What To Expect During The Mortgage Process
You're likely to be surrounded by professionals who have been there before. We've compiled the steps and instructions you should expect. This guide can help you feel at ease, no matter where you are on the journey.
Getting Pre-Approved
Contact a lender to get a preapproval.
Preapproval is a letter sent by a lender indicating that you are eligible for a loan amount. This letter shows sellers and your agent that you are serious buyers. It can also be helpful in hot markets, where sellers might be considering multiple offers.
The lender will ask you some questions and pull your credit reports to pre-approve. Your credit report will show you your credit history, credit accounts, and payment history. Lenders use this information to determine the amount of credit you are eligible for. This amount will allow you to save time and focus on properties within your price range.
Making An Offer
Now that you have your preapproval, you can start looking for properties that meet your criteria. Your agent will help you determine which homes would be a good match and how to schedule showings.
Your agent will help you structure a deal once you have found THE ONE. Your offer will outline how much earnest money you intend to deposit with your offer, how much down payment, and how much financing you are planning to use. The earnest money deposit typically amounts to 1% to 22% of the sale price. These funds are transferred to your down payment and released from escrow.
You can also include contingencies in your offers, such as having the seller pay for refinishing the wood floors or the timing of your home inspections.
Acceptance of your offer becomes binding for you and the seller. So make sure to read it carefully.
How To Apply For A Loan
This is the right time to apply for your mortgage. Any lender can do this step. This means that you don't have to choose the lender who pre-approved you. It is a good idea also to request quotes from multiple lenders.
Lenders will want to know about your income, employment, and debt. Therefore, you should be prepared to give current bank statements (checking, savings, and checking accounts) as well as W-2s dating back several years. Also, be prepared to explain any discrepancies you may have in your credit history, such as late payments, being turned to a collection agency, or bankruptcy. If you anticipate these situations, it is a good idea to have dates, amounts, and causes.
There are many types of mortgages to suit your needs. These mortgages can be either fixed or adjustable rates, conventional or government-issued (VA, FHA, or USDA). You will need to provide proof of military service if you apply for a VA loan. The lender will explain the best fit and give you a Loan Estimate. This includes estimated closing costs, interest rates, monthly payments, principal, interest, taxes, and insurance.
Settlement fees are the cost of closing the loan. Prepaid expenses (put into an escrow account for homeowners insurance and mortgage insurance) are also included in closing costs.
You must get Loan Estimates within three business days of your application.
Underwriting And Loan Processing
Many things will happen behind the scenes at the lender shop when you decide to take out a loan. Lender loan processors will collect documentation about you and your property in order to create a "loan package."
When it comes to the approval of your loan, the main decision-makers are the underwriters. They will verify the accuracy of your documentation and match your eligibility with the loan product that you have applied for.
After everything has been reviewed, an underwriter will decide whether to approve or deny the loan. The underwriter may also approve the loan subject to certain conditions. For example, they might ask for explanations about late payments or collections.
Before Closing
Once you are approved, the lender will notify you and send your loan file to the title agency (or an attorney) for closing. There will be lots of paperwork but don't worry! The Closing Disclosure is one of the most important documents. You should be familiar with it. It is the finalized Loan Estimate that confirms the loan's cost.
The Closing Disclosure should be closely related to your Loan Estimate. You have the right to inspect the Closing Disclosure up to three days before closing.
But there's one more thing. To ensure that all contractual repairs have been completed and that the property is ready for your move-in, you will need to walk the property one last time before closing.
Closing Your Loan
Only one thing stands between you signing the paperwork and homeownership. Bring two forms of identification and be ready to spend at most two hours. Don't rush, and be prepared to spend at least two hours.
The Following Documents Are Key To Your Review:
The Closing Disclosure (which should be provided to you three working days before closing)
The Promissory note (indicating the loan amount and terms)
The Deed of Trust is a document that secures your note and allows the lender to claim the home if the borrower fails to pay.
Certificate of occupancy (which you will need to obtain if your house was built new)
If closing costs are not included in the loan amount, you may also need a cashier's check. A checkbook is also useful for small differences between the final amount and the estimated balance.
Once everything is signed, it's done! Your loan will be funded and recorded by the title company.
