The process of applying for and securing a mortgage can seem a bit daunting; after all, a mortgage will likely be the largest (or one of the largest) loans you ever take out. In reality, though, the process of applying for a mortgage and closing on a real estate deal isn’t that complicated. By having a better understanding of what this process entails, you can begin applying for a home loan with greater confidence.
The first step in applying for a mortgage, in most cases, is getting pre-approved or pre-qualified. Most real estate agents and Realtors will want you to at least present them a pre-approval letter before they’ll begin showing you houses, as this shows that you are at least somewhat committed to buying. Getting pre-qualified can usually be done in a matter of minutes online and can give you a general idea of how large of a loan you may be able to take out. It is important to understand, however, that a pre-approval letter is not a guarantee that your loan application will be approved.
Once you’ve found a home you’d like to place an offer on, you will want to move on to the next step of the process, which is submitting a formal loan application. This application will be much more in-depth than the brief application you submitted when you got your pre-approval letter. Here, your lender will want to know more about your finances, including your income, debts, and employment history. For your formal application, you’ll also need to provide more detailed information about how much you’re looking to borrow.
Loan Estimate Generation
Within a few days of formally applying for your loan, your lender will present you with a loan estimate; this document will provide you with a detailed breakdown of the loan you’re requesting and its terms. This will include details such as:
- your interest rate and interest terms
- repayment terms/period
- closing costs required
- down payment required
- estimated monthly mortgage
This document can be especially useful in comparing loan offers from different mortgage lenders, especially since the loan estimate document is universal and will contain the same details regardless of the lender.
Processing and More
Next comes loan processing, which is the part where the loan officer handling your application orders the appraisal to your new home, a title report, and a detailed credit check on you. This is an important step, as your credit history can have a major impact on your final mortgage decision. During this stage, it is likely that your loan officer will be frequently contacting you to ask for documentation, including:
- W-2s and pay stubs
- bank statements
- proof of income (if self-employed)
- retirement fund statements
- previous years’ tax returns
Appraisal and Underwriting
One of the last steps before your loan can be finalized is the appraisal on your new property; your property needs to appraise for at least the amount that your bank will be lending you. Ideally, the appraisal will come back at or above what you’ve agreed to pay. If the home appraises for less than the loan amount you’re seeking, however, you may need to come up with the difference yourself or convince the seller to drop the price.
Loan Closing (Finally!)
Once all of these steps are completed and the loan is underwritten by your loan officer, all that’s left to do is close! On your closing date, you’ll need to bring a cashier’s check for your down payment, closing costs, and other expenses. From there, you will finalize your loan by signing all the required loan documents and have ownership of the property legally transferred to your name. Congratulations; you’re a homeowner!
While the loan process can vary slightly from one lender to the next, most loans will more-or-less follow this same set of steps. With all this in mind, you can move forward in buying your new home with confidence. For more information on home loan options, call us toll-free 877-255-3554 or contact our team at EPM today online!