On Real Estate & More – October 2021

Purchasing a home and going through the mortgage loan process can seem daunting, especially if you’re a first-time home buyer. A home purchase is one of the biggest investments you will make, so it helps to know what is happening at each stage of the process, so you can be prepared to make good decisions. Luckily, you don’t have to do it alone. Your real estate agent and mortgage loan officer will be your guides. Every lender handles mortgage approvals differently and will have a slightly different process, but the following is generally what to expect when going through the loan process to purchase a home.

Step 1—Prequalification. As you begin searching for a home, real estate agents and sellers want to see you’ve been working with a mortgage lender so they know you can afford to buy a home.

  • First, meet with a lender to get prequalified. Here you submit some basic income and debt information to a lender for pre-qualification. It’s a practical first step that will help you understand how much you can afford.
  • A preapproval letter takes it one step further by verifying the financial information you submit to get a more accurate amount.
  • Pre-approval is issued which verifies the financial information you have submitted

Step 2—Mortgage application. This step starts once you’ve made an offer and entered a contract on a property. Completing a mortgage application is the official beginning of the home loan process, where you’ll fill out your personal, financial, and real estate information. You should be prepared to share the following information:

  • income and employment history
  • tax returns
  • marital status and list of dependents
  • assets and investments
  • debt and liabilities
  • legal and financial declarations
  • property address
  • Social Security number (so that your credit can be checked with your permission).

The lender will perform an initial verification of your information to decide how much they may be able to lend you and at what interest rate. This will be provided to you via a document called a loan estimate.

Step 3—Review the loan estimate. Upon receipt of your application, the lender has three days to provide you with a loan estimate. This step of the loan process is a very important piece when it comes to decision-making. This document will illustrate your:

  • loan amount
  • interest rate
  • estimated monthly payment
  • loan costs (origination fee, discount points, processing costs)
  • closing costs and other fees the lender (or its third-party partners) may charge

Step 4—Loan processing. After reviewing your loan estimates, you’ll complete an intent to proceed with your selected lender. This is when loan processing begins, and you get into “paperwork” stages. During loan processing, you can expect the following steps.

  • Lock interest rate
  • Appraisal and title work received. Your loan processor will likely request an appraisal before moving your file to underwriting. The lender wants to protect the investment they are making so they hire an appraiser to determine the property’s true market value based on current real estate conditions.
  • Loan package submitted to underwriting
  • File reviewed by processor. Next-up after processing is underwriting. This is where the lender will check your eligibility, confirm the information you’ve provided, and determine if you are approved or denied. It is a very thorough stage, and it may result in conditional approval.
  • Loan processor gathers conditions. With conditional approval, the lender will approve the loan if you can resolve/satisfy any conditions they determine are necessary such as proof of mortgage insurance, homeowner’s insurance, flood insurance, or requests for additional documentation—like copies of bank statements, W-2s, tax transcripts, proof of cash reserves, etc.
  • Once you satisfy all underwriting conditions, you’ll receive a clear to close/final loan approval. This is when the lender is ready to prepare final documentation and fund your loan.
  • Closing disclosures received. The title company will schedule signing of your closing documents—which, by law, can be no sooner than three days after the closing disclosure is issued.
  • Loan documents ordered

Step 5 – Final items prior to closing.

  • Loan documents prepared and sent to escrow
  • Buyer loan documents signed & returned
  • Loan funds
  • Loan records with the county

Congratulations, you’re a homeowner!