Simone Spotlight | A Step by Step Process Guide to the Home Loan Process
A Step by Step Process Guide to the
Home Loan Process
october 9th
Your 8-Step Guide To The Home Loan Process
Follow these 8 steps to get a mortgage loan and become a new homeowner.
1. Figure Out What You Can Afford
Before diving into the home loan process, take a close look at your financial situation:
Calculate your credit score.
Evaluate your current debts and monthly expenses.
Determine how much you can comfortably afford as a down payment.
Having a clear understanding of your financial standing will help you set realistic expectations and select the right loan option.
Using a home affordability calculator is another great way to learn how much house you can afford, further aiding your dream home search by knowing what is within reach financially.
2. Start Choosing A Lender and Get Preapproved For A Loan
Mortgage preapproval will show you how much a mortgage lender is willing to lend you for a loan. Mortgage lenders calculate this and your interest rate by assessing your income, credit history, credit report, assets, and credit score.
Keep in mind that preapproval will make you more attractive to home sellers and real estate agents since you’re already vetted and ready for the mortgage loan process.
3. Find Your Dream Home And Put In An Offer
Now it’s time to start looking for your dream home. Look at any homes you think could be the right fit and don’t be afraid to ask your real estate agent for help with the home buying journey. Once you find the perfect home for you, you’ll need to put in an offer. Along with putting in an offer, you will also submit your earnest money deposit to secure the offer on the home.
It’s important to note that during this process your credit will be pulled twice. It’s imperative that you maintain the same income, and credit lines throughout the transaction process. A change in income or credit could change your debt-to-income ratio and derail your home buying timeline or even possibly prevent you from moving forward with your home purchase.
4. Finalize Your Choice For Your Mortgage Lender
Once your offer is accepted on a new home, you can move forward and choose a mortgage lender. It’s best practice to shop around with at least a couple of different lenders to find the best interest rates and fees for your loan.
Keep in mind that your interest rate depends on your mortgage application and the type of loan you are applying for. There are various home loan options available, including:
Conventional Loans: Typically require a 20% down payment, but some lenders accept less.
FHA Loans: Backed by the Federal Housing Administration, these loans require lower down payments and are more accessible to borrowers with lower credit scores.
VA Loans: Exclusive to eligible veterans and military personnel, these loans often require no down payment.
USDA Loans: Designed for rural areas and offer no-down-payment options for eligible buyers.
Select the loan type that aligns with your financial situation and homeownership goals.
5. Submit Your Mortgage Application
After you’ve selected what mortgage lender you’re going to work with, it’s time to completely fill out a mortgage application. Once you’ve submitted all of the necessary documents to complete your application, you’ll get a loan estimate in a couple of days that will disclose the terms, rates, and fees of your home loan.
Lenders require specific documents to process your loan application, including:
W-2s or tax returns
Pay stubs
Bank statements
ID and social security number
Proof of assets
Employment history
Having these documents ready will speed up the loan approval process.
6. Go Through Mortgage Underwriting
Once your application is submitted, the lender will:
Verify your financial information.
Appraise the property.
Review your credit history.
This step ensures you meet all the lender's requirements and guidelines.
Once verification is complete, you’ll receive final approval on your loan application. For the borrower, this process is more of a waiting period as they are usually not needed unless the lender has any specific questions or needs any additional documents.
7. Prepare Your Down Payment And Closing Costs
Now you’re inching closer to the finish line, this is where down payments and closing costs come into play. You’ll need to provide the down payment for the property, payment for the closing costs agreed upon as well as proof of homeowners insurance. This information can be found in the closing disclosure which you will receive after mortgage underwriting has been completed. It’s important for you to understand these closing documents and be financially prepared in order to finish the mortgage loan process.
8. Close On Your New Home
The final step to complete is to attend your closing day meeting and officially become a homeowner. At your closing, you’ll sign all necessary documents and ask any questions you have regarding the sale or the property itself. This meeting will be conducted with the closing attorney or a title company usually in person, but e-closings are also available. Once everything is signed and handed over, you’ll receive the keys to your property and you’ll officially be able to move into your new home.