A Step-by-Step Guide to the Mortgage Loan Process – Bridge Payday
You’ve chosen to purchase a house. Perhaps you’ve attempted to contact a real estate agent, who most likely instructed you Bridge payday consolidation to call back after you’ve been “preapproved.” The next question immediately arises: “How do I begin the process of obtaining a mortgage loan?”
If this is your first time purchasing a home, the mortgage financing procedure might be intimidating and unfamiliar. “Is my credit score good enough to qualify for a loan?” you may be asking. How much time does it take? “How do I begin?”
To alleviate all of those worries and more, below are the processes involved in obtaining a mortgage.
The Nine Steps To Obtaining A Mortgage
1. Obtain Preapproval
The first step we suggest to every home buyer is to get preapproval for a mortgage. A preapproval is a straightforward concept: Prior to exploring what’s available, you should be confident that you understand how much a lender will loan you.
As you may have already discovered, real estate brokers will not devote much of their precious time to you without a preapproval (particularly in a seller’s market). They operate on commission, and they – and sellers – may not take you seriously until you provide them with a preapproval letter. To learn more about our Verified Approval procedure in detail, click here.
When you apply for preapproval, your credit history is checked. This provides the lender with two pieces of information: your credit score and access to your credit record. A credit score of 580 is required to qualify for a Federal Housing Administration (FHA) loan and 620 is required for a conventional loan via Fannie Mae or Freddie Mac. While a VA loan guaranteed by the United States Department of Veterans Affairs does not demand a certain credit score, lenders may establish their own requirements. For VA loans, Rocket Mortgage® requires a credit score of at least 580.
Along with your credit score, lenders will look at your debt load and if you’re attempting to purchase a home while having bankruptcies or collections on your record. If you do have anything similar on your record, you may still qualify for a mortgage, but you may be limited to certain lending possibilities.
Additionally, the lender will inquire about your income and assets up front in order to determine your debt-to-income (DTI) ratio.
Additionally, you’ll be matched with a preliminary lending program, but this may alter during the process.
2. Get Your Documents in Order
In essence, most lenders demand information about your debts and assets, credit history, job history, and evidence of income and employment. Bear in mind that you will not need all of this evidence to get preapproval for your loan. However, the more information you provide your lender upfront, the better your preapproval will be – since both you and the seller will feel more certain that your loan will ultimately be accepted.
Let’s take a look at the paperwork you’ll need to submit with your mortgage application.
You’ll need the following to verify your debts and assets:
Recent statements from your investment portfolio, which may include retirement, mutual fund, and stock and bond accounts.
Receipt of bequests
Your existing mortgage documentation
Other outstanding obligations, such as vehicle loans or college loans, must be verified.
When your loan provider verifies your credit history, he or she may require the following:
Permission to see and copy your credit report
A rationale for any financial catastrophes that show on your credit record, such as bankruptcies, foreclosures, or delinquencies.
Finally, establishing your work and income history will involve the following:
Your current employer’s name, address, and contact information
Two years’ worth of W-2s
If you are self-employed, you should keep profit and loss statements.
Evidence of child support, alimony, or any other kind of income
1040 tax returns
Income and asset evidence may be submitted at a later stage of the underwriting process, but providing it upfront will likely give you a better idea of how much you can afford to pay.
3. Establish a Budget
Your preapproval letter will indicate the maximum amount of money that a lender is prepared to offer you. However, just because you may borrow a particular amount does not mean you must stretch your budget to the breaking point. You may use a mortgage calculator to enter alternative purchase prices and get a realistic estimate of your monthly mortgage payment. Additionally, you may include the cost of taxes and insurance if you know what they will be.
You want to ensure that you have enough money saved for emergencies, investments, and other needs each month. Don’t forget to budget for some fun money as well!
4. Begin the house hunting process
Going out and looking at houses is often the most exciting aspect of the mortgage process. Each residence allows you to picture what your life would be like if you lived there. Even though this is often the most pleasurable portion of the process, you’ll want to begin with a sound game plan.
Depending on your budget, you may or may not be able to locate a house that has all of the features you like. With that in mind, it’s a good idea to create a list of your top objectives for the properties you’re considering to ensure that you maximize your time throughout the house search.
Once you’ve compiled your wish list, we suggest contacting a real estate agent. They are familiar with the market. They view hundreds of properties each year and can work with you to discover something that fulfills your requirements while remaining inside your budget. Our partners at Rocket HomesSM can assist you in connecting with an agent that can assist you in locating a home that meets your criteria.
5. Make A Proposal
Assume you’ve discovered the ideal home. Now is the time to submit an offer. There are various points to consider in this instance. You’ll collaborate with your real estate agent or attorney to draft the purchase agreement, which will contain your offer for the purchase price and a list of any items in the home you choose to include in the transaction.
While these aspects are flexible, sellers are likely to desire a contract with the fewest possible strings attached – one that is as pure as feasible. This may include avoiding requests for seller concessions and furniture inclusion in the purchase.
Additionally, this is the step at which you will make an earnest money deposit. This is a percentage of the purchase price paid to the seller upon acceptance of the offer to demonstrate your commitment to the property.
6. Closing The Loan
After legally securing your offer via a purchase agreement, you’re prepared to apply for a mortgage and settle the loan’s details. If you haven’t previously done so, you’ll need to explore the sorts of mortgages for which you qualify, compare their rates, decide on a down payment amount, and choose a term length.
Following that is the paperwork. While you may have completed the majority of your application paperwork during preapproval, you may need to obtain some final papers before being approved to close. Loan officers will want any further information on your debts, assets, credit, and income that you have not previously submitted.
When your application is complete, your lender will offer you with a loan quote. This document does not indicate that you have been accepted, but it will describe the terms of your mortgage, including the total loan amount and the estimated value of the property you want to purchase.
7. Pending Underwriting
Once your offer is approved, your banker is notified and the purchase agreement is returned to him or her. The banker will go through your choices to ensure you are enrolled in the appropriate loan program. After that, your loan is subjected to underwriting.
An underwriter will check your income, assets, and employment throughout the underwriting process and compare them to the information on your credit report. While lenders routinely check a prospective borrower’s credit report at the start of the process, a preapproval is only valid for 90 days.
If you’ve been home looking for some time, the lender may need to run your credit again. Make a conscious effort to avoid taking on more debt throughout the house-hunting process. Attempting to do so while also attempting to purchase a home may jeopardize your loan.
Prior to closing on the property, you and your lender will normally agree on a time frame for locking your interest rate. Due to the fact that mortgage rates vary multiple times each day, a mortgage rate lock ensures that your interest rate will remain constant until closing or for 30 – 60 days after the lock takes effect.
Additionally, this is the time period during which your lender may request additional or updated documents if they need it for approval considerations.
8. Arrange For An Appraisal Of Your Home
While you are going through the underwriting process, your lender will arrange for a house evaluation. By confirming that the house is worth the amount agreed upon with the seller, the appraisal protects both you and the lender.
Throughout the appraisal process, the house is compared to similar homes in the neighborhood. That means that if the property you’re purchasing is a two-bedroom ranch with a newly remodeled main bath, the appraiser will search for comparable homes in the neighborhood, analyze the sales data, and provide you with a monetary estimate for the house you’re considering.
If the appraisal comes in lower than the sales price, the seller has three options: reduce the price to the appraisal value; bring the difference between the appraisal value and the selling price to the closing table; or walk away from the house (if you have an appraisal clause in your purchase agreement).
9. Make Final Preparations
After the underwriting procedure is completed, the moment has come to come to the closing table. At your closing meeting, you’ll bring picture identification, a copy of your Closing Disclosure, your down payment, and any other closing charges, and then sign the mortgage and take ownership of the deed.
There are many strategies for minimizing the closing fees you are required to bring to closing. One technique to do this is to increase the price of your offer in order to persuade the seller to pay for more items. This manner, the closing expenses are included into the loan.
How Long Is The Mortgage Loan Process?
Now that you understand how the process works, how long does it take to purchase a house? That varies by individual, but let us attempt to give you a general notion.
Mortgage Preapproval: Within One to Two Days
You may get a preapproval from Rocket Mortgage by providing your bank’s income and asset paperwork. Even if you start the process over the phone, the majority of consumers can anticipate being preapproved within a day or two.
Mortgage Loan Closing Timeframe: 30-60 Days
Once we get your purchase agreement and begin the underwriting process, we make every effort to finalize your loan as quickly as possible.
Apart from the search for a property, the next major stumbling block in the process might sometimes be scheduling an appraisal. There are sections of the nation where appraisers are in limited supply. If you’re considering purchasing in one of these locations, it’s critical that both the buyer and seller have reasonable expectations.
You may significantly speed up the process if you provide all requested paperwork on time. This may be the one aspect of the mortgage procedure over which you have the greatest direct influence.
The Bottom Line: Educating Yourself About The Home Loan Application Process Is The First Step Toward Purchasing A New Home.
Once you’ve made it all the way to closing day, you’ll be rewarded with a new house and the formal owning status. Crossing the finish line might seem to be a lengthy, hard task. However, mortgage candidates who are acquainted with each stage along the road are in the greatest position to ensure the smoothest possible processing of their application.