Applying for a mortgage might feel like venturing into uncharted territory for first-time buyers. Even when you have a lot on your plate, you may be wondering what exactly needs doing, by when, and for what purpose. Starting with pre-approval and ending with the day you get the keys, this article covers all of the mortgage process stages.
Having a pre-approval letter from your lender in hand is the best method to approach a real estate agent today. This demonstrates your readiness and financial means to make a purchase.
It doesn’t take long to get pre-approval. Tri-merges include requesting credit reports from all three major bureaus to provide you with a complete picture of your credit history and current score. Lenders can view your payment history (to ensure that debts have been paid on time and in full) and credit limits within the credit report (past and present).
Your loan eligibility will be determined by your lender during the home loan process. You may save a lot of time searching for a property if you get pre-approved first and then just look at homes that are within your price range.
Look for a home
Looking for a home is one of the most exciting mortgage process stages. Most homebuyers begin their search for a new residence long before they have been pre-approved for a mortgage, and often even before they have really considered making a purchase. But if you’ve done all of the above, you’ve got your pre-approval and can start searching seriously.
You have several options for finding a property. Auctions, listings, and online portals are full of properties waiting for you! You can even do this from far away in case you’re buying a house remotely! Thanks to the internet, finding a perfect home has never been easier.
Make an offer
When you’ve finally discovered the perfect home, it’s time to make an offer. With your pre-approval in hand, sellers will understand that you mean business. This is something your real estate agent may assist you with, as various sellers will expect multiple bids.
Earnest money, a deposit showing genuine interest in a property, is typically required at this time. A typical earnest money deposit is from one to two percent of the purchase price. If the deal goes through, this cash will go toward the down payment. Of course, your offer should always include a clause that allows you to back out of the contract under certain conditions. These safeguards are in place in case the home you’ve decided on turns out to be less than ideal.
Settle on a lender
You’ve located a house you like and had an offer accepted on it, so now it’s time to settle on a lender. You are free to keep the same lender with whom you were pre-approved or to switch to a different lender. You should get quotes from at least three different lenders before making a final decision.
Compare the interest rates and costs of many lenders, and find out what options are available to you.
Complete your application
The preliminary approval procedure was where the majority of work was done on this application. However, borrowers will need to submit some new paperwork in order to get their loan applications approved.
Your lender, for instance, will want both the signed Purchase Agreement and evidence of the earnest money payment. Your lender may request pay stubs, bank statements, and other proof of current income and assets. It’s more work if you’re self-employed. The submission of tax returns may be required.
You’ll need to provide proof to your lender if you plan to rely on benefits from sources like Social Security or a long-term disability policy.
A Loan Estimate detailing your home loan’s precise interest rate, closing costs, and other details will be sent to you within three business days.
Get a solicitor
Now that you have completed the application, it is time to see a lawyer. To officially change hands and become the new owner, you will need to exchange deeds. The following are some of the things a lawyer will verify:
- That you’re not overpaying for the property
- That nothing is wrong with the infrastructure, and there are no legal concerns
- That you have the means to pay for everything
- That you understand your legal duties
This procedure takes as long as it takes you to find a reliable lawyer. It’s important to have trust in your lawyer so that you can take your time during this stage.
Following submission, underwriters will evaluate your application. Mortgage underwriters are the most influential in the mortgage approval process and will ultimately decide whether or not to grant you a loan.
You should expect the underwriter to perform a comprehensive examination of your mortgage application, among other tasks. For instance, under most circumstances, a borrower will be expected to pay for an assessment of the property before getting a mortgage on it. The underwriter will use the results of this appraisal to decide whether or not the proceeds from the sale of the property will be sufficient to repay the mortgage loan.
Insurers will let you know what they think of your application after they’ve reviewed it. This might mean agreeing to the loan terms as presented, declining the loan, or approving the loan with certain stipulations. For instance, your mortgage might be authorized with the stipulation that you provide more details regarding your credit history.
If the lender approves your application, you can secure a fixed interest rate. It’s the last rate of interest you’ll pay on your mortgage.
The last of the mortgage process stages is closing on a home purchase once a mortgage application is accepted. Once you’ve signed the final line on the final page, you may call yourself a homeowner. This is all you’ve been working towards, so take the keys and move in!