Your guide to the mortgage process
The mortgage loan process can be daunting, especially if this is your first time buying a home.
Fortunately, you don't have to do it alone. Your real estate agent and mortgage loan advisor will be your guide.
However, it is still helpful to know what is coming in each phase of the process so that you are ready to ask the right questions and make good decisions.
The following awaits you:
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Mortgage Loan Steps (Go To …)
Estimate your budget
Buy for your home and make an offer
Order a house inspection
Go shopping and choose a lender
Complete a full mortgage application
Let the house judge
Mortgage processing and underwriting
1. Estimate your budget. How much home can you afford?
It is important to take certain steps before you start the mortgage loan process.
Most importantly, you estimate how much you can afford. In this way, you can set realistic expectations for finding an apartment and choosing a mortgage loan.
Instead of determining your maximum home purchase price, it may be better to determine the monthly payment that you can manage appropriately.
Then you can work backwards with today's mortgage rates to determine your maximum home buying power.
Budgeting tip: Instead of determining your maximum home purchase price, determine the monthly payment that you can manage appropriately.
Knowing mortgage rates is an important part of the equation.
For example, a change in the mortgage rate of just 1 percentage point could increase or decrease your purchasing power by almost $ 40,000.
Similarly, property taxes can be lower in a mature quarter than in a newly built one. and membership fees for a condominium can vary from building to building.
If you focus on a maximum monthly payment instead of a maximum home purchase price, you can be sure that you have a budget that takes into account all ongoing housing costs – not just mortgage capital and interest.
You also need to find out how much you save. Here you can find out how much you have for your down payment and closing costs.
2. Get pre-approved for a loan
Once you've estimated your own budget, you may be looking for homes in your price range. This is also when you take the first step towards a mortgage.
The first step is to get a pre-approval letter from a mortgage lender. This letter shows how much a mortgage lender has approved for you to borrow based on your savings, loans, and earnings.
You want to do this before you make an offer on a house.
A pre-approval letter gives your offer much more leverage as the seller has solid evidence that you are qualified for a home purchase loan.
Brokers generally prefer a pre-approval letter over a pre-qualification letter because a pre-approval has been checked to prove your eligibility.
Note: There is also something called "pre-qualification" that differs from "pre-approval".
Both terms mean that a lender is likely to be willing to lend you a certain amount of money. However, brokers generally prefer a pre-approval letter over a pre-qualification letter.
This is because pre-qualification letters are not checked. They are just an estimate of your budget based on a few questions.
A pre-approval letter was checked against your credit report, bank statements, W2s, etc. It is an actual offer from a mortgage company to give you loans – not just an estimate.
You don't have to stick to the lender you use for pre-approval when you get your final mortgage. You can always choose a different lender if you find a better deal.
Start your pre-approval here (June 27, 2020)
3rd Buy for your home and make an offer
Now that you've been pre-approved, it's time for the fun part – finding an apartment.
After you have visited the real estate with your real estate agent and selected the desired house, it is time to submit an offer.
Your real estate agent knows how to structure it. It contains contingent liabilities (or conditions) that must be met before the deal is closed.
When you make your offer, you usually also submit your serious money deposit.
Serious money is a cash deposit made to secure your home offer and to show that you are serious about the purchase. It can only be $ 500 or 5% of the purchase price or more, depending on your local custom.
Talk to your real estate agent in advance about how much the deposit should be and issue a check when making an offer. Especially if you shop in a highly competitive market.
4. Order a house inspection
After your offer is accepted, the next step in the mortgage process is usually a house inspection.
A thorough house inspection gives you important details about the house that go beyond what you may see on the surface.
Some of the areas that a home inspector checks include:
Structure of the HouseFoundationElectricalPlumbingRoofing
A home inspection is important because the buyer knows if a home may need expensive repairs.
What is revealed during an inspection can become part of a sales negotiation between buyer and seller and their respective real estate agents.
You may have already chosen a mortgage company when you pre-approved.
However, if you're still shopping after you've found a home and your offer has been accepted, it's time to make a final decision about your lender.
When buying a mortgage, keep in mind that your interest rate doesn't just depend on your application. It also depends on the type of loan you receive.
Mortgage buying tip: Check out some lenders' interest rates and fees, but also ask what types of loans you qualify for.
Of the four major loan programs, VA mortgage rates are often the cheapest and outperform conventional mortgage rates by up to 0.40% on average. Next is the USDA mortgage rate. In third place are FHA mortgage rates, followed by conventional rates.
So look at some different lenders' interest rates and fees, and also ask what types of loans you qualify for. There may be much better deals available than those advertised online.
For a detailed explanation on comparing offers and choosing a mortgage lender, go to: How to Buy a Mortgage and Compare Interest Rates
6. Complete a full mortgage application
After choosing a lender, the next step is to fill out a full mortgage loan application.
Most of this application process was completed in the pre-approval phase. Now, however, some additional documents are needed to get a credit file through underwriting.
For example, your lender needs the fully executed sales contract and proof of your serious money deposit.
Your lender can also request updated income and wealth documentation, such as: B. Pay slips and bank statements.
You will receive a credit estimate within three working days, detailing the exact interest rates, fees and terms of the loan offered.
7. Let the house judge
Your lender will hire an appraiser to make an independent estimate of the value of the home you have bought.
Most lenders use a third party company that is not directly related to the lender.
The rating shows you that you are paying a fair price for the house.
In order for the loan to be approved at the contractually agreed purchase price, the house must evaluate the contractually agreed purchase price.
8. Processing and drawing of mortgages
Once your full loan application has been submitted, the mortgage processing phase begins. For you as a buyer, this is usually a waiting period.
However, if you're curious, the following happens behind the scenes:
The credit processor prepares your file for underwriting.
At this point, all necessary loan supplements as well as your title work and tax certificates will be ordered.
The information on the application, such as bank deposits and payment history, is checked.
Respond to requests as quickly as possible during this period to ensure that underwriting is as smooth and fast as possible.
Credit deviations such as late payments, collection and / or judgments require a written explanation.
As soon as the processor has compiled a complete package with all checks and documentation, the file is sent to the underwriter.
During this time, the underwriter will review your information in detail. It is their job to search the information you provide for missing items and red flags.
They mainly focus on the three Cs of mortgage underwriting:
capacity – Do you have the funds to pay your loan?recognition – Does your credit rating show that you pay your debts on time?safety – Is the value of the property you are buying sufficient for the loan?
They may come back with questions during the drawing process. You should respond as soon as possible to ensure a smooth drawing process.
9th final day
You made it a big day: close.
The lender sends the final documents along with instructions to prepare to the graduate lawyer or title company.
Prepare for a large stack of papers that you will sign.
One of the most important documents is the closing disclosure. It should look something like the credit estimate you received when you originally filled out the full loan application.
The credit estimate gave you the expected cost. The closing disclosure confirms these costs.
In fact, the two should fit together pretty closely. Laws prevent them from being too different.
If everything is OK, sign all your documents, get your keys and just like that – you are a homeowner!
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FAQ on the mortgage loan process
How long does the mortgage loan process take?
For most lenders, the mortgage loan process takes about 30 days. But it can vary a lot from lender to lender. Banks and credit unions generally take a little longer than mortgage banks. A high volume can also change the turning times. In busy months, it can take 45-60 days for a mortgage to be closed.
What does it mean when your mortgage loan is processed?
"Mortgage processing" is when your personal financial information is collected and verified. It is the credit processor's job to organize your credit documents for the insurer. They ensure that all the necessary documents are in place before the credit file is sent to the underwriting.
What do loan officers look for when applying for a mortgage?
Your loan officer will review your credit report closely. You will look at credit scores. You'll also look at payment history, loan requests, loan usage, and controversial accounts. You want to have a strong credit history in which you have consistently repaid loans on time.
The loan officer will also review your income and wealth documentation very carefully to make sure you have enough cash flow for mortgage payments.
How do you know when your mortgage loan is approved?
Typically, your loan officer will call or email you once your loan is approved. Sometimes your loan processor passes on the good news.
What happens after a mortgage loan is approved?
There are basically two types of mortgage approvals: "conditional approval" and "final approval". Upon receipt of your application, either your loan officer or the credit processor will contact you with additional "terms" required to fully approve your loan. Once these conditions are met, you will receive final approval.
How long does underwriting take?
The underwriting subscription times can vary considerably depending on the institution. Many lenders will make a subscription decision in just two or three days. However, for some banks and credit unions, subscription decisions can take a week or even longer.
How long does an assessment take?
The property inspection carried out by the expert can take between 30 minutes and a few hours. Times vary depending on the size and details of the house. The full window – from requesting a rating from your lender to receiving your rating from your lender – is typically 7 to 10 days.
Why should an insurer refuse a loan?
Underwriters can refuse your loan for a number of reasons. Some problems seem minor, others more serious.
Some of the minor reasons for refusing your loan can be easily fixed and you can get your credit process back on track quickly. This may include additional documents to verify your income and employment, or a letter explaining why you have made a large bank account withdrawal.
Some reasons for refusing a mortgage may require major changes before you are approved for a loan. These include insufficient cash reserves, low creditworthiness or high debt ratios.
Do Underwriters Deny Loans Often?
According to the Consumer Financial Protection Bureau (CFPB), almost 11% of mortgage applications are rejected. If you are among these 11%, talk to your loan officer about the options you may have to have your loan application approved in the future.
What are today's mortgage rates?
Today's mortgage rates are exceptionally low. However, the prices vary greatly from customer to customer. So it's important to look around and find the best deal.
See what you qualify for today.
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