Putting the Cart Before the Horse

The loan process actually starts even before you start looking for a home. A pre-qualification from your lender gives you a general idea of how much you can afford so you don’t waste your time looking at houses outside your budget. By answering a few questions about your income and assets you can typically get an answer within a day – many times instantaneously. Pre-qualification forms are available through the internet, in person or over the phone.

A pre-approval is more in-depth and requires you to provide W-2 forms, bank statements and other proofs of your income and assets. However, this process gives you approval for funds once you need them, which can be very beneficial if you aren’t the only one bidding on your dream house. Given a choice, a seller will typically lean towards a pre-approved buyer because they can close much quicker since their credit has been verified and their funds are already approved.

Holding Period

Once your bid has been accepted on a home your good faith deposit is put into escrow. During your "escrow period", which is typically 30-60 days, all parties start to get busy. The escrow company prepares escrow instructions, requests title insurance and prepares the grant deed. The lender receives an appraisal on your home to ensure that the loan amount is appropriate and completes the remaining paperwork. The seller releases any disclosures about the property, and the buyer has all inspections completed.

After the escrow period the loan is approved, the buyer puts their down payment and closing costs into escrow and moves into their new home! You receive your title after the loan has funded for one day, so it is usually mailed to you at your new address.

Final Notes