Your Guide to Financing a Home
Your Guide to Financing a Home
Although a newcomer to the Houston region, you may not be new to the homebuying process. Even so, it’s helpful to review all the steps involved as well as Houston-area resources and conditions. Since Houston has a relatively healthy real estate market, finding the right type of mortgage for your home is made simple by the abudance of property choices. With the proper research and the help of a reliable real estate professional, purchasing your Houston home should be a rewarding experience.

As you prepare to purchase a home and seek financing, it is best to first have a realistic view of the all the steps involved. The financing process can take anywhere from 15 to 45 days, but typically runs 30 days. Your agent should be involved throughout the process to help it run smoothly. The basic timeline for what will happen along the way is as follows and is covered more thoroughly within this chapter.

NAVIGATING THE FINANCING PROCESS
You submit the completed 1003 application and any required supporting documentation to the lender.
  1. The lender orders an appraisal of the property and your credit report and begins verifying your employment and assets.
  2. The lender provides a good-faith estimate of closing and related costs, plus initial Truth in Lending disclosures, which by federal law must be provided by your lender within three days of first pulling your credit report.
  3. The lender evaluates the application and your supporting documents, approves the loan and issues a letter of commitment.
  4. You sign the closing loan documents and the loan is funded.
  5. The lender sends its funds to escrow.
  6. All appropriate documents are recorded at the County Recorder’s Office, the seller is paid and the title to the home is yours. 

HOW IS YOUR CREDIT?
Before you even begin applying for a mortgage loan, you’ll need to evaluate the state of your credit. There are three major credit-reporting agencies in the United States that maintain records of your use of credit: Equifax®, Experian® and TransUnion®.

These records are called credit reports, and lenders will want to check your credit report when you apply for credit. Generally, lenders also will want to know your credit score. A credit score is a number that summarizes your credit risk based on a snapshot of your credit report at a particular point in time. A credit score helps lenders evaluate your credit and estimate the risk of lending to you. By reviewing this report beforehand, you can identify any issues that are due to fraudulent activity and work toward correcting them.

NATIONAL CREDIT-REPORTING AGENCIES
To request a free copy of your credit report once a year, call (877) 322-8228 or visit www.annualcreditreport.com. For more information on credit reporting, visit the Federal Trade Commission at www.FTC.gov.

FICO® SCORES
The most widely used credit scores are FICO® scores, created by Fair Isaac Corporation. Lenders can buy FICO® scores from all three major credit-reporting agencies. Lenders use FICO® scores to help them make billions of credit decisions every year. Fair Isaac Corporation develops FICO® scores based solely on information in consumer credit reports maintained at the credit-reporting agencies.

Your credit score influences the credit that’s available to you and the terms (interest rate, etc.) that lenders offer you. It’s a vital part of your credit health. Understanding your FICO® score can help you manage your credit health. By knowing how your credit risk is evaluated, you can take actions that may lower your credit risk—and thus raise your credit score—over time.

— Why Do You Want a High FICO® Score?
According to Fair Isaac Corporation, the difference between a FICO® score of 620 and 760 often can mean tens of thousands of dollars over the life of your loan. A low score can cost you money each month or even stop you from refinancing at a rate you know other people are getting.

— How Are FICO® Scores Calculated?
Different credit data are collected to determine your credit score. These data can be grouped into five categories weighted at different percentages that reflect how important each of them is in determining your FICO® score. The FICO® score is based on your credit history and is a compilation of several factors including payment history, outstanding credit, length of credit history, new credit you’ve acquired or applied for and types of credit used.

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