Most individuals that buy a residential property count on a mortgage from the bank to pay their costs. However, dealing with the mortgage loan process is both challenging and confusing. Hence, it’s important to learn about the distinct stages of navigating the mortgage process. It is best to rely on a mortgage professional during such an important financial decision. Visit this site for more information.
That being said, here is a guide that’ll prepare you well for getting a mortgage and buying a home.
1. Choose a mortgage lender
The mortgage loan process is already cumbersome and lengthy, and things may become even more difficult if you fail to find the right mortgage lender. Look for a mortgage provider that helps you meet your financial goals and guides and provides a clear understanding at every step of the process. Shortlist a few reliable lenders in your reach, schedule a consultation with them and then choose one according to your mortgage needs.
2. Research about mortgage deals
You should have sufficient knowledge of your credit history, budget, financial status, and other mortgage-related aspects. Find out about the different mortgage deals offered by lenders. Connect with mortgage brokers to learn about your best available options. You should also learn how to get your mortgage application approved early.
3. Collect all necessary documents needed for the mortgage application
List down all the documents you need to submit with your mortgage application to the lender. Arrange the following documents before applying for a mortgage or preapproval.
- Government-issued ID, Driver’s license or any other identification.
- Income verification documents, such as tax returns, paycheck stubs, etc.
- Assets-related documents such as investment or savings accounts which you may use to source your home loan down payment.
- Social Security number
- Documents verifying any settled or paid collections accounts.
4. Get your mortgage pre-approval
Pre-approval application requires submitting debt information and basic income to the lender. This step helps understand how much home loan you can get and at what rates. Pre-application also gives an impression to the lender that you’re serious about the property purchase.
5. Submit completed mortgage application
It is the official beginning of the mortgage loan process. You must provide your real estate, personal, and financial info at this step. You should be prepared with the following details and related documents:
- employment and income history
- list of dependents
- tax returns
- investments and assets
- marital status
- liabilities/debt
- property address
- social security number
- financial and legal declarations
The lender will verify the submitted information and calculate the loan estimate accordingly.
6. Review the loan estimate
Upon receiving your loan estimate, you’ll get a visual representation of your loan. Generally, it’s a three-page document illustrating:
- loan amount
- interest rate
- the cost of the loan (including discount points, origination fee, processing costs, etc)
- the estimated amount of monthly installments
- closing costs and additional charges
The lender usually takes three days to calculate the loan estimate.
7. Loan processing
If you show interest in taking your mortgage application to the next step with the selected mortgage lender, you can initiate the loan processing process (paperwork). The entire process takes 45 – 90 days.
Loan processing entails the following –
- Verification of your assets, income, and employment status.
- Schedule an inspection of the new home you intend to buy
- Re-examine all your documents for regulatory and compliance reasons before the loan file is submitted to the underwriter.
8. Locking the mortgage loan interest rate
Interest rate lock periods can be 30 – 60 days or longer, depending on your confirmation for loan processing. It is to be noted that the interest rates vary according to loan programs, and they change daily according to market fluctuations.
However, some mortgage providers also offer a lock float-down mortgage rate that gives home buyers only one opportunity to exchange their loan rate. Nevertheless, it is advised not to take too long to lock the interest rate, as it may put your loan approval at risk.
9. Underwriting and confirmation of borrower’s information
Underwriting is one of the crucial steps of the mortgage process. At this stage, the lender check’s the applicant’s eligibility and confirms the info they provided. Moreover, they also determine whether your mortgage loan application is denied or approved. If need be, you’ll need to provide additional documents for verification.
10. Conditional approval of the home loan
Your loan application may get approved if you satisfy or resolve the following terms and conditions and submit the new documents (as asked by the lender) –
- Mortgage insurance proof
- Homeowners insurance proof
- Flood insurance proof
- Copy of marriage certificate/divorce decrees
- Additional documents such as tax transcripts, bank statements, Cash reserves proof, etc.
11. Closing and issuing disclosure
Once you have satisfied the lender with all conditional approval conditions, you’ll get closer to your loan application approval. Finally, the lender will prepare the final documents and approve your mortgage loan. At this stage, the title company drafts the loan’s closing disclosure which takes around three days from the date when disclosure is issued.
During this process, the lender wires the loan amount to the closing officer, who confirms the receipt and records the loan details. On the closing day, you’ll be required to sign the documents. After that, the closing agent may visit your place, or you’ll have to visit the title company for the same.
After completing the entire process, you’ll get the keys to your new home. In the case of refinancing, the funds will be available in your accounts after three days of signing the documents.
Endnote
The mortgage approval process is complicated as there are a lot of steps involved in it. The entire process can be both stressful and long. Hence, it’s best not to rush with it. Instead, carefully review your documents before submitting them with the mortgage application.
In addition, make sure to understand everything related to the process to avoid any surprises later on. If need be, take the help of an expert. Most importantly, avoid any kind of mistakes which could risk your home loan approval or affect your eligibility for a mortgage loan.
