homebuying process | My Supreme Team

Understanding Escrow: Why It’s Important during Home Loan Transactions

by Supreme Lending | Dec 10, 2024

Buying a home is an exciting milestone, but it may also come with unfamiliar terms and processes that feel overwhelming. One term you’ll likely encounter is “escrow.” If you’re unsure what escrow means or why it’s important during home loan transactions, you’re not alone—and that’s completely okay! At Supreme Lending, we’re here to make sure every step of your journey feels approachable and empowering. Our goal is to help you move forward with confidence and clarity. Understanding escrow during home loan transactions is crucial to feeling informed and secure throughout the process. Let’s take a closer look at escrow and why it’s such an important part of your homebuying experience.

What Is Escrow?

Escrow is essentially a secure trust account managed by a neutral third party. This account holds money, documents, or other assets on behalf of the buyer and seller during a transaction. The purpose of escrow is to ensure that all conditions of the agreement are met before funds and documents are transferred to their rightful owners.

How Escrow Works in Home Loan Transactions

Escrow plays a vital role in both the home-buying process and ongoing homeownership. Here’s how it functions at different stages:

For Brokers: When purchasing a home, buyers typically deposit earnest money into an escrow account. This account securely holds the funds until the transaction closes, providing protection for both the buyer and seller.
For Lenders: After the purchase, escrow continues to be essential. Many lenders set up an escrow account to manage recurring payments for property taxes and homeowners insurance. This ensures these important bills are paid on time, preventing coverage lapses or late fees.

Why Is Escrow So Important?

Escrow adds security and simplifies a process that may otherwise feel overwhelming. Here’s why it’s a cornerstone of homeownership:

Protects Buyers and Sellers: Escrow ensures no funds or documents change hands until all conditions of the sale are fully met.
Streamlines Payments: For homeowners, escrow simplifies life by automatically managing property taxes and insurance, making budgeting easier.
Ensures Transparency: A neutral third party oversees the process, promoting fairness and clarity for everyone involved.

Ready to Learn More?

At Supreme Lending, we know escrow might feel like just one more piece of a complex puzzle. Understanding escrow during home loan transactions is key to navigating the process with confidence. That’s why we’re here to guide you every step of the way. Our team will walk you through the ins and outs of escrow accounts, from securing your earnest money during the home-buying process to managing your post-closing escrow for taxes and insurance. We’re committed to protecting your financial interests and keeping the process smooth and stress-free. Reach out to Supreme Lending today, and let’s get started!

Home Appraisal Checklist: Key Factors to Consider

by Supreme Lending | Nov 10, 2024

Your Quick Home Appraisal Checklist

When buying or selling a home, it’s important to understand the importance of a home appraisal during the mortgage process. Appraisals determine the value of a property based on various factors, ensuring buyers, sellers, and lenders are aligned on what the home is worth. Knowing what appraisers look for can help ensure a smooth mortgage process and avoid last-minute surprises or delays. Read on for an overview of the appraisal process including a home appraisal checklist for homeowners, buyers, and real estate agents to consider.

What Is an Appraisal?

An appraisal is an independent assessment of a property’s market value led by a licensed appraiser. The value is based on evaluating several aspects of the home, such as the condition, location, and recent sales of comparable properties in the area. The appraisal is an essential step of the mortgage process required by most lenders to verify that they’re not lending more than the home is worth. For buyers, a home appraisal can also offer reassurance that they are paying a fair price.

The Home Appraisal Checklist: What Appraisers Look For

Here’s a quick look at some key elements appraisers may consider when evaluating a property. You can use this guide when searching for a home or preparing to sell.

1. Home Size and Layout

What is the total square footage and number of bedrooms and bathrooms?
Is the layout of the rooms and spaces functional.
Is there a finished basement or attic that adds to the livable space?

2. Exterior Condition

Roof: Are there any missing shingles, leaks, wear and tear, etc.?
Foundation: Are there visible cracks or settling issues?
Siding, windows, and doors: Check for any damage, peeling paint, or outdated fixtures.
Landscaping: Is it overgrown or neglected?

3. Interior Condition

Walls, ceilings, and floors: Are there any cracks, stains, or general wear and tear?
Kitchens and bathrooms: Is there any damage, outdated appliances, or broken equipment? Are there luxury upgrades that may boost the home’s value?
Plumbing and electrical: Are the systems up-to-code, functional, and safe?

4. Lot Size and Usability

How large is the lot?
Is it safe and functional?

5. Upgrades and Amenities

Are there any recent home improvements, such as a kitchen remodel, energy-efficient updates, or a new roof?
Are there unique amenities such as a pool, outdoor kitchen, or wine cellar?

6. Safety and Compliance

Appraisers will check for safety hazards or code violations.
Factors like missing handrails, faulty wiring, or broken windows can negatively impact the appraisal.

7. Location & Neighborhood

Appraisers will examine the property’s location, including proximity to schools, parks, shopping centers, and other amenities.
Neighborhood conditions, crime rates, and overall desirability can also impact the value.

8. Comparable Sales (Comps)

Appraisers will compare the home to the sales of similar properties in the neighborhood.
Factors such as home size, condition, and location are considered to provide a rough benchmark.

Preparing a Home for an Appraisal: Tips for Sellers and Agents

Keeping the home appraisal checklist in mind, there are some measures that sellers or listing agents may consider to prepare for an appraisal and potentially maximize a home’s value.

Make Minor Repairs As Needed. Fix any small but noticeable issues, such as leaky faucets, old paint, stained carpet, and broken hardware. Minor fixes may go a long way in improving a home’s appraisal value.
Clean and Declutter. A clean, organized home allows the appraiser to focus on the property’s key features rather than clutter. This step can also enhance the home’s overall appearance.
Highlight Recent Upgrades. If the home has undergone significant improvements, provide the appraiser with a list of updates, including the dates and cost of renovations.
Provide Easy Access. Make sure that the appraiser can navigate to all areas of the home, including the basement, attic, and other outdoor structures.

Frequently Asked Questions About Appraisals

1. What is the difference between a home appraisal and a home inspection?

A home appraisal determines the market value of the property, which is essential for lenders to approve the loan amount. A home inspection, on the other hand, assesses the condition of the home and identifies any potential issues or repairs that may need to be addressed. While an appraisal focuses on value, an inspection focuses on the home’s livability.

2. What happens if the home appraises for less than the sale price?

If the appraisal comes in lower than the agreed-upon sale price, the buyer and seller may need to renegotiate. The buyer could request the seller to lower the price, or the buyer may need to pay the difference out of pocket.

3. Do you need an appraisal when refinancing?

Yes. When refinancing,* it’s essential to understand the home’s current market value, especially if you’re taking cash out of your home equity. The appraisal also plays a key role in determining the Loan-to-Value ratio, which can affect loan terms, interest rate, and whether private mortgage insurance may be required.

*By refinancing an existing loan, total finance charges may be higher over the life of the loan.

What’s Next?

A home appraisal is one of the most important steps in the mortgage process. Once the appraisal is complete, the report is submitted to the lender for review. The lender reviews the appraisal report to verify the property’s appraised value aligns with the loan amount. When all loan conditions are met, it’s smooth sailing to closing.

Whether buying, selling, or listing a home, understanding the home appraisal checklist can help make the mortgage process smooth and seamless.

For more information about mortgages and steps of the loan process, contact your local Supreme Lending team today!

Mortgage Checklist: What Documents Will You Need?

by Supreme Lending | Oct 14, 2024

An Overview of Your Mortgage Checklist

Ready to buy a home but don’t know where to start? We’ve got you covered with what is needed for the loan application process with this basic mortgage checklist! To qualify for a home loan, lenders will need to review several personal and financial documents during the application and mortgage underwriting process. To help streamline the process, it’s helpful to know what all you may need to provide to ensure your mortgage goes smoothly. Once you have completed the loan application and given your intent to proceed with your loan, here’s a general mortgage checklist of required documentation.

Proof of Income

Lenders need to verify that you have a steady income to make your mortgage payments. This is a key part of the loan process, and the documents you’ll need to provide include:

Pay stubs from the last 30 days (most current)
W-2s and tax returns from the last two years

Employment Verification

In addition to proof of income, lenders verify your employment to ensure you have stable job security. Be prepared to provide:

Employment history for the last two years, address any gaps
Offer letter or contract if you’ve recently started a new job

Credit History

Your credit score plays a big role in determining what loan options and rates you may qualify for. Lenders will pull your credit report to review your creditworthiness. You have options to review your credit beforehand as well.

Proof of Assets

To help determine how much you may be able to afford for a down payment and closing costs, lenders will review your financial assets. At this point in the process, the following will be needed.

Bank statements from the last two months
Investment account statements including 401(K), IRAs, stocks, CDs, money market funds, Terms of Withdrawal Retirement, profit share, etc.
Source of any large deposits, for example if you received mortgage gift funds or sold a large asset

Additionally, any assets used for a down payment, closing costs, and cash reserves must be documented by a paper trail.

Debt-to-Income Ratio

Lenders will review your debt-to-income, known as mortgage DTI, to ensure you can handle additional mortgage payments. This is calculated using:

Total monthly debt payments, for example credit cards, car loans, student debt
Monthly gross income including salary, investment income, bonuses, and commissions

Identification

To confirm your identity, you’ll need to provide:

Government-issued I.D. (valid driver’s license or passport)
Copy of Social Security card (SSN)
Residency history, typically for the last two years including landlord information for renters or a mortgage statement if applicable

Other Information Depending on Your Situation

In addition, you may need to provide other documentation depending on your current circumstances.

These could be:

If paid off a mortgage in last year, need copies of the release of mortgage lien
If own 25% or more of business, need company tax returns for last two years
Divorce decree or child support order, if applicable
Refinance copy of note, Closing Disclosure, and survey
Relocation Agreement if the move if financed by employer (i.e. buyout agreement, documentation outlining company-paid closing cost benefits)
Insurance quote

Program-Specific Documents

For government-insured loan programs, there are a few more items you’ll be required to provide:

FHA: Copy of Social Security card for each applicant and co-applicant
VA: Original Certificate of Eligibility (COE), copy of DD214 discharge paper, and contact information of nearest living relative
FHA and USDA: Total household income of all borrowers moving into the new home

Preparing for a Smooth Process

By preparing yourself for a seamless mortgage process, you’re showing lenders you’re organized and ready to move forward. This preparation may help prevent potential delays, reduce stress, and have the majority of items needed to secure your dream home. Bookmark this mortgage checklist to have on-hand when you’re ready to start your homebuying journey.

If you have any questions about what documents are needed or how to get pre-qualified, our team at Supreme Lending is ready to help!

10 Homebuying Tips for a Smooth Mortgage Process

by Supreme Lending | Oct 7, 2024

Your Helpful Guide to Mortgage Homebuying Tips

mortgage homebuying tips

Buying a home is one of life’s biggest milestones—a place to make lasting memories, build your future, and truly create a place to call your own. But let’s face it: the homebuying process can feel a bit overwhelming at first. But with the right preparation and guidance, you can navigate your mortgage smoothly and confidently. Whether you’re just thinking about purchasing a new home, buying for the very first time, or a seasoned pro, these 10 mortgage homebuying tips will help you make sense of the process and set you up for success.

1. Save for a Down Payment Early

One of the most important mortgage homebuying tips is saving for a down payment. While some loans may require as low as 3-5% down, the more you have saved, the better. A larger down payment also means a lower loan amount and reduced monthly payment. Working with your local lender early on in the process can help you plan for how much to save for.

2. Don’t Wait to Get Pre-Qualified

Before you even start house hunting, the first step in the homebuying process is getting pre-qualified for a mortgage. Pre-qualification gives you an initial idea of how much you may be able to afford based on information you provide to your lender, including your assets, income, and credit score. Getting a mortgage pre-qualification or pre-approval can also show sellers that you’re a serious, capable buyer.

3. Compare Loan Types

Not all mortgages are the same, so it’s important to understand your options so that you can make an informed decision when it comes to financing your home. Whether it’s a Conventional, FHA, VA, or USDA loan, each comes with its own set of guidelines and down payment requirements. There are also several alternative financing programs including a jumbo loan, bank statement loan, and investment property loans.

4. Explore Down Payment Assistance Programs

Do you know about down payment assistance programs that may be available? These programs are designed to help more people become homeowners with affordable options and flexible guidelines. Depending on the program, assistance can be offered through grants, forgivable loans, deferred payment, or tax credits. Don’t hesitate to ask your lender about these potential opportunities, as they may make a big difference in your homebuying journey.

5. Have Your Documentation Ready

When it comes time to apply for your mortgage, you’ll need to provide a variety of documentation so that your lender can verify your income, employment, and creditworthiness. Common documents include pay stubs, tax returns, bank statements, and W-2s. Having these ready may help speed up the process and avoid delays.

6. Know What’s Included in Your Loan Estimate

After you apply for a mortgage, you’ll receive a Loan Estimate (LE). This document provides you with important information regarding your mortgage application, including the estimated principle payment, interest, taxes, and insurance—also known as your mortgage PITI.

7. Prioritize Both an Appraisal and Home Inspection

During the mortgage process, it’s crucial to understand the appraisal and home inspection—and why you should opt to do both. The appraisal is an assessment of the home’s value that most lenders require. This helps confirm that the loan amount aligns with the property’s market value. Meanwhile, the home inspection evaluates the property’s condition and systems. A home inspector can identify any potential repairs or issues, such as roofing damages, electrical problems, or structural concerns.

8. Avoid Large Purchases or New Credit

It’s also important to hold off on making any large purchases or opening new lines of credit during the mortgage approval process. Big expenses like buying a car or furniture, or applying for a new credit card, may affect your credit score and debt-to-income (DTI) ratio. To keep your loan approval on track, avoid major financial moves until after you’ve closed on your new home.

9. Understand Costs Beyond the Down Payment

While the down payment is a big part of the homebuying process, don’t forget about the additional costs involved in securing a mortgage. Beyond the down payment, you’ll need to consider closing costs, which are other fees to process the loan that typically range from 2-6% of the loan amount. Another potential expense is mortgage insurance, which is required for FHA loans and if your down payment is less than 20% for Conventional.

10. Review the Closing Disclosure

Before officially closing on your home, you’ll receive a mortgage Closing Disclosure (CD). This document provides a transparent summary of all loan details, including terms, projected payments, closing costs, and a transaction summary. Lenders are required to provide your disclosure no later than three days before your scheduled closing. Be sure to carefully review all information to ensure it’s correct to avoid any potential delays.

Supreme Lending Is Here to Help

As you can see, the homebuying process has a lot of moving parts. Keeping these mortgage homebuying tips in mind will help ensure your loan experience is a smooth one.

At Supreme Lending, we’re here to guide you every step of the way. Want to learn more about our mortgage services or ready to start your homebuying journey? Contact your local branch today!

Understanding the Steps of the Mortgage Process: From Pre-Qualifying to Closing

by Supreme Lending | May 7, 2024

So, you’ve decided to take the plunge into homeownership. Congratulations! But where do you start? The mortgage process may seem overwhelming, especially for first-time buyers. That’s where your local Supreme Lending team comes in to help simplify the journey from pre-qualification to closing, resulting in a smooth and seamless experience. Let’s break down the nine basic steps of the mortgage process and see how Supreme Lending can help you every step of the way.

1. Get Pre-Qualified.

When buying a home, it’s crucial to know how much house you can afford. Getting pre-qualified or pre-approved for a mortgage is a great first step to becoming a homeowner. A pre-qualification will provide an estimate on what you may be able to qualify for based on information you provide such as assets, income, and credit. Your lender can even provide a pre-qualification letter, which can help show sellers that you’re a capable and serious buyer.

2. House Hunting.

Let the house hunting begin! Work with a real estate agent and view properties based on your location, style, and budget. At Supreme Lending, we understand that finding the perfect home is about more than just the numbers. That’s why we want to ensure your mortgage aligns with your dream home.

3. Make an Offer and Negotiate.

Found your dream home? Now it’s time to make an offer and negotiate a contract based on agreed upon price and terms. With Supreme Lending by your side, you can approach negotiations confidently, knowing that we’re here to support you through all the steps of the mortgage process.

4. Complete a Full Loan Application.

Once your offer is accepted, it’s time to move forward and complete the full mortgage application process by notifying your lender of your intent to proceed with the loan. Supreme Lending can then help guide you through this important step and help you gather the necessary financial documents required, such as pay stubs, tax returns, and account statements.

5. Review the Loan Estimate.

Understanding the details of your loan is essential. During this step, Supreme Lending will provide you with a comprehensive Loan Estimate (LE) document, that breaks down initial disclosures and transaction terms, such as interest rate, closing costs, and any other applicable information. Carefully take the time to review and ensure you fully understand your loan before moving forward.

6. Property and Title Evaluation.

Before finalizing the deal, it’s essential to ensure the home is in good condition and ready to be moved in to. An appraisal is ordered to determine the home’s market value, an inspection is completed to confirm that the home’s systems are up to code, and a title search is conducted to confirm a clear transfer of ownership. Finalizing these important assessments is paramount for a smooth closing.

7. Underwriting Review.

Your loan application undergoes a detailed underwriting review to ensure all lending guidelines are met. Additional conditions may be requested for final approval. With Supreme Lending’s expertise, you can trust that your application is in good hands. Our in-house underwriting team works diligently to streamline the process, keeping you informed every step of the way.

8. Clear-to-Close and Final Review.

Once your loan is approved and all conditions are met, you’re issued the three most exciting words throughout the steps of the mortgage process: Clear-to-Close! You’ll receive an official Closing Disclosure (CD) at least three days prior to your closing day to review. Once you sign off, the final documents are prepared and confirmed.

9. Closing Time.

The big day has arrived! With Supreme Lending, you can sign your closing documents with confidence, knowing that everything has been accurately reviewed and ready to transfer the funds and ownership. Finally, you receive the keys to your new home, marking the end of your journey to homeownership and the start of an exciting new chapter.

While the path to homeownership may seem daunting at first, with Supreme Lending, it becomes an exciting and rewarding experience. From pre-qualification to closing, we can provide the expertise, support, and personalized service you need to navigate the steps of the mortgage process with ease.

So, what are you waiting for? Contact your local Supreme Lending branch today to get started.