The Mortgage Process

Learn how the home loan process works and take the mystery out of buying and financing a home

Find out what you can expect from the mortgage process when buying a home, applying for your mortgage and closing on your loan.

Step 1: Get pre-approved for a mortgage loan

Start the home loan process by applying for a mortgage pre-approval as soon as you decide to start looking for a home to buy. A mortgage pre-approval letter is a great thing to have when shopping for a home. It gives you, and the seller of a property you are interested in, an idea of how much you can spend. Basically, it helps you focus on homes that you can comfortably afford.

Step 2: Find the right home

Once you find a house you want to buy, the next step is making a written offer. The seller may accept your offer outright or there may be some negotiating involved. But once the seller accepts your offer, or the two of you negotiate the final terms, it becomes a legally binding purchase agreement.

You'll also need to make an "earnest money" deposit, which will vary depending on the circumstances. The deposit is applied toward buying the home or, if the deal falls through for reasons that aren't your fault, will be returned to you.

The purchase agreement includes the details of the transaction: the sale price of the home, the closing date, whether appliances are included and other details. It will also outline any contingencies (things that have to happen before you're obligated to buy), such as the home passing a home inspection, you being able to get a mortgage and the seller having good legal title to the property.

Step 3: Gather all your information for the application

Review this mortgage application checklist to make sure that you have all needed documents and information to apply.

Step 4: Formally apply for your mortgage loan

Once you have a binding purchase agreement, you can formally apply for your mortgage.

To apply for a mortgage, you need to prove your identity, document your income and assets, and show that you're able to pay the mortgage back. You will need documents like:

  • Pay stubs and W2's
  • Tax returns (if applicable)
  • Investment and retirement income documentation
  • Bank statements
  • Purchase agreement

Shortly after you complete your application, we'll provide you with a formal estimate of your closing costs to get the mortgage, called a Good Faith Estimate. You'll also receive a Truth-in-Lending Statement, which summarizes your loan terms, interest rate and finance charges to show what the total cost of borrowing will be.

Finally, decide when to lock in the interest rate on your home mortgage. Rates change daily, so it's important to watch trends. If it looks like rates will drop, you may want to wait. If rates are rising, lock in as soon as you can. Typically, you can lock in any time in the mortgage process between the submission of your application and five days before closing.

Step 5: Work with us through the mortgage process

There are several players in the mortgage approval and closing process.

Loan processor - Gathers all necessary documents to process your loan.

Underwriter - Evaluates your credit, assets, debts and the property appraisal, then decides whether to approve your loan.

Title company - Checks the title of the house to make sure it's free of liens associated with previous owners.

Appraiser - Determines the fair market value of the home.

Inspectors - Assess the home to make sure it's in good condition, free of things like pests, structural problems and more.

Homeowners insurance agency - An agency, chosen by you, that will insure the home against damage or loss. Your home must be covered by homeowner's insurance in order to close on your mortgage.

Closing attorney or settlement agent - An individual or agency responsible for registering the transfer of the property with state and local governments, disbursing the closing proceeds and completing the transaction between you and the seller.

Step 6: Close on your new home and mortgage

At the final stage of your mortgage approval process, you'll receive a Closing Disclosure before closing that will list all of the costs, credits and fees needed to complete the purchase of your new home. It's similar to the Good Faith Estimate you received when you applied except now the costs have been finalized.

On closing day of the mortgage process you'll have plenty of documents to review and sign. The closing attorney or settlement agent will go over all of them with you and answer your questions.

After you sign the required paperwork and hand over a cashier's check for the closing costs, the lender will wire the funds to the closing attorney or settlement agent who then sends the funds to the seller. You're officially the owner!

At this point in the home loan process the lender will then set up your loan for servicing and establish an escrow account An escrow account is a separate account that your lender sets up to hold the money it collects each month for your real estate taxes, homeowner's insurance premiums and, if applicable, flood insurance and/or mortgage insurance. The lender takes your estimated annual real estate taxes and insurance premium expenses and divides that amount by 12. This amount is added to your monthly mortgage payment. for your real estate taxes and insurance.

For more detail on what happens at closing, see understanding the closing process.

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