Now, I want to walk with you through the seemingly confusing and complex steps that it takes to get a mortgage and ultimately to buy a house.
So really getting a mortgage can seem like one of the most daunting and confusing tasks, but really when you break it down, there are a couple of simple steps that you'll take to be able to go from wherever you're at to having a place of your own. And I want to walk with you through, the three steps that it takes to buy a house.
Here are the three steps. Number one is getting pre-approved. Number two is writing an offer. Then, number three is moving in, decorating your house, and inviting some friends over to enjoy it.
Number one is getting pre-approved. This is a problem that I see with a lot of people who are willing to purchase a house is when you're excited. You're thinking, man, I'd love to have a place on my own or move out from where I'm at right now.
The first place people go is they go to Zillow or they go to realtor.com or they try to search for houses first, and I get it, you're excited. You want to buy a house, why not start looking at what's available.
But the problem with this is a lot of people don't know how much they can afford upfront. They have an idea, but they're not sure what they are prequalified for through a lender. So what ends up happening is they're searching for all of these homes then they go talk with the realtor. A realtor shows them a couple of properties, and they're still not sure if they're able to afford the house. So there's this uneasiness and a little bit of unrest of not knowing am I going to be able to afford this?
So getting pre-approved is a really simple process. It takes about 15 minutes to fill in some information, and so getting pre-approved is when you're going to talk with a lender first, and what you'll do is they'll take a financial snapshot of where you're at. That way, you understand exactly how much you'll be paying per month and the top limit of what you can afford.
So now that you know how much you can afford, you have the knowledge of purchasing power. So you know exactly the top limit of your budget and you know that everything beneath that is fair game.
So what this looks like is you get a preapproval letter, it's going to say, Hey, John Smith, you've been pre-approved up to $150,000. Great. Now you can go to your realtor and say, Hey, I want to look for anything below $150,000, maybe within 120 to $150,000. So you get to choose and decide ultimately what you want, but you have the knowledge of purchase power that way when you go into some of these houses that you like and you're viewing, what the payment's going to be, what is your approximate rate is going to be some of the closing costs involved.
Also, you're going to have that security, knowing that this is a house that we like, but we can also afford it. So that brings us to step two. So step one is getting pre-approved with a lender of your choice.
Step two is going to be writing an offer. So writing an offer is simply where you say, Hey, we like this house. We want to put it in writing that we're going to make an offer on this house for a specified price. And in that offer, you're going to get to negotiate a couple of different things.
So the main thing that we're negotiating is the purchase price, right? If there's a house that's $150,000, you might come in a little bit lower or you might come in a little bit higher or you might come in right at the asking price.
But some other things that you can get I think a lot of people don't consider, one is seller concession. So you can have your seller pay a portion of your closing costs, which is a big win for you. Most of the time I see contracts come in about 3% seller concession. So that means if it's a hundred thousand dollars house, the seller is gonna be paying $3,000 of your closing costs, which is a big one for you.
Another thing in this area that I think so many people don't recognize is on the contract is the difference between short proration and long proration. So basically this is how much tax credit you're going to get from the seller at closing. So if we're going short proration, you're going to be shorted out of about six months worth of taxes.
If we go long proration you're going to get the full cycle of the tax credit at closing, which means big savings for you.
So your realtor is going to help you draft an offer. That's going to be compelling, and really the goal is to get the seller to accept that offer. So we did the pre-approval, we put in an offer. Now, after we put in an offer, what's going to begin is the loan process.
Now, the loan process is going to take anywhere from 20 to 30 days on average, and in that what's going on and what we do as mortgage brokers is we take the information that you gave us in the pre-approval, and now we want to verify the information with some documents. That way, we know everything that was in the approval was accurate.
So when we're documenting this information, we'll be asking for things like pay stubs, W2's bank statements, maybe a verification of past mortgage. So we'll be asking for different documents that help us paint a more accurate financial picture that you told us in the beginning of the process.
So once that process is done, we go to the closing table in the state of Ohio, we're required to wet sign, which means we'll come together at the closing table. We'll all sit down and you'll have some documents you'll hand over your portion of the cash to close amounts. You'll sign over on the notes and the mortgage.
After that, you'll get the keys to your house. So let's go ahead and recap those three steps. So one is we're getting pre-approved before we go shopping two is we're writing an offer and completing the loan. Then three is we're moving into our home and celebrating that the whole process is over.
Now, I've simplified this process just a little bit. It looks nice and pretty on paper, but in practice really getting a mortgage and buying a house can be one of the most daunting and emotionally fueled moments in your life. Really, it might be one of the biggest purchases. You've ever made up until this point.
It might be the biggest purchase that you'll ever make, and there are so many professionals, real estate professionals who have raised back you up and answered your questions, and helped you throughout the process. That's why we're here is because it's complicated, but our goal is to make it as understandable as possible. That way you can move into a home in a decent time with as little frustration and headaches.
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