Mortgage Loan Process: 8 Steps to Your Next Home

Buying a new home comes with a ton of excitement. It also comes with a considerable amount of paperwork. This paperwork and process can feel overwhelming if you don’t know what to expect. The good news, is your Mortgage Loan Officer will work one-on-one with you throughout the entire loan process; however it helps reduce residual stress to understand the entire process before you apply. That way, you will know what to expect, and you can spend more time thinking about the future in your new home!

  1. Prequalification

Sounds counter-intuitive to qualify before you qualify, doesn’t it? But many real estate agents won’t even show buyers a home without proving they have the potential to purchase.

To prequalify, borrowers will need to provide their loan officer with their personal identification, income, assets, and liabilities. Loan officers will need to verify this information by:

  • Personal identification from two sources of ID, such as driver’s license, state ID, passport, social security card, or work badges
  • Income verification from paystubs, W2s, tax returns, 1099s, or social security award letters
  • Assets by providing information on checking, savings, investments, or retirement accounts
  • Liability documentation, usually in the form of authorizing the loan officer to pull a credit report

From this information, the loan officer can determine the mortgage programs, loan limits, and estimated monthly payment options for your financial situation. These estimates will help give you the foundation to begin planning your purchase. Keep in mind, you will still need to consider your taxes and living costs. Taking the time to create a future budget plan that will set you up for success and narrow down the ideal price point of your future home.

Accompanying a prequalification letter, loan originators will also provide the applicant with a fee sheet that covers a fair estimate of fees for closing on their loan. In most cases, these fees are due at closing for the purchase of a house along with their down payments. If borrowers are refinancing, they can either pay fees at closing or roll them into the loan with proper appraisals.

 

  1. Official Loan Application

When a borrower finds the house they want to buy, they move into the next phase. This is the official application for the loan, which applicants can complete in person with a loan officer or via a secure online portal. While not required, most borrows have their rate “locked” prior to completing the application. This means that their interest rate will not change, regardless of positive or negative changes in the market. Rate locks only remain valid for a specified period of time.

When buying a new house, borrowers must provide additional information over the prequalification material. This documentation includes the signed sales agreement, homeowner’s insurance quote, and invoices or receipts from any home inspections.

When owners refinance a current property, they provide different documentation. Refinance documentation includes the property deed, statement for all current liens, homeowner’s insurance declaration page, and paid property tax receipts.

Having all documentation readily available for the loan officer when requested speeds the process up immensely.

 

  1. Initial Disclosures

With the application complete, the loan officer will provide the borrower with initial disclosures to better understand the transaction.

By signing the following documents, borrowers authorize the lender to begin work:

  • Loan Application for each borrower
  • Borrowers Authorization
  • 4506-C – request for transcripts of tax returns
  • Consent to the Use of Tax Return Information
  • Freedom to Choose Insurance Company
  • USA Patriot Act Disclosure
  • Interest Lock Agreement (if the borrower elects to lock in the interest rate)
  • Loan Estimate – Disclosing the estimated fees and cost of the transaction
  • Borrowers Intent to Proceed Disclosure

 

  1. Loan Processing

A Loan Processor gathers all of the pieces of documentation that you have provided to your Loan Originator. They also collect the documents and disclosures you signed for the lender to create one complete loan file. The Processor will order an appraisal of your property to ensure its value will support your requested loan amount. They will order a title policy and provide information to your closing company. The closing company will verify that the property doesn’t have additional liens and has been transferred properly through the years.

 

  1. Initial Underwriting/Loan Decision

At this stage, the Underwriter receives the loan file for review. Far from a subjective analysis, they have guidelines and regulations they must follow to declare a loan file properly documented. The Underwriter determines whether all the necessary documentation has been provided to complete the loan file. They also verify that you have sufficient income to support current debts in addition to the new mortgage payment.

 

  1. Condition Review/Clear To Close

Often, an Underwriter will have conditions or requirements that you must meet before you can proceed to a loan closing date. They may request various items after your initial meeting with the Loan Originator, based on each particular loan. Typical items an Underwriter may require include: a Homeowner Insurance Policy or more recent pay stubs or bank statements. Once they receive and clear these items, your loan heads off to the Closing Team.

Congratulations! Your loan is now “Clear To Close.”

 

  1. Closing Disclosure

The Closing Team will draft a Closing Disclosure, a comprehensive list of all fees associated with the closing. As a buyer, the Disclosure outlines fees paid to the seller, the lender, and the title company. It will also include the Real Estate Agent commission and associated fees, and also any credits to be given. Lenders must provide a copy of the Closing Disclosure for buyer review at least three days prior to the closing date.

 

  1. Loan Closing

With all or most loan conditions met, your Closing Team will coordinate a convenient closing date for you and your closing company. At this time, you will sign all the closing documentation required by the lender. If you purchase a new home, you will also receive a Deed transferring the property from the seller to you. With all the paperwork signed, you get to walk away with a set of keys to your new home! Or, if you refinance, you get some cash out from the equity in your current home or a better interest rate.

 

Although the mortgage loan process is a heavily regulated and documented process, Standard Bank makes every effort to make it easy and transparent for our customers. Your Mortgage Loan Officer will be by your side every step of the way to communicate and answer questions. Our teams have decades of experience and are here to help you. However, having a bird’s eye view of the process will certainly help you in the long run.

If you have more questions about the process or wish to start the process with a prequalification, contact your hometown Standard Bank Mortgage Officer.