You’ve worked hard to save up for a new home. You’ve sacrificed dinners out and daily coffees from your local cafe, putting every extra penny towards the house of your dreams. Now you’re finally ready to purchase a home, but obtaining a loan may seem mysterious and confusing.
Luckily, we can help you navigate this seemingly daunting process. Below, you will find a mortgage loan processing checklist – a step-by-step guide from pre-approval to closing. Knowing what to expect at each step will keep you ahead of the game and out of the dark.
The very first and most crucial step of the home-buying process and loan processing checklist is mortgage pre-approval. Pre-approval provides you with the amount a bank is willing to loan you for your new home. Pre-approval is different than pre-qualification. When you pre-qualify for a loan, you are providing the bare minimum amount of information so that you get a possible loan amount. Pre-approval takes the process a step further.
The loan officer will ask for all your financial information so that you can receive a much more specific loan amount. Sellers will be looking for buyers with pre-approval to ensure that a financial institution has looked at the buyer’s financial information and deemed it worthy of purchasing a home.
Pre-approval not only helps the seller, but it also helps you as the purchaser. The last thing you want is to fall in love with a home that’s out of your budget. With your pre-approval number in hand, you will be able to narrow down your search to homes that fall within your price range.
It’s now time to find the home you want to purchase. Before you jump in, though, it’s essential to take a moment and make sure your budget is in line with your pre-approval. Often, you get a pre-approval amount that is higher than what you can realistically afford. Knowing your budget will ensure you know exactly how much you can afford monthly to spend on a home.
House Hunting and Offer Acceptance
During the house-hunting and offer process, the loan officer is generally absent. Your realtor will be doing all the work to secure your dream home. Once your offer is accepted, however, your loan officer will come back into the picture in full force. At this point, they will ask you to fill out a mortgage loan application. After your offer is accepted, two key appointments will also occur:
- Your new home will need to pass an appraisal. An appraisal ensures that the price of the house falls in line with the costs of similar homes that have recently sold. The amount of the appraisal must come in at or over the purchase price.
- A home inspection will be ordered to determine that the home does not have any significant issues. This is a significant part of the process for you as the buyer. The last thing you want to do is walk into a money pit. You will meet your home inspector at the house, and they will walk you through any issues the home might have.
The lender already knows your financial information from your pre-approval. Now, they will add information about the home you want to purchase, the type of loan you will be applying for, and additional information about you as the purchaser. Your loan officer will provide you with a loan estimate once they have all the loan application requirements. The loan estimate predicts the costs associated with the loan you are about to obtain.
Once the loan application is complete, your file will begin to move through the processing stage. During this stage, you can expect a lot of correspondence between you and your loan officer. They will need quite a bit of additional information, including but not limited to bank statements, tax records, and the purchase agreement. During this stage, time is of the essence. The sooner you provide the information needed to your loan officer, the faster the process will go.
Once all the information is gathered to process your loan, it’s time for the underwriter to examine everything in your file. They will make sure all of the components comply with lending requirements. In fact, the underwriter is the key decision-maker in this process. They will check to see that you and the property both match the eligibility requirements of the loan you have applied for.
For example, if it’s a VA loan, they will verify your military service. An underwriter will also review your credit history and ability to repay the loan. They’re looking for red flags, and they will ultimately either approve or reject the loan. They may also pass the loan with conditions, which usually means they need more detailed information from you.
Approval and Closing
At this point, it’s time to order title insurance, and all contingencies must be satisfied to close. Once the title is ready and contingencies met, you will receive a date for the closing. The closing will consist of a large stack of papers for you to read through and sign. One of the most important documents will be the closing disclosure. It will look very similar to the loan estimate, but the closing disclosure will be the actual costs of the loan.
Be sure to read this and all other forms during the closing and ask any questions you may have. Once everyone has signed, the title company will complete the transaction by recording and funding the loan. Congratulations! You bought a house!
Education is your strongest weapon in the world of real estate. Going into the home-buying process having this helpful loan processing checklist will ensure you make the right decisions for your financial well-being. Strategic Mortgage professionals are here to help you make this monumental step as seamless as possible.