Once you have a finalized contract, it’s time to apply for your loan. There are four key steps to this process. Now that you know the purchase price and the property address, you can work with your loan officer to complete your loan application, discuss rates and lock options, and select the loan program that best meets your needs.
1) Loan Application Process
Submit your loan application. Your loan officer may guide you to do this online, over the phone or in person.
Submit your documents. In order to process and underwrite your loan, your lender will request:
- Income documentation (such as pay stubs)
- Asset documentation (like bank account statements)
- Other documentation (such as landlord history)
- Other relevant documents. If you were pre-approved, you may still need to provide some updated documentation. Your loan officer will provide you a checklist.
Loan Estimate Issued
Within three (3) business days after the loan application submission, the Loan Estimate will be mailed or emailed to you.
Intent to Proceed
You will indicate your intent to proceed with the mortgage transaction after receipt of the Loan Estimate. Processing of your loan will begin once this step has been completed.
2) Loan Approval Process
Your loan then moves to the processing stage where a loan processor prepares your file for review by an underwriter. At this point, your processor becomes your primary point of contact. During this time, your key responsibilities include:
- Providing your loan processor with any contract changes, renegotiations or repair addenda, if necessary,
- Finalizing homeowner’s (property) insurance and flood insurance, if applicable. A copy of your homeowner’s insurance policy will be required 15 days before closing.
- Reviewing any paperwork you are provided and taking required action
- Providing additional documentation as requested
- Reviewing any revised Loan Estimate issued
3) What Happens at Closing?
Preparing for Closing
You are nearing the final stages of the home buying journey! You will be notified of the loan decision and/or any conditions that need to be met. During this time you have several key responsibilities:
Provide any additional documentation that may be requested.
- Lock your rate at least 15 days before your closing if you haven’t locked it already.
- You will receive your Closing Disclosure from your lender at least three (3) business days before closing. This disclosure documents the actual terms and fees for your loan. Your loan processor will contact you to review the Closing Disclosure and discuss potential impacts, should any terms or fees change.
You'll inspect the property during a final walkthrough.
Your purchase agreement should have a clause allowing you to examine the property before loan closing. This is your time to check for any damage and see that the seller has vacated the property and left any items negotiated in the contract.
Your settlement agent will work with you and your loan officer to manage your closing.
Your settlement agent will complete the transaction through the transfer of the property’s title to the buyer and the transfer of cash to the seller.
You'll sign several documents to settle your costs.
At closing, you’ll sign the documents below to finalize your loan and purchase. The more familiar you are with these documents, the more comfortable you will be on closing day.
- The Note – Your written promise to repay Investor for the principal and interest of the loan
- Deed of Trust – Secures the Note and gives the lender a claim against your home and land if you default on your monthly payments
- Warranty Deed – Passes legal title of the home and land from the seller to you, if applicable
- Closing Disclosure – Provides the actual terms and costs of the loan
4) Celebrate the purchase of your new home
Once you’ve completed the walk-through, signed the paperwork and paid the funds required to close, the transaction is complete. You’ll then receive the keys to your new home.
As a new homeowner, you can enjoy the benefits of becoming a part of a new community and get to know your new neighborhood.
Understanding the mortgage process: a close-up look at costs
You may have submitted your mortgage application (congrats!), but don’t bid farewell to mortgage-related paperwork just yet. Be on the lookout for these two documents from your loan officer, which will help you understand the true cost of your home loan:
- Loan Estimate
The scoop: This three page document—which replaced the Truth-in-Lending statement and the Good Faith Estimate in October 2015—provides an estimate of your mortgage loan terms (think initial loan amount, interest rate and monthly payment) and your closing costs. It’ll also outline what services you help shop for, versus those you cannot.
The timing: Three business days after your mortgage application has been received by your lender
Tip: This is the right time to talk to your loan officer if you need to change any loan terms or have questions about your loan fees.
- Closing Disclosure
The scoop: This document serves as your overview of the closing terms and costs necessary to complete your mortgage transaction, and can be leveraged to identify any costs that have changed from your Loan Estimate. The document replaced both the Truth-in-Lending statement and the HUD-1 Settlement Statement.
The timing: At least three business days before closing
Tip: Carefully review your Closing Disclosure so you know how much cash you’ll need on hand for closing day.
By taking the time to review and understand your mortgage documents, you’ll be ready to close with confidence.