Once you know the steps to obtain a mortgage loan, it will make the process of buying a home much easier.
Step 1: Apply and Pre-qualify
The first thing you’ll want to do when thinking about buying a home is get pre-qualified for a mortgage loan and find out how much you can afford – before you even start home shopping. To begin, meet with a lender or complete a mortgage application.
Be prepared to tell your lender an affordable payment amount for you. Sometimes we can pre-qualify you for more than you feel comfortable with. We want to work with a payment you are comfortable paying.
Once you are pre-qualified and know what you can afford, you can start shopping for a home. Being pre-qualified means you’ll be in a good position to make an offer on a home when you find it, and be an attractive buyer to the seller. It does not mean you are automatically approved for a loan however.
The primary documents a mortgage lender will look for include:
- Income: Pay stubs and W2s from the last two years. We are looking for a consistent two-year work and/or school history.
- Assets: Last two months bank statements. We review all deposits and may need additional deposit documentation.
- Credit: There are minimum credit score requirements for each loan option. We also review payment history, derogatory items, and inquiries.
Estimated funds to close on a home
In this first step we will also go over the estimated funds you will need to close on a home, which includes down payment, closing costs, and taxes and insurance. The primary numbers you want to know are “how much money do I need” and “what is my payment.”
These three pieces – down payment, closing costs, and taxes and insurance – are what you will pay for at or prior to closing in order to purchase a home.
We then review and document where these funds come from to ensure they are from an approved source. Examples of approved sources could be your funds, gift funds, seller contributions, and any assistance programs you might be eligible for at this time.
Once this is completed, you are ready to select a real estate agent. Your agent, lender, and you will work closely together. We are all in this process as a team.
Step 2: Loan Processing
During this step the loan processors will review and double-check your paperwork to ensure everything is accurate before sending it to a loan underwriter. Your mortgage lender will keep you informed about your loan's progress throughout this stage.
Step 3: Home Appraisal
In the third step of the mortgage process, an appraiser will evaluate the property and compare it to similar homes in the area to ensure the purchase price matches your new home's actual value.
It’s important to note the appraisal reflects the market value of the home—not the reconstruction or tax value. You'll receive a copy of the appraisal at your closing.
Different from an appraisal, you may have also received a home inspection on the property.
We'll also obtain a title opinion at this time. This can take up to thirty days and gives us the legal details of the property to confirm current ownership rights.
Lastly, you'll also need to obtain homeowner's insurance at this stage.
Step 4: Final Approval
During final approval, an underwriter will review the paperwork and details of your loan to determine whether or not they will support the pre-qualification (from step one).
- The property: Does the appraisal report verify the value of your home?
- Total debt ratio: Do you have a healthy debt to income ratio?
- Cash reserves: After your loan costs are paid, how much money will you have left in the bank?
- Credit history: Do you have a responsible payment history? How likely are you to repay your loan?
- Employment history: How stable is your current income?
Step 5: Closing
This is where we welcome you to your new home. You'll be signing a lot of documents at the closing. But a closing agent will be there to explain everything. You can also arrange to have your mortgage banker with you to answer questions. At this point, you'll take care of any closing costs and the balance of your down payment. Once complete, you'll officially own your new home!