Understanding The Mortgage Loan Process

If you’re looking to buy a house, know that it doesn’t happen overnight. The mortgage process can take up to 90 days or longer due to the number of steps involved. To make the steps easier, especially for first-time home buyers, it’s helpful to understand the mortgage process. Below, we’ll explain the essential steps you’ll need to take to obtain your new home loan.

Follow these eight steps to get a mortgage loan and become a new homeowner.

1. Figure Out What You Can Afford

Before you begin the mortgage process, it's important to assess your finances and make sure you’re ready to purchase a home. With a new monthly mortgage payment, it’s crucial to know if you can afford it, along with homeowners insurance, property taxes and the ongoing expenses of homeownership. Using a home affordability calculator is a great way to learn how much house you can afford. This tool can help you understand what home price is within reach.

2. Choose A Lender and Get Preapproved For A Loan

Mortgage preapproval shows you how much a mortgage lender is willing to lend you. Mortgage lenders calculate this amount and your interest rate by assessing your income, credit history, credit report, assets and credit score. Keep in mind that preapproval will make you more attractive to home sellers and real estate agents. This is because you’re already vetted and ready for the mortgage loan process.

3. Find Your Dream Home And Put In An Offer

Now it’s time to start looking for your dream home. Look at any homes you think could be the right fit, and don’t be afraid to ask your real estate agent for help during the house hunt. Once you find the perfect home, you’ll need to put in an offer. You’ll also submit your earnest money deposit to secure the offer on the home.

4. Finalize Your Choice Of Mortgage Lender

Once your offer is accepted on a new home, you can move forward and choose a mortgage lender. It’s best practice to shop around with at least a couple of different lenders to find the best interest rates and fees for your specific loan.

Keep in mind – your interest rate depends on your mortgage application and the type of loan you’re applying for. For example: Department of Veterans Affairs (VA) loan mortgage rates are usually better than average conventional mortgage rates. Meanwhile, Federal Housing Administration (FHA) loans tend to have more competitive rates. It’s important to question mortgage lenders to understand what they’re offering.

5. Submit Your Mortgage Application

After you’ve selected a mortgage lender, it’s time to fill out a mortgage application. Once you’ve submitted all of the necessary documents to complete your application, you’ll get a Loan Estimate in a couple of days that will disclose the terms, rates and fees of your home loan.

6. Go Through Mortgage Underwriting

The underwriting process consists of your mortgage lender reviewing your application and verifying your income, assets, debt and property details. Once verification is complete, you’ll receive final approval on your loan application. For the borrower, action may be required at this step unless the lender has any specific questions or needs any additional documents.

7. Prepare Your Down Payment And Closing Costs

This is where down payments and closing costs come into play. You’ll need to have the down payment for the property, closing costs and proof of homeowners insurance. This information can be found in the Closing Disclosure, which you’ll receive after mortgage underwriting has been completed. You’ll provide the cash needed for your down payment, closing costs and any other fees at your closing meeting.

8. Close On Your New Home

The final step is to attend your closing day meeting and officially become a homeowner. At this closing meeting, you’ll sign all necessary documents and ask any remaining questions regarding the sale or the property itself. Typically, the closing attorney or title company conducts this meeting in person, but e-closings are also available. Once everything is signed and handed over, you’ll receive the keys to your property, and you’ll officially be able to move into your new home.

The mortgage process can bring up lots of questions for home buyers. Consider some of these frequently asked questions about the mortgage process.

When should I begin the mortgage process?

You should begin the mortgage loan process as soon as you meet the financial requirements to buy a house. They include credit score, debt-to-income ratio and minimum down payment. You should also be mentally prepared to take on this transition before beginning the process.

How long does it take to get a mortgage?

The time it takes to get a mortgage depends on many factors, such as type of loan, time of year, lender and mortgage application. If everything goes smoothly, home buyers can expect to get their mortgage after about 1 – 2 months.

What is lender processing?

Lender processing refers to a mortgage lender’s processing of all required documents and information needed to make sure the borrower qualifies for the loan they’re applying for.

What do lenders look for when you’re applying for a mortgage loan?

Mortgage lenders look at a variety of factors to determine whether the borrower would be a good candidate for a mortgage loan. These include income, debt-to-income ratio, credit score, assets, employment history and property type.

How long after underwriting can you close on your loan?

Underwriting can take several days to several weeks. Once complete, you’re cleared to close on your loan. Closing usually happens a few days after you’re cleared.

How do I know when my mortgage loan is approved?

Borrowers will receive either a call or an email stating that their mortgage loan has been approved. The good news will usually come from a loan officer.

What happens after my mortgage is approved?

After your mortgage is approved, the closing process will begin, in which you’ll pay all fees, sign all documents and receive the keys to your new home.

How long does it take to close on a house?

The entire closing process will take about 30 – 45 days. The closing meeting itself will take only a few hours.

What are some things that might delay the mortgage process?

There are plenty of factors that might delay the home buying process, such as missing documentation, title issues or even negotiations with the seller. You may also experience delays due to appraisals, inspections or necessary repairs.

The steps in the mortgage process can be easier to tackle if you know what to expect. Do your research and use your real estate agent as a resource to make the experience smoother and prevent potential hiccups.

Ready to own a home of your own? Start your mortgage application today.