Understanding the structure of balloon loans is important to make more informed financial decisions. They differ signifi...
For most people, getting a mortgage requires preparation. The time the process takes can vary. But once a purchase offer has been made on a home, the time can feel like it’s ticking quickly. Mortgage lenders require borrowers to take an application process during which they assess borrower qualifications.
Getting a mortgage can be a complex process, but there are a few things you can do to prepare and make it go more smoothly. Here are some steps you can follow:
The first step to getting approved for a mortgage is applying for one. People can now apply for a mortgage online if they want the speed and convenience of applying from home. Most lenders can also take loan applications via a phone call.
Even if you’ve been pre-approved for a mortgage, you’ll still have to submit a formal application. Getting pre-approved can make the process progress more smoothly, but lenders still want to see the borrower’s most recent personal finance information.
Mortgage applications are normally sent alongside the borrower’s recent financial documents, which can include:
Depending on the type of mortgage you’re applying for and your lender, you may be asked for other documents or proof you meet their minimum financial requirements. If you’re self-employed, you may be asked to provide more proof of financial stability. This may mean providing more bank statements that date back further.
After a mortgage application has been submitted, most lenders get back within a few days with a loan estimate. A loan estimate is a document that outlines:
When you have a loan estimate, you will know the real rate you are being offered. At that point, some people opt to pay a larger upfront fee, which is essentially an interest prepayment. This is known as “buying points” and is included in the list of closing costs. Some people take this course of action if they plan on staying in the home for a long time.
Now that you have some loan estimates, it’s time to inspect them. This is where you can investigate the most important details of each offer before you choose a lender.
This is your opportunity to review:
Normally, different lenders will provide loan estimates that vary widely in cost. You can only know which loan will become cheaper by reviewing all the loan estimates you receive. You can also compare the results of buying points for each specific mortgage.
At this point, the mortgage lenders would have sent you a clear picture of what each mortgage would cost. The borrower’s responsible for choosing a lender based on their best judgment. Once the borrower has made their choice, they must commit to the terms that the lender has provided to get the mortgage.
The loan process begins after making a decision and submitting a formal application. The lender will check the information provided before approving the loan. They will receive several important documents which they will pass on to an underwriter. This includes:
Loan processors professionally gather and organize the information that concerns the buyer and the property. They then pass on the documents as a complete package for the underwriter. They also open the file for you so the process can get moving.
The mortgage underwriter is the decision-maker. They will be the one who evaluates the documents provided after it’s organized for them by the loan processor.
The underwriter is responsible for cross-checking the information provided to verify its authenticity and accuracy. They are there to ensure that the borrower and the property line up with the eligibility requirements of the mortgage. They also perform any additional verification, such as checking the military service of a borrower for a VA Home Loan. This is essentially a broad verification process where they look for red flags that point to potential fraud.
After verifying the information provided, underwriters review the borrower’s financial ability to repay the mortgage. They weigh the property, which serves as collateral, in their decision.
Finally, the underwriter decides to approve or reject the mortgage application. In some cases, they can approve the application under additional conditions. They may also ask for additional information, such as a written explanation of items in the borrower’s credit history.
If the underwriter signs off on the mortgage, the deal is cleared to close – but it isn’t closed quite yet.
A lender has a few responsibilities to fulfill prior to closing a mortgage. Title insurance is ordered, and documents that many in the industry refer to as the “loan docs” are drawn. They are printed and sent to the title company or attorney’s office. There, the closing meeting takes place.
One of the most significant factors in the closing process is the Closing Disclosure. The Closing Disclosure is a federally regulated form that essentially follows up on the loan estimate provided to the borrower. That’s because the loan estimate covers expected costs, while the Closing Disclosure actually confirms those costs. There are regulations that ensure that the two documents don’t contain information that deviates too much. However, there may be some small differences between the information on the two.
Borrowers have the right to review the Closing Disclosure for 3 days before the closing meeting. This is the final chance for a last review of the mortgage details. Borrowers are also entitled to a final walk-through of the property 24 hours prior to the closing meeting.
One can prepare for the mortgage process by taking these steps.