The mortgage loan process can seem foreign and overwhelming to people especially if you are a first-time home buyer. The loan process is fairly straight forward but be prepared to hand over your financial information, other paperwork, and remember to try and be patient. This post will explain the mortgage loan process and the steps along the way.
The first step in the loan process is pre-qualification. In this step your financial information will be analyzed to determine how much house you can afford. There are different loan programs that will lead to different values, so make sure to get prequalified for each type of program that you are eligible for.
Now that you know how much you can afford for a home you can start looking for places in your price range. Make sure to show your pre-approval letter to real estate agents when you are interested in a house to let them know that you are serious about buying the home.
The next step is to complete your loan application. This application will provide information about the home you are planning on buying as well as some other personal information. You will receive a Loan Estimate within three business days which will inform you on the rates and necessary costs for acquiring the loan. You will then need to sign an “Intent to proceed” form, to acknowledge you have applied for the loan.
After the application has been submitted the processing of the mortgage begins. The processor will order a credit report and review it to verify your debts and payment histories. If you have any important outstanding late payments or collections for judgement, you will need to fill out a written explanation. The processor will also examine the appraisal and title report checking for property issues that may require future investigation. They will create a report and the loan moves on to underwriting.
The underwriter will analyze the report sent over by the processor. The underwriting step is very important because this is when they will decide whether it is an acceptable mortgage loan. They will pay the closest attention to your income, your current debt, and your borrowing history. An appraiser will also visit the property to determine if it is worth what the loan is worth.
After the underwriting process and after the loan is approved you will move on to the final stage, closing. Before you sign the paperwork to make it official you will receive a document called the “closing disclosure” that will outline all the details of the loan. At your closing you will need a cashier’s check for your down payment, ID, proof of insurance, review the finals loan documents, and sign the loan documents.