What to Expect During the Mortgage Application Process
If you have never applied for a mortgage, getting started can seem daunting. Fear of the unknown can even cause first-time homebuyers to put off looking for a home, even when they can afford one. This is completely understandable since it will probably be the biggest purchase you’ll make in your lifetime. To take some of the worry away, we have broken down the entire process into six easy steps so you can make your dream of home ownership a reality.
Step 1- Selecting your mortgage lender
The first step in your mortgage journey is selecting your lender. With so many lenders in the area, how do you pick the right one? A great place to start is with friends and family. Ask about their home borrowing experience and see if they can refer you to someone who was helpful to them. Once you have a list of potential lenders, call each and get a feel for their areas of expertise, as well as, their personality. You’ll not only want to find someone with lots of experience working with first-time homebuyers but someone you’ll be comfortable working with. Once you have selected a lender, schedule a discussion to review your financial goals so you can select a mortgage that will work best for you.
Step 2- Pre-Qualification and Loan Application
The second step in the mortgage process consists of loan pre-qualification and application. A pre-qualification will help you determine how much you can realistically borrow to purchase your new home. It is based on a snapshot of information you provide to your mortgage lender such as debt, income, assets, down payment, employment history and estimated credit score. During this stage, credit reports are not typically pulled and your financial background is not thoroughly examined. The lender is just trying to get a clear picture of your financial situation in order to make the pre-qualification as accurate as possible. They will then issue a pre-qualification letter. This letter is not a guarantee that you will receive a loan, but it shows sellers that you are a serious buyer who has done their homework and is shopping for homes in a realistic price range.
After you have selected a home and have an agreement of sale in place, you will complete a formal loan application. At that point, a mortgage lender will begin to gather the information that will be required to underwrite the loan. As part of the application process, you will receive a Loan Estimate from your mortgage lender that includes estimated costs of the loan. If a change should occur during the processing of your loan such as a revised loan amount, you will receive an updated Loan Estimate.
Step 3- Loan Submission
At this point, your mortgage lender has entered all your information into the loan application and it will be submitted for processing. The appraisal for your home will be ordered and any fees due will be collected. The appraisal is an important part of the process because lenders approve loans based on appraised value (not necessarily the sales price) to protect both you and the lender.
Step 4- Processing and Underwriting
Next your loan will move into processing and underwriting. The Mortgage Processor working on your loan will reach out to you to collect additional documentation needed to underwrite the loan. This will include an extensive review of income, employment, assets and credit history. Our mortgage checklist is a guide to help you determine what documentation you will need to provide. If the loan underwriter determines that everything is in order, a loan commitment letter will be provided at this time. The loan commitment is typically contingent on your financial health remaining unchanged.
Step 5- Prepare for Settlement
In preparation for settlement, your employment will be re-verified, a final credit review is performed and all the final underwriting conditions are cleared. After those final details are finished, your loan will be ready for closing.
Step 6- Settlement
You’ve reached the last step in your journey to home ownership! A few days prior to settlement, you will receive a copy of the Closing Disclosure. This document contains the terms of your loan and states the amount of cash that will be due at settlement. It is vital that you review this document carefully to make sure you are aware of all of the costs and terms and that there are no errors.
When you arrive at the closing table, you will need to have your photo ID and a certified check or wire transfer for the closing costs and down payment. There will be many documents to review and sign at closing and it is important that you understand what you are signing. Don’t hesitate to ask questions. Once all of your t’s are crossed and i’s are dotted, you will be handed the keys to your new castle. Congratulations, you are now a homeowner!
Without the right support, mortgage financing can be a very confusing and stressful time. But don’t fret, ENB’s Mortgage Experts are here to help you smile more and worry less through the entire process. Visit our company directory to learn more about each of our experts or call (877) 773-6605 to talk to someone today.