So you’ve decided to take the plunge and buy a new home or refinance your existing home. We applaud your decision, because becoming a homeowner, moving to another home that better suits your personal needs, or getting a better rate or terms than you have on your current mortgage could all mean big benefits for you over the long haul.
A mortgage is a significant transaction, though, and it involves several steps. But there’s no reason to be concerned, especially when you know what to expect ahead of time. Here are the 6 major milestones when you go through the home loan process:
There’s no getting around it: buying or refinancing a home does involve some paperwork. Providing the right documents to assure your ability to qualify for financing is one of the most important points along the way.
As you may already know, paystubs, W-2s, and federal tax returns are the basics you’ll want to gather and provide (and probably have already done so during the pre-approval process). In most cases, the last two of each does the trick.
You’ll also need to show you have the funds to close or can satisfy cash reserve requirements by providing any necessary bank and financial statements for the last two months. Be sure to copy every numbered page, even the ones that don’t have anything on them. If you’ve recently made large deposits into your accounts, you should be ready to show where the money came from.
Will anything else by needed? It’s possible, and your Homeowners Licensed Mortgage Professional will fill you in on the specifics, especially if you’re self-employed, divorced, receiving additional income, paying alimony or child support, or there’s something else unique about your finances or loan program.
The next important step in the home loan process is the appraisal. A licensed professional will conduct a review to reassure both you and us of your new home’s value, and you’ll have an opportunity to see the appraisal report prior to settlement.
The appraiser will visit the property and note its style and overall condition, measure square footage, and confirm the number of rooms. While appraisers are not home inspectors, they will look for any obvious defects or safety issues as well as compare the property to its legally designated use, see if it’s zoned properly, determine if it’s located in a flood plain, and more.
In addition, a list of comparable properties, or “comps,” will be pulled to determine if your purchase price or home value is right for the market. The comps should be located in the same area and should be similar in size, style, and function. For example, if your home is a ranch with 3 bedrooms and 2 baths, the appraiser will base its value on nearby 3-bedroom ranches, not the 12-bedroom megamansion that just sold for huge money on the other side of town.
If you’re buying, you can sit back and relax while the appraiser takes the lead on this part of the process. If you’re refinancing:
- Be sure to keep your home in good condition and present it to the appraiser as you would for a sale.
- Prepare written information regarding improvements and offer an extra copy for your appraiser to keep.
- Be punctual, courteous, and respectful to help your appraiser finish the job accurately and efficiently.
3. Processing & Underwriting
At this stage, your application is in the hands of our processing team. They will order reports, review guidelines, and double check your docs to be sure all is complete. Their goal is to make sure the underwriter will have everything needed for a speedy decision.
Please remember that your income, accounts, and credit are still being checked, and changes to any of them could be detrimental to closing your loan. Remember, the fastest way to an approval and the closing table is the route with no obstacles!
4. Conditional Approval
If all goes well, your loan will come back from the underwriter with a conditional approval. “Conditional” simply means that a few things still have to happen. Some are up to us, and others will occur step-by-step over the natural course of finalizing your loan. Your Homeowners Licensed Mortgage Professional can provide more information and answer any questions.
During this stage, you should continue to avoid any roadblocks that can keep you from moving forward, like major life or employment changes, late payments, random deposits, and opening new credit card accounts. You should also keep all financial documents available, even the new ones.
5. Clear to Close
These are the three words every borrower wants to hear. They mean your mortgage has been fully approved, final documents are ready to be prepared, and your final destination is now in view! Barring any unforeseen changes, you’ll be at the closing table very soon and you’ll receive word on final scheduling.
Before your closing, be on the lookout for a Closing Disclosure form that will confirm the terms and costs of your loan. Please review the CD carefully, reach out right away if you notice any discrepancies, and get ready for what should be a smooth closing to follow.
Congratulations! You successfully met all of your requirements along the way and you’ve reached your home financing destination.
Even though you won’t be talking to us as often after your loan closes, remember that we’re still here for you. Never hesitate to contact your Homeowners Licensed Mortgage Professional with questions when they arise, and we always appreciate your referrals if anyone you know may be ready to embark on their own homebuying or refinancing journey.