Understanding How the Mortgage Process Works
Updated: Aug 27, 2021
With a little knowledge and preparation, you can enjoy a fast and easy home financing experience.
The familiar saying “knowledge is power” is especially applicable to the mortgage process. The more knowledgeable you can become about everything that’s involved with purchasing a home, the more empowered you’ll feel as you move through the steps of securing a home loan.
Reading up on mortgage terminology and trying your hand at calculating your monthly mortgage payment are good places to start. Next, you should familiarize yourself with the loan process below so you know what’s required and what you need to do to get from application to closing.
The 6-Step Loan Process
1. Get your documents together.
The following checklist will help you gather the documents you’ll need to apply for a home loan.
Residential loan application, aka Form 1003, which includes a Fair Lending notice, loan info sheet, and credit authorization
Previous 2 years’ W-2s
Previous 2 years’ tax returns
Most recent rental agreement (if you own rental units)
3 most recent bank statements
Most recent statements for mutual funds, IRA/401(k), or stock accounts
Settlement agreement and divorce decree (if applicable)
Bankruptcy filed (if applicable; schedule of creditors, discharge notice, and filing)
A letter explaining how you will use the loan proceeds (for cash-out refinances)
Your Green Card or H-1 or L-1 visa (for non-U.S. citizens)
The first mortgage note (for second mortgages
2. Get pre-approved for a mortgage.
You may come across terms like pre-qualification and pre-approval when researching mortgages. While they sound similar, they’re actually very different. When it comes to buying a home quickly, one is far better than the other.
Pre-qualification determines your ability to repay a loan based on asset and income information you provide. Pre-qualification often takes only minutes online or by phone. While it can give you an idea of what you may be able to borrow, it does not involve a detailed analysis of your credit and finances.
Pre-approval is a more rigorous process where your information is reviewed and verified by an underwriter. This involves an analysis of your financial status and credit history. With a pre-approval, you’ll be able to set your budget, negotiate confidently, and close faster.
3. Shop for mortgages and rates.
Many types of loans are available with different requirements and benefits. Your experienced, licensed Mortgage loan officer can help you find a loan product that will best suit your needs based on your current financial situation and future goals.
For instance, if you plan on selling your home after only a few years, an adjustable rate mortgage (ARM) might be a viable option. If you plan on living in your home for a long time and you prefer consistent monthly payments, you may want to consider a fixed rate mortgage.
4. Apply for a loan.
You can start the process today by:
Filling out a pre-qualify form.
Requesting a free rate quote.
5. Get approved for a loan.
After applying for your mortgage, the loan review and approval process begins. We will verify your credit, employment history, assets, property value and more. Check out our Home Buying Guide and follow the guidelines below to help your loan move smoothly and quickly through processing and underwriting.
Complete your application thoroughly.
Respond promptly to requests.
Disclose all other loans and credit.
Be accessible when scheduling a closing date.
Don’t make any major purchases.
Don’t move money around in your accounts.
6. Close on your loan.
Almost done! Once your loan has been approved, we’ll reach out to you to schedule a closing date. You’ll review final documents and make sure the rates and amounts are what you have agreed to. You’ll also pay closing costs and your down payment with a certified or cashier’s check from your bank. Bring your photo ID and Social Security card to this meeting. Once your loan has been funded, you’ll get the keys to your new home!
Let’s do this!
Owning a home is an exciting and fulfilling aspect of life, and we want your home financing experience to be positive and memorable. We hope the knowledge you’ve acquired in this article has given you the confidence to take the next step. Start the conversation with your friendly and helpful Mortgage loan officer today!