in 7 steps
As exciting as it is to purchase a home, it can also be an intimidating process if you don’t know what to expect. Whether you’re a first-time homebuyer or looking to refinance, familiarizing yourself with each phase of the process can lead to a smoother experience from start to finish.
Let’s break down how to get a home loan and the 7 steps you’ll take on the path to homeownership:
1. Find a Mortgage Broker.
While a drive through your dream neighborhood might be all it takes to spark your homeownership journey, your first step is finding a local independent mortgage broker. Mortgage brokers help you navigate the housing market with more confidence as they can help you determine how much house you can afford. So whether you are looking to set a budget, or to find the best loan terms and rates available to you, seek out a mortgage broker first.
Additionally, mortgage lenders may offer different mortgage products — each with their own unique set of closing costs, fees, and interest rates. Partnering with a mortgage broker at this early stage of the loan process is beneficial as they will negotiate on your behalf to find a deal that fits your financial needs.
2. Get Pre-approved
During the pre-approval process, your mortgage broker will evaluate your finances (assets, debts, income, and credit) to determine if you’re qualified for a lender’s loan products. You need to get pre-approved before house shopping so you understand what lenders are willing to loan you.
Imagine having your heart set on a particular colonial home in the perfect neighborhood, only to discover you aren’t approved for a loan large enough to cover the cost. This is why it pays to secure pre-approval with your mortgage broker beforehand. A pre-approval means you can secure a loan for that dream home and gives you a competitive advantage when placing an offer.
3. Make an Offer
With preapprovals in hand, you’re now able to shop with more certainty. Once you’ve found the home that checks all the boxes you can make an offer. You’ll mostly partner with your real estate agent during the house hunting stage, but your mortgage broker will come back into the picture once you’ve made an offer on a home.
4. Complete Your Mortgage Application
Once your offer has been accepted, you’ll finalize a purchase agreement, do your happy dance, and complete a formal mortgage application. Most lenders use the same form, called the Uniform Residential Loan Application (URLA), also known as 1003 Fannie Mae form. This is one of the more straightforward steps in the mortgage process and you’ll likely be able to complete it digitally. Your mortgage broker will still be there to answer any questions you have along the way.
5. Processing Your Mortgage
Once your mortgage broker has your completed mortgage application and a copy of your purchase agreement, your mortgage package will be ready for processing. During this step, a loan processor will collect and review a variety of documents relating to you and the home you’re planning to purchase.
The exact steps a processor takes may vary based on your unique situation and the type of loan you’re applying for, but they typically include:
- Verifying your assets, employment, and income
- Ordering your credit reports (if your broker hasn’t done it already)
- Ordering a home appraisal and title report
6. Mortgage Underwriting
If the home buying process is a story, underwriting is the last step before you reach the climax. During this step, an underwriter from your chosen lender will evaluate your mortgage application, along with the supporting documents gathered by the loan processor, and compare them with the requirements of the loan you’ve applied for. While progressing through the underwriting step is a breeze for some, hiccups don’t automatically mean denial.
If your underwriter discovers any minor issues during their review, they may send you a list of conditions that you’ll need to address before your application can be approved. If you’ve partnered with a mortgage broker, you can rely on them to help you resolve conditions quickly and move towards approval.
7. Close On Your Home
Once your underwriter is satisfied that you and the property meet all the requirements necessary, you’ll be clear to close on your new home. At your mortgage closing, you’ll meet with the seller of your home and other mortgage professionals to sign loan documents and make your purchase official.Before closing, you’ll receive a closing disclosure (CD), a five-page form that contains the key details of your mortgage. The lender is required by law to give you your final CD at least three days before your closing, so you’ll have plenty of time to ask questions before the big day.
Now that you know what to expect from the mortgage loan process, you are ready to find a mortgage broker and start your home-buying journey.