You have decided to buy a home, but the only challenge right now is how you will finance the decision. Fortunately, you can get a mortgage that suits your financial needs. However, some people have a misconception that a home loan application process is difficult and sometimes impossible. On the contrary, it is an easy process, but it will require effort from your side. These steps will help you in your home, the loan application process whether you are planning to apply for a mortgage now or in the future.
A home loan pre-approval prepares you for a stress-free home buying process. Before a purchase transaction, a real estate agent wants to know if you qualify for a home loan. You need to approach the agent with a lender pre-approval as proof that you are ready and able to buy a home. Fortunately, you will not spend much time getting a pre-approval. You will require a credit report that includes your credit history and credit score. Pre-approvals indicate the capacity of the borrower to repay the mortgage as well as the credit of the borrower. You need to be organized for the pre-approval process by gathering up the required documents for mortgage pre-approval. That way, you can then present all documents to the loan officer at a go to get started.
You might have already started searching for a home online through various websites or physically. However, at this point, you ought to begin working with the agent to view the houses you would like to buy. In as much as you find it easy and fun to shop for homes online, you need to beware of certain things because some real agent portals don’t post the actual home prices. The estimates offered on these online sites can be high or low. For instance, you might have been pre-approved for a home loan of $500000; thus, you can include home searches up to $532000. You can work with your real estate agent to help you fine tune the choices because they have the experience of telling you the homes that can be negotiated down to an affordable price. Also, you need to know that some listings on the portals are not updated, and they do not indicate all the available homes in the market. Once you have viewed the homes, it is time you made an offer with the agent. Your agent will give you a contingency such as home inspections and appraisals, and they protect your earnest money. The buyer and seller must sign the purchase agreement, and at that point, you can proceed to finalize on loan.
Mortgage loan application
You require a few documents as you apply for a home loan so that your loan file can go through underwriting. Some details are already included in the papers you provided during pre-application while other details will be gathered over the phone or online. Some of the information you will be required to submit during the loan application step is your current employer, job title, salary including allowances and commissions, alimony, public assistance, and pensions. Borrowers should also provide information detailing their assets, debts, property information, certificate of eligibility, type of mortgage, and financial blemishes. Lenders collect this information to produce a loan estimate describing the terms as well as the costs related to the loan, such as closing costs, monthly payments, and interest rates. You will receive the loan estimate within three days after the application. At this point, the borrower is not yet denied or approved for the loan.
Loan processing and underwriting
Loan processors review information from the presented documents and assemble a neat package for the underwriter. The underwriter is the primary decision maker on whether your loan application will be approved or declined. They will look at the property to see whether it matches with the eligibility requirements for the loan product applied. They also review the credit history and capacity to pay the loan as they pay attention to red flags. The borrower will be called to sign several documents upon approval of the home loan application. Some documents are essential in sealing the deal between the borrower and the lender while others between the seller and the borrower for a purchase transaction.