Mortgage 101: The Loan Process
The loan process can seem overwhelming and intimidating to many potential homebuyers. Here is a guide to help you understand the steps involved in the mortgage loan process, so you can prepare and feel reassured before you begin.
1. Organize your documents
The more prepared and organized you are before you start the mortgage process, the smoother things will go down the road. Take a look at our mortgage checklist for some of the documents and paperwork you will need to supply to the lender.
2. Get pre-qualified
One of the first steps in the loan process should be to get a loan pre-qualification from a lender. A mortgage pre-qualification is an estimate of how much the lender thinks you could be eligible to borrow based on your basic financial information. This should be done early on, before you start looking at homes, so you know how much home you can afford. This way you can focus on properties within your budget and not get distracted by homes that aren’t the right fit financially. Pre-qualification is an important first step to prevent delays in your loan application.
3. Apply for a loan
Once you’ve found the perfect home, you are ready to complete a full mortgage application. The mortgage loan application form asks for detailed information about you, your finances, and the property you wish to purchase. You will need to supply the lender with all of the required documentation for processing. The lender will examine this information, as well as your credit history. The down payment and various fees will also be discussed at this time. The borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) within three days of submitting the application, which itemizes the rates and associated costs for obtaining the loan.
4. Processing/ Underwriting
Once you have completed the mortgage loan application and submitted it along with all of the required documents, it will be turned over to the loan processing department and then to the underwriter. All of the information you supplied will be verified and your credit report and any other documents still needed will be ordered. A home appraisal will also be arranged at this point. After verification, an underwriter will receive your application. Underwriters work with guidelines to make the final decision to approve or decline your loan.
5. Closing the loan
Closing is the last step in the loan process. The closing appointment usually takes about 1-2 hours and is where you will sign all of the necessary title and loan papers. The loan will become official at closing, and you will get the keys to your new home after you sign all of the loan documents. There will be a lot of paperwork at closing, so be prepared. You will need to bring the following items with you to your closing:
- Your I.D.
- Proof of homeowner’s insurance
- A cashier’s check for closing costs and the down payment
