If you’re looking to buy a house, know that it doesn’t happen overnight. The mortgage process can take up to 90 days or longer due to the number of steps involved. To make the steps easier, especially for first-time home buyers, it’s helpful to understand the mortgage process. Below, we’ll explain the essential steps you’ll need to take to obtain your new home loan.
Follow these eight steps to get a mortgage loan and become a new homeowner.
Before you begin the mortgage process, it's important to assess your finances and make sure you’re ready to purchase a home. With a new monthly mortgage payment, it’s crucial to know if you can afford it, along with homeowners insurance, property taxes and the ongoing expenses of homeownership. Using a home affordability calculator is a great way to learn how much house you can afford. This tool can help you understand what home price is within reach.
Mortgage preapproval shows you how much a mortgage lender is willing to lend you. Mortgage lenders calculate this amount and your interest rate by assessing your income, credit history, credit report, assets and credit score. Keep in mind that preapproval will make you more attractive to home sellers and real estate agents. This is because you’re already vetted and ready for the mortgage loan process.
Now it’s time to start looking for your dream home. Look at any homes you think could be the right fit, and don’t be afraid to ask your real estate agent for help during the house hunt. Once you find the perfect home, you’ll need to put in an offer. You’ll also submit your earnest money deposit to secure the offer on the home.
Once your offer is accepted on a new home, you can move forward and choose a mortgage lender. It’s best practice to shop around with at least a couple of different lenders to find the best interest rates and fees for your specific loan.
Keep in mind – your interest rate depends on your mortgage application and the type of loan you’re applying for. For example: Department of Veterans Affairs (VA) loan mortgage rates are usually better than average conventional mortgage rates. Meanwhile, Federal Housing Administration (FHA) loans tend to have more competitive rates. It’s important to question mortgage lenders to understand what they’re offering.
After you’ve selected a mortgage lender, it’s time to fill out a mortgage application. Once you’ve submitted all of the necessary documents to complete your application, you’ll get a Loan Estimate in a couple of days that will disclose the terms, rates and fees of your home loan.
The underwriting process consists of your mortgage lender reviewing your application and verifying your income, assets, debt and property details. Once verification is complete, you’ll receive final approval on your loan application. For the borrower, action may be required at this step unless the lender has any specific questions or needs any additional documents.
This is where down payments and closing costs come into play. You’ll need to have the down payment for the property, closing costs and proof of homeowners insurance. This information can be found in the Closing Disclosure, which you’ll receive after mortgage underwriting has been completed. You’ll provide the cash needed for your down payment, closing costs and any other fees at your closing meeting.
The final step is to attend your closing day meeting and officially become a homeowner. At this closing meeting, you’ll sign all necessary documents and ask any remaining questions regarding the sale or the property itself. Typically, the closing attorney or title company conducts this meeting in person, but e-closings are also available. Once everything is signed and handed over, you’ll receive the keys to your property, and you’ll officially be able to move into your new home.