The mortgage loan process can seem daunting and intimidating, especially for the first time home buyer. Fortunately, you don’t have to do it alone. Your real estate agent and mortgage loan officer will help you in the process. But it important to know what’s coming at each stage of the process, so you can get yourself prepared to ask the right questions and make good decisions.
Here are the steps involved in the mortgage application process:
1. Estimate your budget
It’s important to take few steps before commencing the mortgage loan process. It’s important to keep your affordability in mind while purchasing a house. This allows you to set realistic expectations while seeking a house and choosing a mortgage. Start the process by determining your budget, how much you can afford to pay for a monthly mortgage payment instead of seeking your maximum home purchase price.
2. Get pre-approved for a loan
Once you have the estimation of your budget, you may start hunting homes within your price range. This is also the first step towards getting a mortgage. But first you have to get a pre-approval letter from a mortgage lender. This letter shows how much money a mortgage lender has approved to lend you, based on your savings, credit, and income. You need to do this before you make an offer on a house.
3. Make an offer
Once you get the pre-approval, now it’s time to start house-hunting. You begin this by visiting properties with your agent. After picking out the home you want, it’s time to make an offer. Your real estate agent will know the technicalities of how to structure the offer.
4. Order a home inspection
Once your offer is accepted, the next step is a home inspection. A thorough home inspection highlights the important details about the home beyond what you may be able to see on the surface. Some of the areas that come under homes inspection are
- Home’s structure
Home inspection helps the buyer to know if a home may need costly repairs. What is uncovered during an inspection can be used in sales negotiation between buyer and seller, and their respective real estate agents.
5. Go rate shopping and choose a lender
Remember your mortgage rate doesn’t depend on your application alone. It may also depend on your choice of loan you want to get. Assess fees and rates of different lenders and ask what types of loans you have eligibility for. This will affect your rates and eligibility
6. Complete a full mortgage application
Once you select a lender, the next step is to complete a full mortgage loan application. Most of the application process was finished during the pre-approval stage. But you’ll need to submit few more documents to get your loan file through underwriting.
7. Have the home appraised
Your lender will arrange for an appraiser to provide an independent estimate of the value of the home you’re buying. The appraisal lets you know that the price you’re paying for the house is fair
8. Mortgage processing and underwriting
Once your loan application is fully submitted the mortgage processing stage begins. The processing stage begins with the Loan Processor who prepares your file for underwriting. At this point, all the necessary credit reports are accessed, as well as your title search and tax transcripts. The information on the application, such as bank deposits and payment histories, are verified.
9. Closing day
Finally you made it. It’s a closing a day. The lender will send the closing documents, along with instructions regarding its preparation, to the closing attorney or title company. Prepare yourself for signing a big stack of papers.