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Explaining the Whole Mortgage Process

Guide to getting a mortgage

If you are about to buy your first home, you will probably need a mortgage. The whole mortgage process can be intimidating and complex, but it can become much more accessible and seem more doable to most with preparation and knowing what to expect. Here is what you should expect and how the mortgage process works.

Before you start the process of getting a mortgage, you need to understand what type of mortgage is best for you. You should check out and consider multiple different types of mortgages available, like fixed-rate mortgages or adjustable-rate mortgages. After you have found the right mortgage for you, you can move on to the pre-qualification step!

Pre-Qualification For The Mortgage Process

Pre-qualification or pre-approval should be done before you actually go out and start looking at houses. It is a document that shows how much a mortgage lender is willing to loan you. Having this pre-approval document beforehand will show that you are a serious buyer when you start looking at properties. It also gives you a good idea of your budget when looking at houses.

In the pre-approval process, the mortgage lender goes through your credit history and credit report to determine how much the maximum amount they are willing to lend to you.

Application

After finding the perfect home for yourself, you can now apply for your mortgage. This will most likely be the same mortgage lender that provided you with the pre-approval, but if you look around and find better offers or rates, go for it!

You will have to submit multiple documents to your mortgage lender during the application process. Lenders can have different requirements, but the basic documents each lender needs include:

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  • An identification card (Passport or Driving License).
  • Proof of income.
  • Proof of address.
  • Your credit report.
  • Proof of deposit (on the home you are purchasing).

Make sure to ask your mortgage lender for all their requirements in order to make this process as smooth as possible.

Loan Processing

After you are done with the application process, you will be provided with a loan estimate. A loan estimate is a document that provides all the mortgage information you should need. It is formatted in an easy-to-understand way with full explanations to make sure you understand what you are getting into. If you have applied to multiple lenders, a loan estimate lets you go through, compare, and choose the best option for yourself.

A loan estimate is valid for ten working days, which means you have to accept it within that time frame. If you take any longer, the lender might change the terms or rates or maybe issue a completely new loan estimate to you. Once you accept a loan estimate, the mortgage lender starts processing your loan. This means going through and verifying the documents and information you have provided them.

Underwriting

Underwriters go through and review your application thoroughly. They require appraisals of the property you want to purchase in order to make sure the sale of the property would be enough to cover the amount loaned to you. Even though you yourself aren’t likely to deal with underwriters, they are the ones who actually decide if they approve of giving you the loan.

Once the underwriters have taken all the necessary steps, they will either accept, reject, or accept your loan with conditions. Conditions can vary and depend on your financial circumstances. They could mean compulsory repairs to the home you are purchasing or asking for additional requirements.

Closing The Mortgage Process

If your application is processed and approved, your mortgage lender will send you a closing disclosure form. This form contains all the estimated closing costs and final closing costs. If all the costs are in order, you just sign the document, and your mortgage is done! If not, ask for clarification from the lender or agent and accept the mortgage when all the terms are in order.

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Written By

Travis Barnett is an expert in finances backed by 10 years of experience as a financial analyst at CNB. He graduated from UCLA's Anderson School of Management in 2010 and has been in the field ever since. Travis now enjoys sharing his business experience with others as a financial writer in San Diego. In his spare time, he enjoys hitting the links and working on his golf swing.

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