One of my clients asked me recently to explain what we had to do once the contract was closed… really. I call this part of the process the “back burner” because there is a lot of waiting involved. Waiting for your loan to be approved by the lender, both you as a borrower and the property under contract as collateral. It’s also a waiting process for the title report to be returned from the title company, telling us what liens need to be cleared by the seller in order to convey “clean” title. (For example, outstanding mortgages or environmental control board liens would need to be resolved before we could close.)
Here is the list I provided to my client about how the mortgage process works, roughly, from when the signed contract is submitted to the lender to closing.
Submit initial application with contract of sale.
Your loan rep/mortgage broker asks you for lots of documents to prove your income and rental history.
Underwriting reviews your application, the appraisal and any other documents relating to the condo/coop they ask for (sometimes offering plan, budget, etc…).
They ask for more documents (they always ask for more).
They issue a mortgage commitment. If you are denied a mortgage commitment, this is what triggers the contingency clause in the contract of sale.
Whatever contingencies are asked for as part of the commitment (sometimes it’s even more documents, or updated versions of documents you’ve already given) need to be satisfied. Occasionally even the appraisal needs to be submitted.
Then the loan is “clear to close.” Once we have a clear to close, then we schedule the closing. Sometimes, this is a week or two before we are closing. Most of the time this is the same week or even a couple of days before we want to close. (And sometimes we delay the closing because we’re waiting for the clear to close.)
As for things you should be doing, make sure you keep the ball in your loan rep/mortgage broker’s court at all times as much as possible–when they ask for a document get it to them as quickly as you can.
In the meantime I am ordering the title report and waiting for the mortgage commitment. Once title comes in I’ll review it, find out from the seller how they will address any blemishes on title (things they will need to pay or resolve prior to closing).]]>
Hiring an attorney isn’t something people do very often. I find with my first time home buyer clients especially, I am the first attorney they have worked with. It’s hard to know what questions to ask when you’re making those first introductory calls to decide which attorney is right for you. Here are a few examples of things you should ask.
1. What are your rates?
Obviously, this is an important question to ask before you hire the attorney! I will usually ask the client more about their transaction to get an idea of the scope of work involved. I prefer to bill flat rate, so everyone knows what the transaction will require and so my clients aren’t afraid to call me with questions, lest they get billed for that time.
However, not all transactions are as clear-cut and have more open-ended negotiation periods. For example, Pre- and Post-Nuptial agreements are often revised multiple times, so occasionally hourly billing is more suitable to the type of work.
If an attorney is billing flat rate, ask them to enumerate what is and is not included in that time. If an attorney is billing hourly, ask them whether they will be billing you for travel–this might end up being a lot if your attorney is located in Long Island and your closing location is in the Bronx. You should also ask what the rate is for paralegal and clerical time versus attorney time.
Most attorneys will provide a written Retainer Agreement summarizing the terms of the service they will perform for you and when and how you will be billed for that work.
2. Do you offer free consultations? If not, what is the fee for consultations and what do they involve?
I offer phone consultations. For my real estate clients I follow up with a detailed summary of the settlement process for the transaction the client is exploring.
For more complex matters, like those exploring litigation (not something I practice myself), a consultation is important to determine whether or not you have a case and what your legal options are.
Sometimes clients prefer to have an office to go to to sit with a lawyer in front of a big desk. When I meet clients in person I like to do it over coffee or tea.
3. How much experience do you have in this field?
This is a great question as it helps you get to know the attorney and how they might help you. You can ask for case highlights or whether they have experience doing your specific transaction. For example, short sales and corporate relocation are specific types of real estate transaction that can throw curve balls into the process, it is helpful to ask if the attorney has experience working with the particulars of your transaction.
4. How much and what types of electronic communication do you use? When are you available via email?
Attorneys vary wildly on the types of electronic communication they use. Some firms have electronic client portals where you can log-in to check the status of your work. Some attorneys only use email via their legal assistants and only during office hours. Different clients have different needs around email.
I’m definitely an email-reliant attorney who checks email frequently, including nights and weekends.
5. Will I primarily interact with your assistant or directly with you?
Depending on the law firm, certain types of transactions are mostly coordinated by a legal assistant. It is a good idea to find out ahead of time who you will be relying on primarily for communication and action. As a solo practitioner, I choose to keep my client roster low enough so that I am the only one interacting with my clients.
6. When are you available to have meetings and make phone calls?
Some attorneys have certain night and weekend availability. Some are only available during business hours. As a solo practitioner it’s great for me to be flexible because often my clients’ work schedules (especially if I’m working with a couple) don’t mesh during business hours. I regularly take phone appointments during the evening and on weekend. If you have restrictive time during the workday, this is a good thing to keep in mind when hiring an attorney.
I think that hiring an attorney is often based on two main criteria, experience in your field of need and personality, with the above questions as additional details to help . You need someone you feel you can trust to guide you through a process that is likely unfamiliar to you. The initial communication with the attorney is a chance to get to know this person and find out if they are someone you trust and with whom you feel great about moving forward in your legal transaction.
When my friends ask me what they need to know when they start shopping for a new home, this is the first piece of advice I give them. I’ve been working on real estate transactions for almost a decade (October is my anniversary), and financing is the most crucial element!
The negotiation process with a prospective seller over a property can be arduous, with parties stuck at an impasse with sometimes hundreds of dollars between them. Buying the right loan product will save you thousands of dollars over the life of your loan. Squaring away your loan deal before you shop for a loan will make these negotiations even more fruitful.
Loans aren’t simply a “you get what you qualify for” proposition–products vary from bank to bank. It can be very intimidating to shop aggressively for a loan product but it is very worth it in the end. All of those times you spend haggling a great deal at a flea market will literally be pocket change compared to the satisfaction of saving thousands on your rate.
Spending the time to shop around for a loan you qualify for can be difficult because it takes time and often folks are under a time crunch (like a 30 day contract mortgage contingency deadline period, for example), which is why it is crucial to begin this process before you start shopping for a property. It’s not nearly as fun as daydreaming about the perfect place to situate your collection of rare succulents or where you’re going to get your Sunday morning brunch around the corner, but it is so important.
There are two main ways to shop for a loan. You can shop directly with mortgage companies or use a mortgage broker as an intermediary. All of the major banks and credit unions will have a mortgage department where you can call, give them your information and find out what rate you qualify for. This can be great because you can really see where you’re going to save money, compare different lenders and find something extremely competitive. If you’re a true bargain shopper and not afraid of talking about money, this is a great way to feel like a triumphant hunter holding a major trophy (or teddy bear if you’re vegetarian).
Lenders make money off your loan in two major ways–one is your interest rate (easy to compare between products) and one is closing costs, money you pay up front at your closing that you never get back. Sometimes, depending on how long you’ll be in a property, you can save money over time by “buying points” off a loan. Certain fees are negotiable and non-standard, like origination fees and loan servicing fees. Sometimes these origination fees are thousands of dollars, so what looks like a low interest rate isn’t actually that low because you had to pay so much up front for the privilege of borrowing money.
Working directly with a lender generally means you will have one point-person during the sales process and another point-person during the closing process.
If you aren’t interested in doing the ground-work of shopping for a loan yourself, find a great mortgage broker. Not a good mortgage broker, not an “okay” mortgage broker, find a mortgage broker who is a mortgage super hero*. You’re going to need to do some digging, but I find the best way is to chat up your friends who have recently purchased a home or are in the residential real estate business (even if you aren’t using their business geographically, they may have good contacts within your state).
Ask for client testimonials and referrals. Talk to the mortgage broker and get a feel for whether or not you trust them. Look for them on Yelp and other consumer referral sites. (Look beyond the star rating and really read the reviews, folks will occasionally low-star a professional when they are looking for a person to blame and sometimes that person is the mortgage broker when what went wrong in the transaction wasn’t their responsibility.)
A mortgage broker can be a huge asset in aggressively shopping for loan products. They can also help you qualify for a loan when you have a difficult or non-traditional credit situation (self-employed and entrepreneurs fall into this category). They will shop you around to all the major and minor lenders in their network and get paid a commission by the mortgage company for selling you the loan, so your mortgage broker’s work is at no cost to you. They act as your point person for the closing process and generally remain consistent throughout the process.
They also will handle last-minute loan snafus (as there are many possibly worst-case scenarios), which is where the super hero skills really shine. I’ve personally found my problem solving skills and logical reasoning are often more valuable than my legal education during the real estate closing process. A super hero mortgage broker is going to have these problem solving skills sharpened through thousands of closings.
There are a lot of things you can do to clean-up your credit score before loan shopping in order to qualify for better loan products, I’ll address that in a later blog post. But even doing some cursory work before you begin the home shopping process can help you get better rates.
It’s also important to note that both you and your property have to qualify for your loan product and rates cannot be locked in until your property is identified, but laying this groundwork ahead of time or concurrent with shopping for real estate is crucial to saving money in the long-run.
The process of buying a loan product is one of the least sexy parts of buying a home but it is one of the most crucial to saving money over the lifetime of your property ownership. Imagine how many more brunches you can buy with your savings!
*Of course hero in this context is a gender-neutral term.
If you have any questions about the home buying process, get in touch!
bevin at bestlittlelawfirm.com or (347) 878-3370]]>
I am now expanding my practice areas to include the transactional needs of all families.
*Real Estate purchases and sales
*Wills and Estate Planning
*Pre- and Post-Nuptial Agreements
*Domestic Partnership Agreements
*Contract review for entertainment professionals
*Intellectual property protection through copyright, trademark and other protections
*Second parent adoption
Please get in touch if you have any questions!
bevin at bestlittlelawfirm.com]]>