Home buying A to Z|Get a Mortgage| Home Loan|  BUY A Home| Real Estate

Home buying A to Z|Get a Mortgage| Home Loan| BUY A Home| Real Estate

Hey there this is Chris Trapani The
Mortgage Pro you know I decided to do something a little different
instead of bits and pieces of all little different videos on all different
subjects I said it might be a long video but let's make
a video that's going to cover the home buying process from a to z
it's going to cover everything so let's give this a shot
let's see what we can do I hope it's not too long but you can always come back to it.

[Music] okay we're gonna get started. Now as
always if you enjoy this video hit the like
button and you can subscribe so you'll get all my new stuff
and you'll learn how the process works and any new changes that come around in
the industry so let's start we're going to go with
step number one step number one here's how it works,
people it's a normal thing, hey i decided to buy
a house so they decide and they reach out to
a realtor well it kind of seems like it would make sense but the
first thing you really need to do is secure your financing because guess
what the first thing that the realtor does he
sends you to me so he can't show you a house or
take you out or submit an offer or do anything until he knows you're approved
because way too often it's a waste of time for a
realtor so they make it a rule that they do not show houses pretty much
until they know borrow has been pre-approved so how do we go through the
pre-approval process well what we need to do is we need to
verify the most important things that are
important to any lender on any loan program and we start with
this number one your credit obviously we have
to run a credit report no we cannot actually do a full
pre-approval if you show us just like a copy or a
credit karma or whatnot we actually have to run a
mortgage credit report in your name in
our company's name in order to do that now
what's important about credit well there's a couple of things
foreclosure if you've had a foreclosure in the last seven years on a
conventional loan or three years on a fha loan
or two years on a va loan that would preclude you from doing that so if you
do have a foreclosure a couple of years ago
that just means maybe you can't get a conventional loan but you could go
fha or if the case is a va so that's not that big a problem on
a bankruptcy see this is a this is a very common situation
is four years on a conventional loan two years on an fha or va loan
so hey look bad things happen to good people if that was part of your past
look just got to get past it it's usually not too bad
so let's pretend you're past that and you do not have a bankruptcy or
foreclosure or you're past that time frame now what
scores are acceptable well on an fha loan
or a va loan you can often sometimes get an approval believe it or not with as
little as 500.

Now on a va loan you're really not going
to get an approval with zero down at a 500 score and
on an fha loan it would require a 10 down payment if your score is 579 or
below now once you start hitting 580 on either
one of these type of programs the approvals will become more and more
commonplace at 580 and above fha we're looking at a
three and a half percent down payment and on a va it's still zero and they've
earned that right and that's wonderful now on a
conventional loan we're looking at a minimum of a 620 fico
score at 620 you can be approved for a
conventional loan now very often one borrower
with a minimal down at 620 on a conventional loan
won't get approved now if you have more than one borrower
look it looks at it as we have two people we can go to
if there's a problem here so we're looking at it and you're more likely to
get approved if you have a co-borrow with a
very low fico score so now you know what you need to do with
a fico score the next thing we need to do on a
pre-approval is obviously we have to look at your income
what is your income how is your income derived
how long have you been on the job you don't have to be on a job
for a long period of time you could have gotten a first paycheck yesterday
now on in most cases we need to see a two-year work history it doesn't have to
be the same job but a two-year work history we have to
prove that whether it's fha or conventional
obviously you can't be 18 years old starting your first job
yesterday it just doesn't work that way now there
are exceptions to the two-year rule let me give you an example if you were
in school and you got a degree maybe you became a
school teacher maybe you became a radiologist in in a hospital
or an ultrasound technician if you went to school and we will need to see the
transcripts we will need to see the time frame you went to school from
this time to this time and that will be acceptable instead of
that two years so i recently did a loan for a
registered nurse she went to school for four years she
got her first pay stub and we funded the loan why because we
used the four years as the history and now her new income was 50 bucks an hour
she's doing fantastic real proud of her she's in her own home
so we can use that now how do you get paid do you get paid
salary well salary is easy if you get paid five thousand dollars a month
for income we use five thousand dollars a month.

If you are paid
hourly what happens is we have to figure out how many hours you work
as an example if you work 50 hours a week
you're working 10 hours overtime plus the 40 hours
first we start with the base pay which is the 40 hours
and a simple way to figure that out is we work on monthly incomes so if you're
making twenty dollars an hour multiply whatever
that hourly rate is by 173.333
that is 40 hours a week that's how much you make
monthly so that's pretty simple now if you work
less than 40 hours we're going to take an average over two years
because sometimes people work part-time jobs hey did you work 20 hours this week
22 the week before 30 the week before next week you're working 13 when we when
we look at all these things we have to average them out we also have to average
overtime over a period of two years and if you
get bonuses or commissions again over a
two-year period see income works in reverse
we look backwards pretty much for most in most cases
to see how long have you been making this money now it's okay if you get a
raise if you get a promotion we'll use that
higher income but again we're going to use the
overtime or commission or bonuses going backwards and we're going to
average it out if you are self-employed this is going to be really super
important i don't care if you gross a million dollars a year
that doesn't matter what matters is what you pay
taxes on so if you gross a million dollars and write off
999 000 you made a thousand dollars you're not going to be able to
buy a pair of nikes never mind buy a house so
it depends on what you pay taxes on there are such things called
depreciation that your tax preparer might use
we're going to add that on to your income also sometimes people
use their home and a tax preparer will write off some expenses in the use of
the home we get to add that back on so let's say you grossed a hundred
thousand dollars but you had fifty thousand dollars in expenses we're going to take 2 years of 50,000 last year and how much was it the year before oh 47,000 that's 97 000 we're going to average
that over a period of 24 months and that's
the allowable income that we use that works
for fha va and conventional loans it works
the same exact way so obviously now we've looked at the
income we've looked at your credit we also have
to look at your down payment where's the down payment coming from now
there are down payment assistance programs that's for another video they
are available we do have different types of programs by the way they're not
perfect programs but they're good but you do pay a higher interest rate if
you take that sometimes you have to pay it back in a
certain period of time or live in a home for a certain period so there's
different stipulations on that but let's just assume you're putting a
down payment now you are allowed to get a gift for a down payment so grandma can
help you mom can help you cousin charlie can help
you your best friend in certain circumstance
we have to document the relationship can also help you and we can use a gift
it's not allowed to be a loan you are not allowed to borrow
money for the down payment you can obviously use your savings
you can use your 401k there's a lot of options and a lot of ways to come up
with the money i once did uh an incredible job with
the for this family i was so excited still one of the proudest things i ever
did is i had this family there were eight
brothers and sisters they all wanted to buy a house and what
they did was one of them had saved about four
thousand dollars and the other seven gifted a thousand dollars each see it
doesn't have to be one person who's gonna gift you ten thousand or twenty
thousand dollars they each gifted a thousand dollars each and the next month the next brother basically he had some money saved and everybody gifted him a thousand dollars each and they were all young and what they did was they lived together to save the money so that they can help each other and in 18 months all eight of them bought houses that was one of the coolest things i ever did and the reason i'm telling you this is i want you to think outside the box maybe there are other ways maybe even your boss our boss is allowed to give you a gift for a home loan so you can do a lot of different things now the down payment required if you're a veteran zero down thank you for your service you deserve that right if you're looking for an fha loan it is 580 and above three and a half percent down 579 and below it is 10 percent down now if you're looking at a conventional loan for a first time home buyer you may be able to get a program that allows you to put a three percent down payment and if you're a slightly lower income we might even be able to get you a lower pmi rate with what's called a home possible loan so fannie mae and freddie mac they have home possible and home ready they're great programs that help you save a little bit of money so i think that's a pretty good deal too otherwise you're looking at five percent down 10 percent down the more you put down the better the interest rate you're able to get the higher the credit score the better the interest rate you're able to get so all these things come together as far as what we can do now if you're looking at buying a home for an investment this is a totally different situation it's pretty much going to be a 20 down and you're going to be limited to a conventional loan but for now i'm going to assume you want to fire your landlord you want to move into your own house this is what you want to do you want to buy a home people say to me all the time hey chris how does that work those minimum down payments well they do require pmi mortgage insurance it's called.

Private mortgage insurance for conventional or mortgage insurance premium for an fha loan if you're a veteran you do not pay pmi now you do pay a funding fee that they add to the loan amount it's a little bit different disabled vets don't even have to pay that which is great so let's see pmi on an fha loan look it's going to cost you x amount of dollars depending on your loan amount for pmi now on a conventional loan if you have a super high fico score the pmi rates cheaper and if you have a lower fico score the pmi rate is more expensive so when i look at a person and i evaluate their finances and i'm doing a pre-approval i look at the fico scores because the fico is going to tell me hey chris where can i where can you save them the most money a high fico score it's usually a conventional loan a low fico score it's almost always going to be an fha loan is the way i'm going to recommend it based on the loan amount now every single county has different loan amounts as far as limits what they do allow you so we can take a look at that as a whole we'll figure out what we need to do as far as the purchase price you're looking for see here in california a half a million dollar home is not really a crazy expensive home and i know in many parts of the country a half a million dollar home when you're buying a semi mansion so there are different limits based on the average area income and the average area home price so that's for another video but here's what we're going to do we're going to take all your credit we're going to evaluate the whole situation with your credit we're going to evaluate your down payment availability what how much you can put down we're going to evaluate your income and we're going to say this is the right program for you now i've been doing this so long i'm a dinosaur in this business i know just by looking at a few things which loan is is the right loan for you and your individual circumstances and most experienced loan officers will be able to do that.

So that's a big deal we take all your information. we're going to look at your pay stubs for income. we're going to look at w-2s for income we're going to look at perhaps your income taxes sometimes people have to provide their income taxes maybe they're self-employed or maybe they're commissioned there's different reasons why we would need to see income taxes and we're going to enter your computer your income into a computer we're going to run your credit again it goes into the same software we're going to look at where is the money coming from is the money coming from a gift is it coming from your bank account we're going to enter those things into the computer.

We're also going to evaluate some things. that we need to do to avoid discrimination and protect borrowers and future borrowers from discrimination so we're going to ask a whole bunch of questions we're going to enter it in and we're going to run it right through fannie mae or freddie mac's website and it's going to give us what we call a du approval or an lp approval and depending on which one we run and once we have that approval we know how much money you're approved for to borrow and then and only then can you really go out with a realtor with confidence saying hey i have a pre approval letter underwriter or have a du that's called desktop underwriter or a loan prospector approval so that we can submit this with an offer if we decide we find a house we want to do that with so those are the things that are required for a pre-approval they are a big deal and they're complete and they're important, they're all taken care of.

attorney

Step number two you're ready to go out there with a realtor and find the house that you're looking for now you know it's human nature if you're approved for 300,000 most people really want the house that's 350 000. it's just how things work but it's really important to stay within your approvability where you're approved what's the sense in wasting everybody's time to go see a 500 000 house if you're approved for four hundred thousand so you have to keep your expectations realistic and the location so your location in one location a four hundred thousand dollar house may be incredible and another location a 400,000 house may be a thousand square feet.so which one do you want how far is your commute you need to look at all these things as far as what's reasonable to you what do you really want in a house and that's where a good agent is important couple of things that are really important about the agent that you pick and we're always there to help you pick an agent that's going to work for you.

Number one you want somebody with experience number two you want somebody who's a good negotiator because they're going to be negotiating half their job is finding the house the other half is negotiating on your behalf to get you the best price now one of the things i personally do is see i don't give a borrower or even a realtor the du approval or the pre-approval letter until i know how much the offer is for because why would I give a letter why would i give a letter saying you're approved for 450,000 if you're going to offer 425,000 on the house see i want to give as exact as possible because otherwise that other realtor could be saying yeah he's approved for 450 but uh the letter you know he's only offering 425 maybe we could squeeze him for a little bit more i don't want that to happen myself and the realtor you choose we're going to team up and we're going to see what we can do to help you get your offer accepted.

Now what I do I do to help you get an offer accepted. instead of just sitting back and waiting for the realtor to make an offer and right now we are in a crazy time in southern california where i am if a house is in the 450,000 range they're gonna get not one not five not ten but they can get thirty to fifty offers on that one house so your offer needs to stand out somehow and usually it's offering above the asking price hey they're going to look at who has the best credit who has the most likability as far as going to be approved you know what deal do they like the most because you know an agent wants to know am i going to get paid is my client going to go crazy trying to get this done or is this going to be an easy one for them so i personally make a phone call to the agents and i tell them look this is a super important this is chris trapani the mortgage pro and i have a slam dunk deal ready to go here! I have a client they have a 702 fico score they have this much money and they have this much in reserves and that debt ratio works within the guidelines and i'm going to try and sell them on what a great borrower you are and that's what a really good loan officer is supposed to do so we work it as a team the realtor myself and yourself if we're working together and we try and get your offer accepted and once we do that and let's see the appraisal and how much is the recording fee we take it to the next step Okay, let's assume that we worked hard we worked as a team we made an offer we spoke to the listing, agent we got your offer accepted what's the next step? the next step is we open escrow and why is opening escrow important what is that what isn escrow? escrow companies what they do is their job is to act as the fiduciary they make sure everything is legal that the loan and the buyers all the information is recorded with the county they make sure all the money that comes in your deposit and all the money coming from everywhere the loan money it all comes together they hold it and when the time is right and the loan is recorded with the county they're going to divvy up the money now in a number of states we do not use escrow companies in many states the use attorneys but basically it's the same process only the attorneys probably charge a little bit more money but it's the same process, this is what we do and how it works so now we've opened up escrow we're asking them for all the fees what are we asking them for fees for? well theres escrow fees and title fees we have to put all the fees together with the lender fees such as processing and underwriting and let's see the appraisal and how much is the recording fee going to be and there's all these different fees realize that there are probably over 25 people that are going to work on your real estate loan that's pretty crazy, but there's 25 people those people obviously have to get paid so there's a whole bunch of different fees different states have different amounts depends on where you are but we also very often have what's called an impound account we're going to open up an impound account which is your personal savings account and the job of that savings account is every month when you put a payment in a portion of that money is going to go into that savings account your savings account for property taxes and a portion will go in for homeowners insurance so that when the property taxes come due and the homeowners insurance come due they could write a check or electronically pay it that's obviously I'm showing my age here writing a check, but they'll pay that money for you out of your account now it costs money to set that account up see it depends on what month of the year the taxes are due in your state and what month you're in as an example here in California in the month of September you'd have to put 9 months property taxes up front because the next month six months property taxes are due and they have to have enough money so when the property taxes come due again every six months that they have enough money and when the homeowners insurance comes due a little piece of your payment every month goes in so that in 12 months they're ready to make another payment on your behalf if you ever sell the house, refinance the house that money in the impound account comes back to you because it's your money so we open up escrow, we ask the escrow company for all those fees so that we can put them together in orderly and legal fashion so we can give you what are called loan disclosures now the loan disclosures include a loan estimate the truth is the loan estimate is not exact it can't be.

But what they do is they overdo and they raise some of the fees on purpose it's not that you're going to pay them but they have to disclose and they cant, if the fees are too low they can't raise them later because that would be illegal in most of those fees so they put them high and if anything happens they're covered, but most of those fees or many of the fees will be lower.

Now you're going to sign that loan estimate and that allows us to go to the next level you're going to sign the loan estimate with a bunch of forms one of them is an intent to proceed so that allows us to go to the next level and the net step is going to be ordering an appraisal we order the home appraisal because that's a super important step the appraisal is a protection for you as well as for the lender see if you're buying a house for $400,000 and the house appraises for $350,000 you can't get the financing on it that protects you and that protects the lender you have an out to say hey i dont want that house it's not appraising to where we thought it would be now an experienced real estate agent he knows where it's going to come approximately but he's not a licensed appraiser it's very much a science having an appraisal.

And the appraisal is basically going to go to the lender and he's going to evaluate it the underwriter is going to evaluate it as part of the approval process but before we even get the appraisal because that could take a week to two depending on how busy the industry is and the appraiser are right now we're going to package your file and what that means is we take your application we're going to take your credit report we take the DU approval, remember we ran it through the website their software to evaluate that we take your paystubs your bank statements your 401k your IRA your documentation your proof of who you are, your ID everything, we're going to package it we have a certain formula for how we do it and we are going to send it to an underwriter we don't even have the appraisal back but we're hoping to get an approval back subject to an acceptable appraisal so what the underwriter's job is to do is to evaluate everything that the loan officer and my staff have put together they're going to evaluate your bank statements how much is in there does he have an insufficient funds did he bounced checks? How did he use his money? they're going to look at those things they don't over-look at them but they are going to look at them they're going to look at your W2s and your taxes and your pay stubs and do the numbers line up are the debt ratios, do you have too much debt or are you in line with where you should be based on your income including this new house payment they're going to evaluate all that theyr'e going to evaluate the credit is the credit good enough does the credit meet the guidelines there's a hundred different things that they're going to look at now my job as the loan officer i always tell people and they laugh at me when i say this i am kind of like a defense attorney my job is to prove that you meet the guidelines and i have to forensically prove it on paper if it's not on paper or today electronically it doesn't exist so oh the common sense said there's no such thing as common sense prove it or it doesn't exist that's my job to build a case on your behalf the underwriter who is sending that file to they're making believe you and i are lying cheating and stealing and putting together fraudulent documents well they're looking for everything to make sure that you meet that guidelines because see if they do alone and you don't meet the guidelines guess what fannie mae freddie mac hud who owns fha the va say hey you buy that loan back yeah write a check you buy that loan back because we're not insuring it so no company wants to deal with that they would lose a fortune if that happens so that's why they're going to ask for and over ask for documentation and proof of every single thing so the underwriter is judge jury and prosecuting attorney all in one they're going to make believe that we're lying about everything prove it prove it prove it prove it and that's their job see their job depends on it because if they have a high failure rate or foreclosure or default rate the lender is going to look at them and there's reports on these guys and say no i don't think i want this person working for me anymore so their job and their family's livelihood depends on it and that's why they're going to ask you for all this documentation sometimes people feel it's intrusive and it actually could be that doesn't really make a difference as much as let's make the end justified means let's get you in your own house okay you got the approval congratulations we're excited to make this happen for you i think that's a big deal but it comes with conditions almost every loan comes with conditions the underwriter is literally going to ask for certain paperwork they're going
to say hey prove to me that that deposit check cleared you bank and proved to me that hey send me the last pay stub we're missing a pay stub or something happened here write a letter explaining this address that's on your credit report hey there are three inquiries on the credit report explain what they were did you open new credit so there's little things like that that they are going to ask for very normal type of stuff but you need
to do this to meet what's called the conditional approval and in the meantime your appraisal has probably come which we've also submitted so once we meet all the conditions the lender is going to issue what we call a clear to close and that's an exciting news because you'll be closing on your home soon the next step is the closing disclosure also called the cd and what the closing disclosure does is it evaluates all the numbers and these numbers are going to be the real numbers that there's very little that could possibly change in these numbers from the day you sign this you're going to get the closing disclosures you're going to work with these numbers
it tells you this is how much money youneed to wire or to the attorney's office and you have to sign those documents now once you sign those documents what's going to happen is the clock starts ticking are not legally allowed to sign the closing documents don't confuse them with the closing disclosures which you just signed you're not allowed to sign the closing
documents for three more business days sundays do not count holidays do not count that's just how it works so three days later you sign the closing documents and usually depending on the situation the company and the guidelines and whatnot usually within a day sometimes two or three days days some
companies and states require will allow them to even fund the same day so usually within a couple of days you are going to fund the loan that
means the bank has wired the money for your loan so that we can pay off the seller and now you become a homeowner but there's one step left it has to record with the county once all the numbers come together and the funding is there the title insurance company is going to say okay everything lines up properly okay record that loan and they go to the county and they record the loan congratulations you have fired your landlord you've gone through this whole video and you've gone through all the steps and you've fired your landlord so if you are ready to do that reach out to us you can always go to my website my website's real easy landlord dot info click the apply button and we'll help you get started and if you got something great out of this video if you enjoyed it if there's something beneficial do me a favor give it a thumbs up hit the like button and you can always subscribe again and
i'll help you with anything you need you'll get to see everything as it comes forward all the new videos all the new changes every law there's new loan limits and there's there's new laws and rules that come about so feel free to reach out to me reach out to my staff we are happy to help you fire your landlord or maybe we're going to help you fire your neighborhood and move up to a new one so whatever it is this is chris the mortgage pro saying hey we're here for you we got your back [Music]

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