Many people do not know what to expect when they go through the mortgage process. It can be intimidating to go into the home buying experience without knowing how long it is going to take or what you are going to have to do. On the other hand, it is very beneficial to know exactly what to expect so you can be confident you are not going to have any surprises as you search for a home. For these reasons, we have laid out an easy to follow guide for what to expect as you go through each step of the mortgage process.
First, Pre-approval – Typically, the first step when applying for a mortgage is getting “pre-approved” by a licensed mortgage loan officer. This involves filling out an application so a loan officer can take a look at your stated income and debts and then give you an estimation of how much you can qualify for. This helps you know in advance how much home you can afford, which gives you negotiating power when you make a purchase offer.
Second, Documentation & Disclosures – You will need to provide your loan officer with the necessary documentation to verify what you have stated on your application. These documents include things like pay stubs, bank statements, tax returns, and W2’s. In addition to these documents, you will be required to review and sign several forms known as the “initial disclosures.” These forms help ensure that you and the lender are both legally protected throughout the process.
Searching for a Home – You may have already begun searching for a home before completing the first two steps, that’s ok! The pre-approval just helps to give you an exact idea of what you can afford so that you are not wasting your time looking for homes above your price range. Your loan officer will work hand in hand with your real estate agent to ensure that your agent is finding you homes that are within your budget and that the terms of the loan best suit your needs. Once the real estate agent has found you the home of your dreams, he or she will then work with you and the seller to negotiate a price. From there, you make an offer and hope that gets accepted! A little back and forth is to be expected with these negotiations.
The Appraisal – An appraisal is something that is required on all home purchases. This involves a licensed appraiser coming out to inspect the home to determine the value of the home. The appraiser uses recent sales of comparable homes in the area to help determine the value. The appraisal helps protect the borrower from overpaying for the home and also ensures that there are no existing liens on the property from previous owners.
Loan Processing and Underwriting – While you are searching for a home, your loan will be going through processing and underwriting. Processing involves things like verifying employment and insurance. Underwriting involves a complete review of the loan to make sure everything is in compliance with state and federal law. This process usually takes one to two weeks.
Loan Decision – Once your loan has been underwritten, it is approved or declined. There may be a conditional loan approval given contingent upon further documentation or actions.
Closing – Once your loan has been approved, and your offer has been accepted, it is time to close your loan and get you into your new house! A closing will be scheduled with a licensed title agent at a time that is convenient for you. At this meeting, you will review and sign the final docs required for getting your loan. Upon completion of this meeting, all necessary funds for purchase of the home will be transferred, and your name will be placed on title as the rightful owner of the home.
As you can see, getting a mortgage for your home really is just a simple step by step process. Another important thing to note is that you will always have an experienced loan officer ready and willing to help you and guide you every step of the way. Home buying can seem intimidating at first, but when you know what to expect, you can be confident that you will have a good experience.