The Loan & Mortgage Process
When you purchase a home, there are many moving pieces that need to be completed and organized. Some of these milestones are related to the home you are purchasing and some of them are related to the mortgage process. What is expected throughout the transaction?
The simple reason for becoming pre-approved is to determine how much home you can actually afford and how much money you will be able to borrow from your mortgage/lending institution. There is a difference between becoming pre-approved for a mortgage and being pre-qualified for a loan.
Pre-qualification is a quick way of determining how much you can borrow/afford. You can call a lender, provide them with your income, debts, and how large of a down payment you can make on the home and they will estimate how much you can borrow based on these criteria. While this is a valuable step in the process, it is not considered pre-approval. Pre-approval is more in depth and requires your financial records and a preliminary approval process is conducted. Becoming pre-approved is a solid, definitive, look at how much you are able to borrow to apply toward the purchase of a home. If you would like sellers to take you’re seriously, becoming pre-approved is the way to go and one of the first steps that should be taken on the path to home ownership.
Search for Homes
Today, many home buyers begin their home search online. When you finally begin to view homes, keep in mind that every home might need changes, improvements, or if searching for new construction, it might be perfect the way it is. Either way, you will be investing in a property that becomes your home, which means you are purchasing more than a house.
Submitting an Offer
By this time, it’s likely you will have found a real estate agent to help out. Before making the offer, you should know things such as, the market value of the home, sold prices of similar properties (comps, comparables), the amount of time the home has been for sale, and weather or not you think any major systems might need to be replaced or updated. It is also at this time that you will determine an ideal closing time frame, contingencies, and many other aspects of the offer. Once you have signed the offer and it has been delivered to the seller, the offer could become ratified/accepted, countered, or rejected.
At the loan application, you will be beginning the process for loan approval. During this stage, your credit, income, and asset information will be looked at to approve your loan. It is at this point, where you will have everything about you verified and underwritten, to make sure you are a credible candidate for the mortgage product offered by the lending institution. The loan application is the heart beat of the mortgage experience.
It is highly important that you submit all the required documentation in a timely manor, in order to ensure the mortgage application is processed as quickly as possible. Also, be prepared to pay for things such as a credit check, application fee, and the appraisal for the home that is now under contract and moving toward closing.
Common documents you might be asked to bring to the loan application:
- Paycheck stubs
- W-2 forms
- Tax returns
- Your address
- Credit card accounts
- Financial and asset accounts
- The ratified contract for the home being purchased
- COA (Condominium Owner’s Association) information
- Bankruptcies, and judgments
- Divorce and child support documentation
There may be other documentation requirements, depending upon the lending institution and the type of mortgage product.