Home buying is the biggest investment most people will make. It’s also the most enjoyable one because you are buying a home where you will live and enjoy life.
Unless you have a sizeable amount of cash to buy a house, you will need to apply for a mortgage to finance your new home. Most banks and creditors will require you to supply part of the cost with your own funds and the mortgage will cover the rest. Depending on the type of loan you choose, your financial situation, your line of credit history, and your credit score, you will have a clear picture of how much you can afford to spend so that you look at the right price brackets and find a home that matches your financial criteria.
For first-time home buyers, getting a mortgage loan may seem complicated. At Society Mortgage we’ll help you navigate through the complexities of the mortgage process and offer as much information as you may need.
Here is a clear step-by-step guide to how the mortgage process unfolds.
Step 1: Assess Your Personal Finance
Before starting the mortgage loan process, evaluate your financial health. Take some time to write down your monthly payments and income so you can calculate how much financial room you have to pay for a mortgage and all related expenses, such as homeowners insurance. If you already pay for rent, subtract that from your expenses.
Review your credit score, income, previous debt, and savings. If you want the mortgage process to go faster, gather all necessary financial documents, such as pay stubs, tax returns, and bank statements, which you’ll need later for the mortgage loan application process. Financial accessibility will make the application process faster and you could get approved and into your new home quicker.
Step 2: Research and Choose a Mortgage Lender
Research various mortgage lenders to find one that offers favorable mortgage rates and terms. Our loan officers at Society Mortgage are always happy to describe all the mortgage preapproval solutions available to you. They will present you with the pros and cons of each mortgage and give you all the necessary information to find the right home loan for your income and overall situation.
Society Mortgage offers excellent and competitive interest loan rates to help prospective homeowners achieve their dreams. With Society Mortgage, you know that you will be able to buy a home with the best terms and conditions. Contact us to learn more about our mortgage loan services!
Step 3: Get Pre-Approved for a Mortgage
Once you have chosen a lender, contact them to get pre-approved for a mortgage.
What is pre-approval? Pre-approval involves a housing lender reviewing potential home buyers financial information, offering an initial assessment that they qualify for a home loan, and providing an estimate of how much they are willing to lend you. It is not a definitive answer but it gives you a ballpark figure of how much you can spend on a home.
Pre-approval gives you a clear price range. You also show sellers you’re a serious buyer. When you get pre-approved it means that a lender has reviewed your income and has decided that you are a person who can afford to get a home loan. This signals to sellers that you are a solid buyer.
Step 4: Start House Hunting
With your mortgage preapproval letter in hand, begin searching for a type of home that fits your criteria and mortgage loans budget. Consider working with a real estate agent who can help you find suitable properties and navigate the buying process.
House hunting can take time, especially in a buyers’ market. You might need to make concessions. Finding the home you want in a bustling city might mean you need to pay more or you have to downsize. If you are willing to go a bit further out into the suburbs, you may be able to afford a bigger home, but with the assumption you will be commuting.
Ultimately, you have to decide which home fits your needs, privacy and security expectations. Are you a first-time homebuyer? Is this your forever home? Once you know what need, you will be better able to get a mortgage based on the type of house you are looking for.
Step 5: Make an Offer
Once you have found the home that fits your needs and budget, the next step is making an offer. Your offer should include the purchase price you’re willing to pay and any contingencies, such as the requirement for a home inspection or appraisal.
The seller might have other offers. They will decide which one is the highest but they will also consider other features such as the level of the due diligence money and the existence of a pre-approval by a lender.
Step 6: Apply for the Mortgage
After your offer is accepted, you can formally apply for a mortgage with your lender. This involves submitting a complete mortgage application along with all the necessary documentation.
Necessary documentation
Your lender will ask for proof of income like pay stubs, W-2 forms, and tax returns for the past two years. You should also supply employment verification and contact information for your employer and a letter verifying your employment status.
Your lender will also require proof of assets with banking statements from your deposit and checking accounts, retirement accounts, and other assets to demonstrate you have the necessary funds for the down payment, closing fees and costs, and mortgage insurance.
Your lender will also pull your credit report and check your credit score. They will calculate your debt-to-income ratio. Using home affordability calculator indicators, lenders want to know how creditworthy you are and whether they can trust you to repay your mortgage.
Finally, a government-issued ID such as a driver’s license or passport are necessary identification papers.
Types of mortgage to choose from
You will be offered different types of mortgages: conventional private mortgage, Veterans Affairs (VA), or Federal Housing Administration (FHA) mortgage. You can also see whether you prefer fixed interest rates or adjustable interest rates. The duration of the mortgage interest rate impacts your monthly mortgage payment, therefore it is important to choose the right duration for you.
When you submit your application, the lender may request additional documentation. This can include explanations for large deposits in your bank account, further details about your employment, or additional proof of assets.
Loan estimate
Within a few business days of receiving your application, the lender must provide you with a loan estimate. This document outlines the loan amount, annual percentage rate, monthly mortgage payment and closing costs, and closing date.
Review this estimate carefully to ensure it meets your expectations and budget.
Step 7: Underwriting Process
The lender’s underwriter will review your application, verify your financial information, and check you meet all the loan requirements. They will also order a property title search and an appraisal to determine the home’s market value.
If the appraisal shows that the home is worth less than the loan amount you have applied for you can either ask the seller to lower the price or pay the difference with your own money.
If the appraisal shows that the home is worth more, you are in good luck: you are paying less for something worth more.
Step 8: Home Inspection and Appraisal
After your offer on a home is accepted, you will schedule a home inspection, usually within three business days. It’s a good idea to hire a certified and experienced home inspector. Real estate agents can often recommend reputable inspectors.
The home inspection includes the following:
- Roof: Inspecting shingles, gutters, flashing, and chimneys for signs of damage or wear.
- Foundation: Checking for cracks, settling, and other structural issues.
- Siding: Looking for damage, decay, or pests.
- Windows and doors: Assessing their condition, seals, and functionality.
- Landscaping and drainage: Evaluating how the landscaping might affect the foundation and drainage around the home.
Inside the home, the inspector will check the following:
- Structural elements: Inspecting walls, ceilings, and floors for structural integrity and signs of damage.
- Electrical system: Checking the electrical panel, outlets, switches, and fixtures.
- Plumbing system: Inspecting pipes, fixtures, water heaters, and checking for leaks and water pressure.
- Heating and cooling systems: Assessing the HVAC system, including the furnace, air conditioning, and ductwork.
- Insulation and ventilation: Evaluating attic and crawl space insulation, and ventilation.
- Appliances: Checking built-in appliances.
Step 9: Loan Approval and Commitment
If the underwriter is satisfied with all the information, you’ll receive final approval through a loan commitment document. This document indicates the lender’s approval and their readiness to fund your mortgage, subject to final conditions being met. Once your loan is approved, you can move forward with closing the loan and the purchase agreement.
You are almost ready to buy your new home!
Step 10: Closing
The final step is to close the home loan. You’ll review and sign all the necessary legal documents, pay any closing costs, and finalize the mortgage. Once completed, ownership of the property is transferred to you, and you receive the keys to your new home. You are now a homeowner!
Society Mortgage for Your Dream Home
Our Loan Officers are experienced, trusted, and professional. They are here to guide you through the mortgage process and provide information and management advice to help you determine which mortgage works best for your personal finances. They are happy to answer questions and will make sure the whole process goes smoothly so that you soon move into your new home.
Do you still have questions on home loans? Contact us at Society Mortgage and an expert Loan Officer will help you understand everything about the mortgage loan process. Are you ready to apply for a new mortgage? Call us today and let’s start your mortgage process together!
What happens in mortgage processing?
Mortgage processing is the stage where your lender verifies all the information provided in your mortgage application. This includes confirming your income, employment, assets, and debts from other loans, such as credit cards, a student loan, or personal loans.
The processor will gather necessary documents, such as bank statements, tax returns, and pay stubs, and check that all paperwork is complete and accurate. They will also order a home appraisal to determine the property’s value. This careful review helps the lender assess the risk of granting you a loan and prepares your loan application for underwriting.
How long does the mortgage approval process take?
The mortgage approval process typically takes between 30 to 45 days, but this can vary based on several factors. The complexity of your financial situation, the thoroughness of your documentation, the lender’s efficiency, and the real estate market’s current conditions all play a role. Some applications can be processed faster if all necessary documents are provided promptly and there are no significant issues, while others may take longer if additional information or corrections are needed.
What is the approval process for a mortgage?
Here is the approval process for a mortgage in a nutshell:
Pre-Approval: You provide financial information to get an estimate of how much you can borrow.
Application: Submit a formal mortgage application with all the documents you’ll need.
Processing: A mortgage processor verifies your financial information and orders an appraisal.
Underwriting: An underwriter reviews your application and supporting documents to assess risk and ensure you meet the lender’s criteria.
Approval: If the underwriter is satisfied, you receive conditional approval. Once all conditions are met, you’ll get final approval.
Closing process: You sign the final documents, pay closing costs, and the loan is funded, completing the process.
What does the mortgage process entail?
The mortgage process refers to the series of steps a borrower goes through to obtain a mortgage loan. This process includes pre-approval, application, processing, underwriting, and closing.
Each stage involves specific tasks and verifications to check that the borrower qualifies for the loan and that the property meets the lender’s criteria. The lender wants to make sure the borrower is financially sound and can repay the mortgage. The borrower wants a mortgage with an affordable monthly payment to buy a property that fits their needs.
The goal of the mortgage process is to secure financing for the purchase of a home or refinance an existing mortgage. Both the borrower and lender are protected and satisfied with the terms of the agreement.
