Buying a home is a milestone that many people dream about. After many weeks/months of looking for your perfect home the next step is to procure financing for this purchase. The process involves 5 major steps: The application, loan estimate, home appraisal, loan underwriting and closing.
The Mortgage Application:
Once you have chosen the lender that you will be working with, you begin the loan process by filling out the mortgage loan application. The lender will let you know what documentation you will need to provide. This will be what the lender uses to verify your ability to repay the loan. The paperwork you will need to supply will include things like bank statements, income verifications, your credit reports, tax documents and verification of your deposit. The agency will use these to determine your eligibility for the loan.
Loan Estimate:
The lender that you are working with will use the information gleaned from your application to make you an offer for a loan. This estimate will get you a ball park figure for your closing costs, title insurance, the amount of loan that they will lend and your down payment requirements. They will also disclose the term of your loan, the number of monthly payments that will be required, the payment amounts, what fees you will pay for any late payments and any insurance or tax escrows that will be required. The lender will tell you what the total loan amount (principal + interest over the loan’s life) will be. This loan estimate will include a commitment letter outlining all the terms of the loan and a promise to you to loan based on the documents that will be verified.
Home Appraisal:
The lender will now require a home appraisal. The bank will send out a third-party appraiser to look over the home you are purchasing and determine its value based on other homes like it in the area. If the value of the home is more than or equal to the offer price, the bank will continue with the loan.
Underwriting Process:
After the appraisal for your home is done and approved by your lender the underwriting begins. This is the time when all the details of your financials will be scrutinized and verified. The lender may have questions for you that you should provide to them to help move the process along. Questions may revolve around your financial history or work history. This is the part of the process that can take up to a month to complete so be patient and cooperative to make it work smoothly for you. The underwriters will order your title insurance. Once everything is complete the lender schedules your closing.
The Closing:
This is the fun part! You will be required to have home owner’s insurance for your house and bring proof of it to your closing. Prior to the closing, the lender will let you know what costs you will be required to pay for the loan. These will include the cost of the bank appraisal, title insurance, title fees, registry of deeds fees and bank fees at the very least. The lender will require that you sign the loan documents and then will record the paper work with the registry of deeds in your county. After that, the lender will release the borrowed funds to your home seller. Congratulations…you are now a home owner. Have fun moving in!
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