The mortgage process may seem like a daunting task, especially as a first time home buyer. However, when broken down into smaller steps, this process is quite simple.
The Mortgage Application Process
Pre-approval is the first step in the home owner process. A mortgage pre-approval is presented by a mortgage lender. The pre-approval letter states you are approved for a mortgage. This step requires you to fill out a loan application and provide the lender with financial background information.Other required many documents in the pre-approval process may include:
- Proof of income(Pay stubs)
- Proof of employment
- Tax document(W-2’s, Tax return)
- Credit report
- Social security number
Depending on the lender, the pre-approval process may take 2 to 4 weeks to complete. Your credit history and loan data will be reviewed and detailed in a pre-approval letter (PAL). PAL examines how much you can borrow, what loan you may qualify for, and the appropriate interest rate offerings. These letters are typically valid for 45-90 days.
When applying for your mortgage, there are several required forms. While there is a large amount of information needed for a mortgage application, most of the information is easy to access. Required information from mortgage lenders may vary, however below are a few items to keep you on track:
- Current Employer, their phone, street address, and your position
- Salary and how long you’ve been with your current employer
- 2 years of W-2
- Pensions, Social Security
- Public Assistance, Child Support
- Bank Accounts
- Real Property
- Current Mortgage
- Car Loans
- Credit Cards
- Street Address
- Expected Sales Price
- Type of Home
- Size of Property
- Real Estate Taxes
- Homeowner’s Association Dues
- Estimated Closing Date
Type of Mortgages to Consider
- Fixed or Adjustable
- Forward or Reverse Mortgage
- Conventional Mortgage
- Government Insured: VA Loan, FHA Loan, USDA Loan
- Jumbo Loan
If you are applying for a Veteran’s Administration (VA) loan you are required to provide proof of military service. In addition, a Certificate of Eligibility (COE) is also essential to receive a VA loan.
After the above information is collected, it is examined to produce a loan estimate. The loan estimate details the terms and predicts your total loan costs, such as closing costs, interest rates, and monthly payments.
In this step, a mortgage processor reviews the documentation package and files including:
- Credit report (if not pulled for a pre-approval)
- Title examination/legal work
- Property appraisal
- Property inspection(if required)
If necessary, the mortgage processor may request additional documentations during processing. The step reviews all documents and forms to ensure success in the mortgage application transaction.
In the underwriting process, a person called the underwriter, evaluates the information prepared in the previous processing step. They cross check documents, ensuring all the borrower’s requests are fulfilled. Furthermore, underwriters review the borrower’s credit history and capability to repay the loan. The underwriting process will also determine any indications of fraud in the mortgage application.
Once the information is reviewed, the underwriter either approves or rejects the loan. Sometimes, a loan approval may include conditions. For example, underwriters may ask for a written explanation of a borrower’s poor credit history. In addition, initial interest rates may lock in conditional loan approvals.
After all the conditions are met for a mortgage loan application, a closing meeting is scheduled.
Closing is the last step in the home purchasing process. This final step requires all the parties to sign necessary home mortgage documents. One essential document to consider is the closing disclosure. Similar to a loan estimate, the closing disclosure explores loan terms, monthly payments, and closing costs. Additionally, you have the right to review the closing disclosure three days before the closing meeting. This period provides an opportunity to examine all loan information. The following are key documents in the closing process:
- Closing Disclosure – A summary of loan terms, monthly payments and closing costs.
- Promissory Note – It’s the promise that you will pay the loan.
- Deed of Trust – Give the lender a claim against the home if you fail to fulfill the terms.
- Certificate of Occupancy – A legal document allow you to move into a newly constructed house
If you are a first-time home buy, consider the HomePath ReadyBuyer Program. This program educates first-time homebuyers about the mortgage application process as well as offers a favorable loan package. Borrowers can pay as low as 3% and get up to 3% back on your home’s purchase price. While there are a few requirements to qualify for the HomePath ReadyBuyers Program, it walks first time buyers through the mortgage application process.
Although purchasing a home may be a complicated journey, taking time to understand each step in the mortgage loan application process ensures an easy and successful path to home ownership.
Congratulations! You are now on your way to owning your own home.