The process of getting a mortgage loan can seem complicated, particularly for first-time homebuyers. Mixed in with the joy of finding the right home is the need to supply a lot of documentation and paperwork. However, borrowers will have the help of mortgage loan officers and real estate agents for all the steps to getting a home loan.
Steps That Go Into A Home Loan
Outlined below are the various steps involved in getting a home loan.
Pre-Qualification/Pre-Approval Phase
The first step in purchasing a home is the pre-qualification phase. This occurs as soon as a borrower has decided that they are ready to buy a home and entails a free analysis to determine whether they are in a position to buy a home. During this process, a bank or other type of lender makes an estimate of the maximum monthly mortgage payment that a borrower can afford and how much they can borrow.
Pre-qualification should not be confused with pre-approval. Although they both take place at the beginning of the home buying process and can give buyers an idea of how much they can spend, pre-qualification letters are not verified.
A pre-approval letter, in contrast, is vetted against the borrower’s bank statements and credit report and represents an actual offer rather than an estimate. For this reason, real estate agents generally prefer to see a pre-approval letter over a pre-qualification letter. Of course, a home buyer is not required to ultimately get a mortgage from the lender they used for the pre-approval; they are free to use a different lender if they find a better deal.
Getting an official pre-approval letter from a mortgage lender shows how much money a home buyer has been approved to borrow based on their savings, income and credit. It is important to secure this letter before making an offer on a house because it gives the seller solid evidence that a potential buyer is serious. Being pre-approved can also strengthen a borrower’s negotiating position when they make an offer.
The Application Process
After visiting properties with a real estate agent and finding a home that meets their requirements, the next step for homebuyers is making an offer to buy the home. During this phase, a real estate agent negotiates and submits a contract for purchasing the property.
An earnest money deposit is often submitted along with the offer. This is a cash deposit that is made to secure a potential buyer’s offer and signal that they are serious. This might be as little as $500 or up to 5% of the purchase price, depending on the market and the competition
Once the buyer’s offer has been accepted, they are given an initial disclosure package and begin the official mortgage application process. At this time, they will likely be required to give their loan officer updated income and asset documentation, including bank statements and pay stubs. Completing these documents thoroughly and quickly can help keep the loan and home purchase on track.
Within a few days of submitting the official application, a borrower will receive a loan estimate listing the exact fees, rates and terms of the loan.
Processing The Request
During the processing phase, an appraisal and title work are ordered. When all of the documentation has been gathered, a processor reviews it for accuracy and completion.
This entails verifying information on the credit report, appraisal, title and other documents. Following a complete review, the processor then passes the full application package on to the underwriter.
Underwriting
When the loan reaches the underwriter, it is reviewed to ensure that it meets the guidelines for approval. The underwriter looks at the disclosures, asset documentation, appraisal, credit, employment and other documents to confirm that all of the guidelines and regulations are met. After passing this phase and clearing any of the contingencies that were placed on the loan, the underwriter clears the loan for final approval and sends it into closing.
Closing
Closing is the final stage of a home loan and it typically takes place at a set date, time and location. The buyer receives a closing disclosure at least three days before the closing that lists the terms of the loan, closing costs and the amount of money that must be brought to the closing.
Once all of the relevant documents have been signed, the funds are distributed and the ownership of the property in question is transferred from the current owner to the buyer. At this point, the house officially belongs to the new owner.
Work With The Home Loan Experts
If you are interested in purchasing a new home, let the home loan experts at My Lending Pal show you how our mortgage offerings can help you achieve your homeownership dreams.
