Finding your dream home could be a tedious process, while getting the mortgage approved could be sometimes another headache especially for first time home buyers. Here we list out the general process to equip your mind with enough information and steps that comes when you are ready to make your dream home come true!
Pre-Approval
Borrower and loan officers exchange information. The borrower will provide the estimate purchase price, approximate down payment, current income and credit history with monthly liabilities. In return, the loan officer will calculate the debt/income ratio to pre-qualify and provide valuable advices as to most suitable loan program, rate and monthly payment information.
Usually it costs around 30 minutes to 1 business day to get a pre-approval, after getting the pre-approval, this is where you usually start the home shopping and submitting offers as listing agents generally would be more willing to show homes or negotiate with buyers will pre-approvals. And remember:
Typically a pre-approval is good for 45 days-90 days
Application
Once the borrower’s offer to purchase is accepted by the seller then it’s time to apply. The loan officer will ask for documentation to verify income, asset and photo identification to complete mortgage application for the borrower to review and sign. The loan officer must issue a Loan Estimate within 3 days of application date.
Application Check List:
- Pay stubs for the past 30 days
- W-2 for the past 2 years
- Details about long-term debts i.e. auto/student loans
- Recent statements from all your bank stock & mutual fund accounts
- Previous year’s tax returns
- Proof of any supplemental income
- Proof of homeowner’s insurance
- Rental Agreements if own rental property
- If not a US citizen, provide copies of green card/valid working visa
Delivery of Loan Estimate
The purpose of delivering Loan Estimate to the borrower within 3 days of application is to help applicants to obtain an early understanding of various features, costs and risks that associated with a mortgage loan. Until the borrower has received the Loan Estimate and indicate an intent to proceed, the loan officer is prohibited from charging any fees.
Conditional Approval
Within hours of submission of complete mortgage application and required documents, the borrower will receive an initial mortgage approval notice with approval conditions, including a satisfactory appraisal report that supports purchase price and complete title commitment to show all current liens and title deficiency, if any.
This is also where you start the home inspection process to examine home conditions that should met with the approval criteria.
Closing
Once all the approval condition are met, the borrower will receive a Mortgage Commitment Letter to inform the mortgage application is firmly approved and the purchase closing can be scheduled. A Loan Disclosure which details all the closing costs must be delivered at least 3 business days prior to closing can take place.
Things you shouldn’t be doing during the application process
- Apply for or take out new credit cards, auto or personal loans or have new credit inquiries in your credit bureau file during the course of your loan process and closing
- Make any large, unverifiable and undocumented deposits or withdrawals to your checking or savings accounts
- Quit or change employment
- Make a contract purchase offer for an amount higher than your pre-qualification or pre-approved amount
- Include the seller’s personal property (furniture, machinery, etc.) in the purchase contract as only real estate is permissible