Understanding the Mortgage Loan Process in 6 Steps
Interested in learning more about the mortgage loan process and how it works?
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Are you a first time home buyer interested in learning about the mortgage loan process? While it may seem a little intimidating at first, starting the mortgage process and securing a loan doesn’t have to be complicated when you know what to expect. While a lot of it may be new to you, this isn’t anything you can’t handle. Buying a home is the dream of many Americans, and going through the mortgage process will take you one step closer to walking through the door of your new home!
In this article, we’re going to cover:
- How to know you’re ready to buy a home
- Understanding the mortgage loan process in 6 steps
Are you ready to purchase your first home? That’s great news!
The time may be right to consider purchasing a house
Purchasing a home is a big life goal, and many people associate it with the realization of the American dream. When you have a house, you are the owner of your property and are free to make improvements, relax, raise a family, and enjoy all of life’s moments. The feeling you get when you walk through the door of your first home is not something you’ll forget, which is why when you’re considering starting the purchasing process, make sure you’re equipped to take this leap.
Ready to start seriously looking to purchase a house? Make sure you can check these items off your list:
- Whittle down your outstanding debt such as credit cards and car loans.
- Make sure your credit score is good so you can get the best interest rate.
- You have a steady job that allows you to meet all your needs and have spending money.
- You already have savings or an emergency fund that can help out should a crisis arise.
- You can afford a good down payment of at least 10%.
- You’re looking to settle down and live in one place for a few (or many!) years.
Understanding the mortgage loan process: how it really works
You’re ready to start looking for a home, but make sure you know how the process will unfold
Going through the mortgage loan process may take some time, but it’s worth it in the end. Image courtesy of Bob Vila.
In order to purchase their homes, home buyers will need to go through the mortgage loan process. Ready to start the mortgage loan process but want to know what you should expect? Not to worry, we have the 6 steps you’ll need to take from start to finish.
- Decide what your price range is and what you can afford
While it’s exciting to view homes online and see what kinds of properties are out there, you should first sit down and see what you can (and cannot) afford. This is easy to do when you’re working with a realtor or real estate agent, because they will then only come to you with properties that are within certain parameters.
Remember, you want to be able to afford your mortgage payment each month and have enough money left over to live comfortably. When you stay in your price range, you limit the risk of defaulting.
- Look for a lender and get pre approved
Getting pre approved by a lender is one way to determine what price range you should look for a home in. The lender will assess your debt to income ratio, credit history, credit report, and other assets to determine your interest rate and the amount you are approved for. It’s always a good idea to shop around and see what lender can give you the best interest rate on your loan.
Once approved, you can tell sellers that you’ve already been approved for a certain amount, which can make you an attractive buyer.
- Find your dream home and submit your application
Once you’ve found the home you’re interested in, and secured your lender with a pre approval, it’s time to submit your mortgage loan application. You will need to fill out an application in addition to providing supporting documentation such as proof of your income, the amount of any debts, and other assets you may have.
- Get a home inspection and purchase home insurance
You’ll then need to make sure you schedule a home inspection with a certified inspector. This is important because it allows a neutral, third party professional to tour the property and help point out any significant issues. You’d definitely want to know if there is something wrong with the property before you purchase it, so don’t skip this step, even if your lender doesn’t require it.
A home inspector knows what to look for, and will mark down their findings. You can then decide to negotiate with the sellers to fix the issues, or have them adjust the price of the home so you can fix the problem.
You will also need to purchase homeowner’s insurance before your lender will process and approve your loan application.
- Wait for the lender to complete items on their end
As you’re waiting for loan approval, your lender is ensuring the home is appraised so that the price is fair and in line with other properties in the area that are similar. They are also doing a title search to ensure you’re not purchasing a property with outstanding liens on it.
After these tasks are completed, your loan should be approved and your lender will set a date for closing and inform you of the amount you’ll need to bring with you for the down payment and closing costs.
- Meet at closing and finalize
Congratulations, you’re about to close on your home! At the closing you’ll hand over your down payment and what you own for closing costs. You’ll then sign all the required paperwork, and be on your way to enjoying your new home!
The mortgage loan process isn’t something to feel intimidated by, once you know what to expect. Just make sure you take it one step at a time, and you’ll be ready to close before you know it.
Discover your dream home in German Village, OH.