Unless you are one of the fortunate people who can purchase a home paying cash, you will need a mortgage in order to purchase your new home. The contract that you and the seller signed has a mortgage contingency in it. Once you receive the mortgage commitment, we can proceed towards the closing. If you cannot get a mortgage, the contract is null and void. As part of this, you will need to get a mortgage commitment from your lender. The contract will specify a due date, usually 30 – 40 days from the date the contract is signed. This means you need to apply for the mortgage as soon as attorney review is over.
You’ll need to meet with your mortgage rep to fill out forms and supply the paperwork required. At a minimum, be prepared to supply copies of your last 2 years tax returns, pay stubs and copies of all banking statements. There will probably be additional paperwork involved. Once the paperwork is submitted, do not make any large purchase as this may affect your debt to income ratio. Do not change jobs if at all possible.
If for some reason, you are not approved for a mortgage loan, notify your attorney immediately. Your attorney will terminate the contract and obtain a return of your full deposit.
Another condition of the mortgage commitment is an appraisal of the property. For conventional financing, the property must appraise for at least 80% of the purchase price. You, as the buyer, will be paying the other 20% (or more) in cash.
Once you have the mortgage commitment, it will be forwarded to your attorney. Your attorney will forward a copy to the seller’s attorney. At that time, the mortgage contingency clause in the sale contract will be satisfied. This means you can proceed to closing.
Next chapter – Inspections