Although every home buyer may have a different scenario, most mortgages follow a basic fundamental process. If you’ve never gotten a mortgage before, or if it has been a long time since you’ve navigated the process, here’s what you can expect during the mortgage application journey.
Step 1: Submitting Your Application
The first thing you’ll likely do when applying for a mortgage is fill out an official application document. This is presuming you’ve already gone through the pre-qualification and/or pre-approval steps. (If you’re not sure about pre-qualification versus pre-approval, read our related post here.) When filling out your application, you’ll provide your lender with all the basic information they’ll need: your name, date of birth, social security number, etc. You may also need to provide information relating to your income, credit score and other financial-related information. This information will need to be verified by your lender in order to pre-approve (and later approve) your loan.
Step 2: Collecting Documents
After submitting your mortgage application, your lender will need to gather the necessary documents and send them to the underwriter.
Step 3: Underwriting
A mortgage underwriter is someone who looks at an applicant’s financial information and assesses the amount of risk the applicant poses to the lender. The underwriting stage will help determine whether or not the potential borrower is approved for financing, and if so, how much and at what interest rate.
Step 4: Documentation to Support Underwriting
Sometimes the underwriter will need additional documentation to verify the information on your application. It’s important that you respond ASAP to any requests your lender makes during this period, to ensure the rest of the underwriting goes as quickly and smoothly as possible. If the underwriter uncovers any issues, such as late payments or collections, you may need to provide a written explanation.
Step 5: Closing
Once all documentation has been provided, verified and drawn up, and any and all issues have been resolved, the next step is closing the loan. This is the big day in which the lender will send all the closing documents and instructions on how to prepare them to the closing attorney or title company. Be prepared to sign a stack of paperwork, but don’t just plow through each piece of paper without reading its contents. Remember, this is a huge financial contract for which you will be legally responsible. Pay close attention to the Closing Disclosure, which confirms the costs laid out in your Loan Estimate. If there is a discrepancy, or if you have any questions, don’t be afraid to stop and ask your real estate agent or attorney for guidance.
Step 7: Funding
Once the closing documents are signed, sealed and delivered to the appropriate institutions, the funding process can move forward. Congratulations, homeowner!
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