According to Forbes, the mortgage home loan process isn’t an easy undertaking, especially for first-time homeowners. As a new home buyer, you aren’t sure of what is expected of you and what you have to do.
Usually, you have to go through several approvals, make a down payment, and negotiate the price. However, the mortgage home loan process doesn’t have to be as confusing as it appears for most first-time home buyers.
Here are six key steps of the mortgage home loan process that will help make the whole procedure easier.
The first step is to acquire a pre-approval letter from a lending institution that shows your qualification for a loan of a specific amount. The letter demonstrates your commitment to purchasing a home to your agent and seller. Besides, it can be beneficial in high-demand markets where sellers have many offers to consider.
For a lending institution to pre-approve you, they’ll have to assess your credit report and ask you certain questions to determine your eligibility. Often, your credit report indicates your credit score, credit accounts, and payment history. Your potential lender uses these details to establish the amount of credit you qualify for. This is useful to you as it’ll help you focus on home offers within your price range.
The next step of the mortgage home loan process involves finding a house that matches your description. You should stick to the price range that the pre-approval step recommends. Therefore, you’ll need to engage a property agent willing to work within your limitations.
As soon as you come across a house you like and can afford; it’s time to make an offer to the seller through your agent. And if the seller agrees to your offer, you’ll have to sign a purchase agreement. The offer you make will detail the amount you’re willing to pay as earnest money, your down payment, and the amount you’re planning to finance.
As soon as you make an offer and sign a purchase agreement, you’ll have to get and finalize a mortgage loan application. Getting an application form is simple because most lending institutions use the same one. You can often get the Uniform Residential Loan Application (URLA) online.
Ensure you correctly fill out the loan application form and attach any relevant supporting documentation. For instance, you’ll have to include your W-2 forms, pay stubs, tax returns, and documentation indicating any loans or debt you have at the moment.
Once you apply for a mortgage loan, many things start happening behind the scenes in the lending institution. The lending institution’s loan processors will assemble documentation about you and the home you intend to purchase to develop a “loan package” for the underwriter.
Usually, underwriters are the main decision-makers concerning your mortgage loan approval. They’ll verify the correctness of the documentation in your file and compare your eligibility and the type of home with the mortgage loan package you’ve applied for.
Once the underwriters have reviewed everything, they’ll approve or reject your loan application. In some cases, they may approve your loan with specific conditions, including requiring you to explain the late payments in your credit history. In such cases, they may be the ones to decide how long to close after conditional approval.
The lending institution will notify you as soon as your loan application is approved and transfer your loan file to the title company. At this point, the Closing Disclosure document that confirms the cost of your loan will be availed.
You have a right to assess the Closing Disclosure within three days to confirm it matches your Loan Estimate before the close. At this point, you’ll have to do a final inspection of the home 24 hours before the close to ensure any necessary repairs are finalized.
The last step involves the title company setting up the closing. Here, both you and the seller will take some time to review and sign the necessary documents. Once all the conditions are fulfilled, the title is recorded, and you’ll be handed the keys to your new home!
Conclusion Getting a mortgage home loan from a lending institution is daunting, particularly for first-time home buyers. However, with these steps, you’ll know what is expected of you, and you’ll be much more prepared to go through the process smoothly.