The Mortgage Loan Process in Six Steps
The steps to getting a mortgage may seem shrouded in mystery like the Wizard of Oz behind the curtain. The reality is that there is a consistent process to a mortgage loan and they follow a predictable progression of six primary steps. And once you understand this list of steps, then you can begin the path that will take you to your next home. Removing some of the mystery can make the process not only more predictable, but certainly more understandable.
Step 1 – Mortgage Pre-Approval
Once upon a time, many mortgages were made without any sort of pre-approval process. While this could work for some, others need a little help understanding what they can afford. The pre-approval process is a simple credit pull from the three credit reporting bureaus and it may involve reviewing income documents or bank statements. This report will show both your credit history and score. It is an indication of your ability to repay a loan.
This allows a lender to more accurately determine the loan amount for which you qualify. The pre-approval stage will help you settle on a budget range. You will know what house you can afford and feel confident making an offer on a home in your budget. A pre-approval is also an excellent way to indicate to a buyer that you are serious about an offer. Having a pre-approval letter ready to go can help you complete negotiations on your dream home.
Step 2 – The Home Search
After you have obtained a pre-approval, it’s then time for the fun part. Online technology has made the home search a much more informed process. You can use popular online tools like Zillow or work with a local real estate agent to find the home you are looking for. Using an experienced realtor can potentially help you save some money in the process. When paired with a reputable mortgage broker like at Range Lending, the process can actually be fun.
A mortgage broker is there to run the numbers and verify that you can afford that dream home. They’ll guide you through the process and make sure that you are set up in the best possible way for success.
Step 3 – Write The Offer
In many ways, the offer is the most suspenseful part of the process. If you opt to go the route of going out on your own, then there are websites where you can purchase an offer template. If you opted to work with an experienced real estate agent, then you have a trusted guide to navigate the all-important offer stage. If you’ve been pre-approved and have searched diligently to find the home you need, then this step is where the hard work can pay off.
Your offer may include contingencies which are conditions that must be met prior to the execution of the contract. These contingencies include no unexpected findings in the home inspection, the need to first close on your current home, or other such situations. Offers typically include 1-2% down for earnest money, or a deposit that is committed to confirming your earnest desire to purchase the home.
Step 4 – Seller Counter or Acceptance
The seller will either accept, reject or counter your offer. If you receive acceptance of your offer, then congratulations, it is time to move on to the next step in the mortgage process. If you receive a rejection, then your offer is either simply too low, the seller has a better offer, or the seller rejects your contingencies. You may still have a chance to see an offer accepted, but you will need to re-evaluate how badly you want the home and adjust accordingly. Lastly, do not despair if your offer is countered, it means you are close and a little more negotiation may just do the trick. It is not uncommon for prolonged negotiations to take place or even to face several rounds of offers and negotiations on different homes in a sellers’ market.
Step 5 – Mortgage Application Process
While step one, the mortgage pre-approval process, may help pave the runway for your mortgage, this part of the process is where you work with the mortgage broker to fund your now accepted sales agreement. You will need to submit updated documentation for your income, liabilities and additional information. Your mortgage broker will be able to lock in your mortgage rate and schedule your closing. If you opt to go with an experienced mortgage broker, then they can help you quickly navigate this part of the process and get to the closing much sooner.
Step 6 – The Closing
A mortgage loan truly culminates in the closing of a mortgage. It is the final action of the plot that secures your ownership of your new home. Expect to bring the cash to close and sign more than a few mortgage documents. The mortgage application process really feeds into the closing, and it is important to assemble the correct documentation to keep the process progressingly smoothly. If your mortgage broker, real estate attorney, and title company have all done their work, then this is the part where you can celebrate!
Hopefully, you now feel more comfortable with the mortgage process. If you have further questions about the mortgage loan process, then do not hesitate to reach out to Range Lending where a dedicated mortgage broker can work with you to better educate you on the process. Range Lending is widely known for the level of diligent work that enables you to close on your mortgage in record time.
