In March 2020, the national median listing price for a home was $320,000, according to Realtor.com. That’s not pocket change, so it should come as no surprise that many Americans need to borrow funds to make their dreams of homeownership a reality. Understanding how the mortgage process works can help you avoid costly missteps and make your experience a positive one. Take a little time to educate yourself about the ins and outs of securing a home loan.
How the Mortgage Process Works
In today’s fast-paced world, you can accomplish a lot with a push of a button. While technology has streamlined things a great deal, getting a mortgage is still a process, and that means that there are several steps that will need to be completed if you hope to be approved for a mortgage. Learning a bit about how the mortgage process works will make it easier to move forward with confidence. What steps should you expect to take as you navigate the mortgage process?
1. Get Ready
Before you apply for a loan, you need to prepare for your finances to be placed under a microscope. Credit.com suggests that you check your credit scores before approaching a lender to be sure that they’re where you want them to be. People with higher credit scores are generally offered more favorable loan terms, so it may be worth your while to repair a low credit score before applying for a home loan. You can also use this time to educate yourself about the various types of home loans, the difference between fixed- and adjustable-rate loans, and other relevant topics. Many reputable organizations offer free courses for first-time homebuyers that can be helpful.
2. Pursue Preapproval
Before you start hunting for the perfect house, you’ll want to apply for preapproval from a lender. Getting preapproved for a mortgage lets you know how much you’ll be able to borrow. It not only establishes that you are a serious buyer but also provides clear evidence of what you can afford to spend. This can come in handy when you’re dealing with real estate agents and sellers, especially in competitive housing markets.
What is involved in the preapproval process? As The Mortgage Reports explains, you’ll provide a lender with all the necessary documentation of your income and credit history so that they can complete a thorough examination. Then, they’ll provide you with a preapproval letter that explains the type of loan that they’re willing to offer you, including the amount that they’re willing to lend and the terms of the loan. Keep in mind that this is not a guarantee of a loan – you’ll still need to find a property and file a loan application – but receiving a preapproval letter puts you one step closer to a home loan.
3. Make It Official
Once you find the right home and have your offer accepted, it’s time to make it official by submitting a formal loan application. Thanks to the preapproval, much of this will already be on file, so you may just need to add information about the property. As Forbes explains, you’ll be given a list of conditions to fulfill before closing, and you’ll need to be ready to respond to any requests for additional information. Meanwhile, the loan will go to the underwriter for final approval.
4. Go to Closing
Closing opens the door to homeownership. According to the Consumer Financial Protection Bureau, it’s the final step in the mortgage process. It’s when you sign the paperwork that legally transfers ownership of the property from the seller to the buyer (i.e., you!). You’ll also need to come prepared to pay any closing costs. These are the fees owed to third parties for the services required to complete the real estate transaction. Closing typically only takes 60 to 90 minutes, and when it’s done, you’ll be a homeowner.
Would you like to learn more about how the mortgage process works? If you’ve got questions, PrimeLending Dallas has answers. Our experienced loan officers will listen carefully and offer personalized guidance so that you get truly useful responses. Contact us today to get started.