Understanding The Loan Process

Signing loan papers

Buying a house is a big step, and you can be prepared if you know what to expect. Here’s a quick run-down of the loan process:

  1. Prepare Your Required Documents – Before anything, you should get together the documents that will be required throughout this process. This includes:
    • Tax returns from the past two years
    • Bank, stock and mutual fund account statements from the last three months
    • The most recent copies of your stock brokerage or IRA/401K accounts
    • Other: If you’re not a US citizen, own other properties, or have other circumstances, you may be required to submit additional documentation. Your lender can help you determine what you may need to submit.
    • It is also wise during this period to retrieve a copy of your credit report, so you can correct any issues before applying for a home loan.
  2. Pre-Qualification – During this first stage, a lender will gather information about a borrower’s income and debts. This will determine how much the borrower can pay for a house. As a borrower, you should get pre-qualified for each mortgage loan type you may qualify for.
  3. Choosing a Mortgage Program – Once you’ve been pre-qualified, it’s time to weigh your options. One of the biggest factors in choosing a mortgage program is determining how long you plan to keep the loan. If your plan is to sell the house in the coming years, an adjustable or balloon loan would be worth considering. However, a fixed loan may be more suitable for the borrower who has no plans to sell the house down the line, or at least not for many years. To help you decide which option is best for you, it may be worth consulting with an experienced mortgage professional.
  4. Applying For & Processing the Loan – Now the fun truly begins. With the help of a mortgage professional, the borrower completes the application and provides all required documentation to be submitted. Within three days of the submission to your mortgage lender, you will receive the various fees and closing cost estimates. At this point, you are in the Processing phase, during which all of your documents are verified. If a written statement is required to explain any previous credit mishaps, it will happen during this period. The Processor will also examine the Appraisal and Title Report and investigating any property issues that may exist.
  5. Submission to Lender – Once the Processor is finishing compiling the complete home mortgage package with your documents and verifications, it is sent to the lender. This is when the underwriter will determine whether or not the package is considered an acceptable home loan. If no more information is needed, the loan will move into the “approved” status, if applicable
  6. The Final Stage – Closing – Once your home loan is approved, the file is transferred to the closing and funding department. The broker and closing attorney will be notified, and a time is scheduled for you, the borrower, to sign all loan documentation. The closing attorney will provide the signed documents to the lender, at which point the funding of the loan is arranged, and the attorney will arrange for the mortgage note and deed of trust to be recorded at the county recorder’s office. Final settlements and disbursements are made after the recording of the mortgage note and deed of trust.

While the process can seem tedious and frustrating at times, it’s well worth it in the end. Contact us today and let us help you find your dream house!