Finding your way through the mortgage loan process can seem intimidating and complex.
Choosing an experienced, professional loan originator to explain the process and answer your questions is the best move you can make. A little education up front will give you confidence as you navigate through the progression of finding a home to moving in.
Here are six steps that outline the home-buying process.
Pre-Approval
Securing your mortgage loan is essential to buy your house unless you can pay cash. Getting pre-approved is a wise decision, especially in today’s competitive market. You’ll need to agree with your loan originator to pull your credit report and share some required documents that outline your financial stability.
Getting pre-approved shows sellers that you are serious about purchasing a house, giving you the edge against buyers who weren’t as proactive.
House Shopping
Before stepping foot into a potential new home, sit down and make a budget. Use a mortgage loan calculator to determine how much house you can afford. Map out the neighborhoods you like and the amenities you can’t live without. Ask your realtor to work within those parameters. While you may end up missing out on a few of your preferences, commit to staying within your budget guidelines.
When you find the house you want to buy, your real estate agent will help you make an offer. An offer that is simple, free of contingencies, and accompanied by an aggressive earnest money deposit will be welcomed by most any seller.
Mortgage Application
This is one of the most important mortgage steps. This is the time to sit down with your originator and pursue concrete numbers. If you took our advice and got pre-approved, the application process won’t be as lengthy.
You’ll need to bring a list of documents, including income, debts, and assets so that your mortgage originator will be able to verify all the information. This is also time to ask your Loan Officer questions and decide on the type of mortgage loan you want. According to J.R. Huber, senior vice president of Sales and Production, the loan officers “…solve problems that may arise during the transaction and anticipate issues before they become problems.”
Within a day or so you’ll receive a loan estimate detailing all fees associated with securing a mortgage. Your originator will also send you a document from the lender agreeing to extend you a mortgage loan. The term for this document is a commitment letter.
Related Read: Top 3 Reasons Mortgage Applications are Denied
Loan Processing
This is the part of the process where your job is to primarily wait. The processing department verifies all of the information that has been obtained from the borrower. The Processor will order an appraisal on the property and the title report. They also dig into your credit report and may ask you about information such as late payments, collections or bankruptcies. This is also when the lender confirms all the information you have included on the application such as your income, employment, saving accounts, and other debt-obligation balances and payments.
Assistant Vice President Ronda Day, MIG’s branch operations coordinator, said “We try to only ask for documentation once and give a good explanation of why we need it. If it’s something we can get on our own, we will. Anything we can do to make the borrower’s life easier, we do it.”
Related Read: Understanding Your Credit Score
Underwriting
The mortgage Underwriter is a key figure in the mortgage process. It’s his or her job to only loan money to borrowers who provide proof that they will be able to make their monthly payments on time. Once the mortgage package is complete, it’s sent to the underwriter for review. According to MIG’s Underwriting Manager, the underwriter makes sure that the borrowers can afford the house and still “…have sufficient funds left over to pay for other things that life requires.”
Closing
It’s finally here! Once the loan is approved, it moves to this final stage. The closing will be scheduled, and you will get notification of the time and date. The Closer orders the title work and ensures all the contingencies have been met. Sharon L. Rivers, senior vice president of Closing/Post Closing Operations said, “Our overall goal is to provide the best experience with the borrower at the closing table.”
Since closing might be several weeks after the initial application and credit pull, many lenders pull another credit report. It’s critical that you don’t take on new debt in the period between the beginning of the loan process and closing.
At the closing, there will be a great amount of documentation to sign that verifies all of the information, so be prepared to write your name – a lot!
Yes, there are numerous steps to take if you want to secure a mortgage loan. However, a helpful mortgage originator will be able to assist you in navigating the road to homeownership agilely and effectively. When you see the “Sold” sign in front of your home, it will all be worth it.
