You have used a free mortgage calculator and considered different mortgage amounts and mortgage rates and mortgage payments. You have done your research on the historically low mortgage rates, selected a mortgage originator to work with, and are applying for a new mortgage. Now what? Many mortgage applicants are unsure as to what happens next as they move through the mortgage process.
6 Steps To A Mortgage Loan
Here are the six basic steps to obtain a mortgage loan:
- Pre-Qualification: Whether you are applying for an FHA Home Loan, Home Equity Loan or HELOC, refinance mortgage for debt consolidation, or a purchase mortgage for your new home, before you submit a mortgage application you should be pre-qualified by a mortgage originator. Pre-qualification is often thought of as something that is only for mortgage applicants for purchase mortgages; however, refinance mortgage applicants sometimes have some issues that need to be worked on before being eligible for a new mortgage. Save yourself the time, energy, and, more importantly, possibly money on appraisals or credit reports: Regardless of the type of mortgage for which you are applying, get pre-qualified first.
- Application: To ensure your mortgage funds quickly and efficiently, be prepared with all the necessary documentation when you complete and sign your mortgage application package. More and more applications are being done via email or the internet, often allowing for missed paperwork or signatures. Before returning your signed application to your mortgage originator,, make sure you have signed and dated all necessary paperwork, and have also gathered all the income, asset and credit information requested. The more complete your mortgage application package, the faster the next step.
- Processing: Once you submit your mortgage application, it will move into the processing phase; most mortgage lenders have specific personnel for mortgage processing. Your processor will review the application package to ensure it is complete, and subsequently will request missing items. He or she will coordinate with the title and settlement agents to ensure proper documentation is received from them for your mortgage package. As well, your mortgage processor will receive the appraisal of the property and review to ensure it is adequate for your transaction. Using a loan APR calculator or closing costs calculator built into loan processing software, the processor will ensure proper disclosure compliance and that you have the funds to close. The processor then packages your completed mortgage application and documentation for the next step.
- Underwriting: Once your mortgage application is complete,, it will be submitted to an underwriter who will review the information in the file, make some calculations, ensure compliance with all applicable regulations, and issue your loan approval. With the approval will come a list of conditions that need to be met, often including additional income documentation from you, information from the appraiser or title company, or clarification of required insurance. Once the conditional requests are fulfilled and approved, loan documents can be issued for your signature.
- Loan Documents: With loan approval complete and any conditions met, your mortgage documents are formally ready to be printed and signed. Arriving as a thick packet of legal documents, loan documents are a binding agreement between you and the lender. You will be provided a copy of the documents, usually at signing; it is suggested that you request a complete copy before signing, so you can read and review them for any questions you may have. As well, reviewing the loan documents before signing will allow you to ensure that there are no mistakes or misunderstanding among the loan terms specified in Step 2 (Application). Specifically check the mortgage rate and other terms, closing costs.
- Closing and Funding: Once you are satisfied with your review, sign your loan documents with a notary. As soon as the loan documents are returned and sufficient funds, if needed, are provided to the settlement agent for closing, your lender will fund your mortgage–and you will receive the keys to your new home. Congratulations!
Now when you use a free mortgage payment calculator to decide whether you can afford to purchase a new home or benefit from a refinance mortgage, you know what will happen next!
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years’ experience in the mortgage industry.
