Buying a home is exciting, but for many buyers, the mortgage process can feel like one of the more confusing parts of the journey. There are applications, documents, appraisals, underwriting, loan conditions, disclosures, and plenty of new terminology along the way.
Understanding what happens from the time you apply for your mortgage until you receive the keys can make the process feel much more manageable.
While every lender and loan may work a little differently, here is a general look at what buyers can expect.
Getting Pre-Approved
For many buyers, the mortgage conversation begins before they ever make an offer on a home.
A mortgage pre-approval gives you an idea of how much a lender may be willing to lend based on information such as your income, assets, debts, and credit history. Your lender may request documents such as:
- Recent pay stubs
- W-2s or tax returns
- Bank and asset statements
- Identification
- Information about existing debts
A pre-approval is not a final loan approval, but it can help you establish a realistic price range before beginning your home search.
It is also important to remember that the amount you are approved to borrow and the amount you feel comfortable spending do not necessarily have to be the same. Consider the entire cost of homeownership when deciding on your personal budget.
Making an Offer and Completing the Mortgage Application
Once you have an accepted offer on a home, your lender can begin working with the details of that particular property.
You may need to provide updated financial information or additional documentation. Responding promptly to requests from your lender can help keep the process moving.
For most mortgages, after a lender receives the information necessary to constitute an application, the lender must provide a Loan Estimate within three business days. The Loan Estimate outlines important information such as the estimated interest rate, monthly payment, loan costs, closing costs, taxes, and insurance.
Take the time to review it and ask your lender about anything you do not understand.
Loan Processing Begins
Once you decide to move forward with the loan, the mortgage enters the processing stage.
The loan processor works to assemble and verify the information needed for your loan file. This can include reviewing income and employment information, bank statements, credit information, the purchase contract, insurance information, and other documentation required for the particular loan program.
Do not be surprised if you are asked for additional documents or even updated versions of documents you previously submitted.
A request for more information does not automatically mean something is wrong. Mortgage files often require documentation to verify information before the loan can move forward.
The Appraisal
For many financed purchases, the lender will require an appraisal of the property.
An appraisal is performed by a licensed or certified appraiser and provides the lender with an independent opinion of the property’s value.
It is important to understand that an appraisal and a home inspection serve different purposes.
A home inspection is primarily designed to help the buyer better understand the condition of the property.
An appraisal is primarily performed for the lender to help determine whether the property’s value supports the loan.
If the appraisal creates questions about value or identifies lender-required repairs, your lender and real estate professional can help explain what options may be available based on your loan and contract.
Underwriting
Underwriting is one of the most important stages of the mortgage process.
The underwriter reviews the complete loan file to determine whether the borrower and property meet the requirements of the loan program.
The underwriter may review:
- Income and employment
- Credit history
- Assets and funds needed for closing
- Existing debts
- The appraisal
- Property information
- Other documentation required by the lender or loan program
Sometimes the underwriter will issue what is commonly called a conditional approval.
This means the loan may be approved provided certain additional requirements are satisfied. The lender might ask for an updated bank statement, explanation of a deposit, employment verification, insurance documentation, or another piece of information.
Again, additional requests during underwriting are common.
Be Careful With Your Finances Before Closing
One of the most important things buyers can do while their mortgage is being processed is avoid making major financial changes without first speaking with their lender.
Before closing, consider checking with your lender before:
- Opening a new credit card
- Financing furniture or appliances
- Buying or leasing a vehicle
- Co-signing a loan for someone else
- Moving large amounts of money between accounts
- Making unusually large deposits
- Changing employment or how you are paid
Even something that seems unrelated to your home purchase could potentially affect your loan qualification or create additional documentation requirements.
When in doubt, call your lender before making the change.
Final Loan Approval and Clear to Close
As the remaining loan conditions are satisfied, the lender works toward final approval.
You may hear the phrase “clear to close.”
Generally, this means the lender has completed the major approval requirements and the loan is moving toward closing. There may still be final administrative steps taking place behind the scenes, so buyers should continue communicating with their lender, attorney, and real estate professional.
And yes, even at this point, it is still a good idea to avoid major financial changes.
Reviewing the Closing Disclosure
Before closing, borrowers receiving most traditional mortgages will receive a Closing Disclosure.
This document provides the final details of the mortgage, including the loan terms, monthly payment, fees, and closing costs.
Federal rules generally require borrowers to receive the Closing Disclosure at least three business days before closing. This gives you an opportunity to review the final numbers and compare them with your Loan Estimate.
Review it carefully.
If something looks different from what you expected, contact your lender or settlement professional and ask questions before closing.
The Final Walkthrough
Shortly before closing, buyers typically have an opportunity to conduct a final walkthrough of the property according to the terms of their contract.
The final walkthrough is not another home inspection. Instead, it is generally an opportunity to confirm that the property’s condition is consistent with the contract and that any agreed-upon items or repairs have been addressed.
If there is an issue, contact your real estate professional before closing so it can be addressed appropriately.
Closing Day
You made it!
At closing, there will be documents to review and sign related to both the purchase of the property and your mortgage.
Mortgage documents commonly include the promissory note, mortgage or security instrument, and other loan-related documents.
Your lender, attorney, and other professionals involved in the transaction can answer questions about the documents within their respective roles.
Once the necessary documents have been signed, funds have been handled, and the transaction has been completed according to the requirements of the closing, you are officially at the finish line.
Communication Makes a Difference
The mortgage process involves a lot of moving pieces, and buyers do not have to understand every lending term before purchasing a home.
What matters is having professionals you trust and asking questions along the way.
Keep communication open with your lender, real estate professional, attorney, and other professionals involved in your transaction. Provide requested documents as quickly as possible, keep copies of important paperwork, and speak up when something does not make sense.
The goal should never be simply to get through the process. It should be to understand the decisions you are making along the way.
Buying a home is a major financial decision. Having the right information and the right team around you can help you approach that decision with greater confidence.
Buying a Home in Central New York?
If you are thinking about purchasing a home in Syracuse, Baldwinsville, Liverpool, Clay, Cicero, or another Central New York community, understanding the process before you begin can make a big difference.
At HHC Realty, we believe in Serve, Don’t Sell. That means helping clients understand their options, connecting them with the appropriate professionals, and giving them the information they need to make decisions that are right for them.
Have questions about getting started with your Central New York home search? We would be happy to help you understand the real estate side of the process and connect you with resources for the next step.
