Understanding the Mortgage Process

Understanding the mortgage process can seem overwhelming and difficult at first. But, the more you know about it before being thrust into the home-purchasing situation, the more comfortable you will feel.

Applying for the Loan

The actual application for the loan is the first step in the mortgage process. Before applying for the actual loan, however, you might wish to go through a pre-approval process. By getting a pre-approval, you will have an idea of how much money you can afford to spend on your new home. This way, you know what houses are within the price range you can spend. There are also numerous mortgage calculators on the Internet that will help you get an idea of how much money you can afford to pay per month on a house payment.

If you decide to get pre-approved for a loan, you will receive an official “pre-approval letter” from the lending institution. This can provide you with a little extra leverage when it comes to negotiating the price of the home.

Once you have selected the home you wish to purchase and you have signed a purchase agreement with the seller, it is time to apply for the actual loan. The loan form will ask questions about your income and your employment. You will also be asked to list all of your liabilities and assets. The form is quite lengthy and will take some time to complete. As you are getting the application form completed, the lender might also get an appraisal of the property in order to ensure it is worth the cost of the loan.

Underwriting

Underwriting is the next step in the mortgage process. During this time, your process is evaluated in order to determine if your loan should be approved. Basically, the lender tries to determine if the home is worth the cost of the loan and if you will be likely to repay the loan. If the answers are yes, you will receive the loan. In order to make this decision, the lender will gather as much financial information about you as possible in order to determine your credit worthiness and your ability to repay the loan.

Exploring Loan Options

You will also need to determine which of the many different loan options is best for you. The three options you will have will be: fixed rate, adjustable-rate, and balloon. Your total monthly payment will also be determined. This will include the principal, the interest, insurance, and taxes.

Closing the Deal

Once all of the paperwork is in place, it is time to go to your closing and make the deal official. The closing usually occurs about thirty to ninety days after you have ratified the purchase agreement. It is important to make sure the closing takes place while your interest rate lock-in is still valid. Expect the closing process to take one hour our longer as you sign all of the documents and other paperwork. This process may be facilitated by a lending institution, a real estate broker, a title company, an escrow agent, or an attorney, depending on the state in which you live.