The mere mention of a mortgage is a bit daunting, even to those who have previously experienced the process.
Luckily, borrowers don’t have to walk alone because real estate professionals and mortgage specialists can help guide you along the mortgage financing byways. However, it is always helpful to be prepared – even if only to know what to ask!
Before a borrower even submits a complete mortgage application, they have successfully progressed through these pre-mortgage application stages –
- Created a reasonable, well-thought-out budget
- Consulted with a mortgage professional to obtain a preapproval
- Found a property and have received an accepted offer
- Completed a home inspection as dictated by the contract’s terms
- Selected a lender that offers the mortgage program you need and competitive rates.
The Mortgage Process Begins
With an executed purchase agreement and a passing home inspection report in hand, homebuyers have arrived at what is technically the first stage of the mortgage loan process – submitting a complete mortgage loan application.
Note that much of the paperwork required for an underwriter to make a credit decision at preapproval has likely already been provided. However, this previously submitted paperwork may need updates. Documents previously unavailable will also need to be submitted –
- A fully executed purchase agreement, including all appendices.
- Evidence of the provision of an earnest money deposit.
- Any other conditions arising from the provision of other submitted paperwork after review.
Upon application, borrowers will receive (by law) a Loan Estimate, a document that reveals details about the mortgage product for which you have applied. With the paperwork submitted, homebuyers then hit a hurry-up-and-wait waiting period.
The purpose of the paperwork is to provide an underwriter with enough documentation to answer underwriting’s three C’s–
- The Borrower’s Capacity — will the borrower meet monthly obligations as agreed? This can be verified by pay stubs, W2s or tax returns, etc.
- The Borrower’s Credit — will the borrower choose to make on-time monthly payments? This is determined by the quality of the borrower’s profile on the lender’s credit report.
- The Collateral — the real property acts as a security interest for the, should the borrower default. A neutral, licensed appraiser determines this acceptability of collateral.
It is commonplace for underwriters to ask for clarification or additional information in making a final credit decision. As such, borrowers must understand the urgency of this requested information and respond quickly to avoid needlessly stalling the mortgage process.
The underwriter issues a loan approval for a complete file that meets lending criteria. According to law, borrowers are required to receive a copy of the closing disclosure three business days before closing that discloses the relevant loan and closing details.
The Mortgage Process Ends & Payments Begin
You have made it – your closing day has arrived.
Be prepared to sign a mountain of paperwork and watch tens of thousands of dollars change hands, but don’t forget to grab the keys when done. A closing can be stressful, which is why it is helpful to have an attorney protecting your interests, given the amount of money involved.