The loan process for getting a home can be very daunting. Here is a simplified step by step process to help guide you in going through the mortgage loan process. There are generally six steps from Pre-Approval to Closing when buying a home. When refinancing a home loan, you can expect to start at step 3.
The first step in the mortgage loan process is acquiring a pre-approval from a lender. This is a crucial step in the process because securing a pre-approval is your flashy signal to sellers and your real estate agent that you are a serious buyer.
Your pre-approval will include a tri-merge credit report from all 3 major bureaus (Experian, Equifax, & Transunion). This information will be used by the lender to decide the size of the mortgage loan that you can afford. Electing to snag a pre-approval will greatly enhance your chances of securing your dream home.
(*Tip: Don’t confuse a pre-qualification for a pre-approval. A pre-qualification is more of a marketing tool than a serious bargaining tool like a pre-approval.)
Now that you’ve got a leg up on the completion with your pre-approval in hand, its time to start shopping for a home in your price range. This is the fun part. Also, by having a pre-approval before house shopping, you can avoid the disappointment of falling in love with a home that you can’t afford.
Search your desired neighborhoods in person, online, and in print. I recommend shopping until you have compiled a top 10 list. Then, whittle your list down to 5. Next, select a top 3 and make your final selection from your top 3 list. Once you’ve picked a winner, it’s time to make an offer.
Be sure to go over what contingencies will be in place in regards to your offer to buy the home. Contingencies are beneficial because they protect your Earnest Money Deposit. When both the seller and buyer agree to the terms of the sale, the binding purchase agreement is signed.
(*Tip: Online listing sites like Zillow are not fully comprehensive concerning listings, prices, and soon to be available listings.)
Now that you’re ready to apply for your loan, there are documents that you need to submit to your lender. Employment information is requested including your employers information, the amount of time you’ve held the job, your position or title, and your salary including overtime, bonuses, and commissions.
Income information requested includes two years of W-2’s, pensions or social security, public assistance, child support, & alimony. Information about the home you wish to purchase will be requested as well.
You will also have to provide background information about any tarnishes on your credit report. Finally, disclose the type of loan you are requesting. At this stage you will be provided with a loan estimate pulled from all of the information that you supplied the lender. This loan estimate will provide the terms of your loan and the estimated costs of the loan.
(*Tip: By law, lenders are required to provide you with a loan estimate within three days of your loan application.)
In this step, the loan processor will compile and review information about the borrower and the property. The loan processor will start verifying employment and bank deposits, order a property inspection, a property appraisal, and a title search. Then, they will assemble a coherent package for the underwriter.
(Trick: Start getting your affairs in order at least 3-5 years before you want to get a mortgage loan. This will improve your approval odds and most likely result in better terms for your mortgage as well.)
The underwriter has the final say so. This means that the underwriter approves or denies your loan. If you are approved, then your interest rate will be locked in before closing. All of the contingencies must be satisfied before closing the deal. Finally, title insurance is ordered before the closing meeting so that you receive your house keys following the meeting.
(Trick: Carefully monitor bond prices because interest rates trade up or down each day that bond markets are open.)
Congratulations for making it to the final stage of the mortgage loan process! Prepare to be greeted by a mound of paperwork at your final closing meeting. Don’t forget to bring 2 forms of id to this meeting.
You will sign a Closing Disclosure which confirms the costs of your loan, a promissory note, a deed of trust, and a certificate of occupation. As long as the terms of the mortgage agreement don’t vary by amounts larger than allotted by law, it’s time to sign off on your new home!
(*Trick: Review your Closing Disclosure 3 days prior to the closing meeting as required by law.)
My Loan Tailor, LLC is a marketing lead generator company engaged with collecting lead data for the benefit of individuals seeking loan/finance information, contact, and/or consultation with lenders and financial institutions in the United States of America. My Loan Tailor, LLC is not a mortgage lender, originator, broker, or financial institution. We distribute lead information and connect people who are interested in lending services. This website is for persons in the United States of America
