steps).
If you don't qualify, then you need some other financing or the seller could effectively act as the lender to you. But you need to be careful, there are legal ramifications here too. Once again, you need to make sure the seller has legal right to sell the property. If they have a mortgage against it and they sell you the property subject to that mortgage, you may wind up with problems down the road due to the "due on sale" clause.
I'll say it again. Get professional help, much of it can be free and even if it's not, what you pay for could save you lots of money and time.
The procedure for getting financing is to check with your local banker or broker to complete a 1003 universal residential loan application.
This should be done immediately before ***ANYTHING ELSE!!! ***The main reason is that is you do not qualify you could be wasting time AND MONEY for yourself and the seller This is very critical for you to know as well as the person you are buying the home from. It is not easy for those with perfect credit to qualify and this is how you know where you stand on your best option to purchase a home.
If you do not qualify for a traditional mortgage then seller financing is a possible option but there are many things to be aware of in that arena as well.
Once you are qualified then you can go to an escrow or attorney, this depends on what state you are in as this varies by State.
You will have the escrow or attorney issue your escrow instructions or terms of agreement and that will act as your purchase contract if you do not have one already.
You should obtain a home inspection from a professional. Even if you are buying "as is" this is invaluable for you to know what your checklist of repairs will look like and this is your opportunity to ask the seller for repairs; or concessions if they do not want to do the repairs requested.
if you have financing and you have done your inspections ( appraisal will be done by the lender ), then getting your loan officer all they need to fund your loan will be where most of your efforts will go.
Keep in mind that even if you do not have an "agent", you can speak with local agents to "consult" on any major issues, questions or concerns you may have.
First, have an attorney draw up and sales and purchase agreement. Contact a lender to apply for a preapproval for a mortgage. This should be at no cost no obligation to you. Have ready, photo id, most recent pay statement showing 30 or more days of income, 2 years W2's, 2 years tax returns, your 2 most recent bank statements, all pages. Submit these documents to your mortgage loan officer. If you qualify for a mortgage - yoru lender should discuss with you your loan options. The next step is for you to pay to have a home inspection. after the report is in - you should go over it with your attorney - and you and the seller agree on a final price based on the condition of the property. The bank will then order an appraisal of the property - you will pay for this, then the bank will issue a committment to lend on the property you have put an offer. When you have agreeded on a closing date - you sign the mortgage, title and deed paperwork - and you own the home.
The first thing is to get with a mortgage lender so they can:
take a loan application
pull your credit
look at your tax returns for the last 2 yrs federal with all schedules and W2s
2 months of your bank statements to show the funds are seasoned meaning in your account for 2 mns if they are not funds from work or other traceable means;
look at your work history
how much of a payment shock there might be between what you pay now and what you will pay on the new home
what is your debt to income ratio; all outgoing debt (only items on your credit report accept for VA they add in an additiona factor) plus new house payment divided by your currently monthly income
Need to see how much you qualify for. You may qualify for a USDA Loan depending on where the property is which is 0% down, you finance in all your closing cost to as long as the amount does not exceed the max county limite. If you are in California you may qualify for CHPDA for help as a first time home buyer.
Biggest thing is get with a lender!
Speak to several local loan officers in order to get a full view of your financing options. There may be good local representatives in your state that are listed in this site's directory. Try to choose someone with whom you can meet face to face, and that keeps hours that are convenient for you.
A lender will have a conversation with you with regard to your income, asset base, credit, comfortable payment, etc. in addition to explaining all available mortgage products and options.
Avoid having your credit pulled multiple times to avoid damaging your scores - ask the first lender for a copy so that you know exactly where you stand, and can share that information as you work towards your loan.
Have handy at minimum the following, as it applies to you: 2 year's worth of income documentation (tax returns, W-2s, 1099s, business returns, profit and loss statements, investments and dividends, as applicable), 2 month's worth of asset documentation (bank statements for all accounts, trust info, cash value life insurance, etc.), 2 recent paystubs, any paperwork pertaining to the credit issues you may have had, your ID, and information regarding the property you want to buy . . . the more of this you have ready, the more accurate the information you will receive.
The mortgage process, assuming all else is ok with the property, takes roughly 3-5 weeks in my area as of this writing - ask if that applies in yours as well.