A step-by-step guide
Step 1: Qualifying you for a Mortgage Loan
The first step is to determine how much home can you afford? What price range home should you be looking for? These questions are easily answered through a simple pre-qualification process. The necessary pre-qualification information is based on your current income and existing financial obligations. From this, a determination is based on debt to income ratios as to how much home you can comfortably afford. This prevents you from spending time looking at homes for which you may not qualify.
Step 2: Loan Application
This is usually a face to face meeting with your mortgage loan officer. You are provided with a loan application, a Good Faith Estimate with an estimate of closing costs and required disclosures.
Step 3: Loan Processing
The third step to your mortgage loan is processing. After the loan application packet is completed, a "needs letter" will be provided to you outlining the required documents necessary to prepare your loan to go to underwriting. It is important to provide all of the requested documents to assist the loan processor in assembling your loan package for final "underwriting" approval.
Step 4: Underwriting
The underwriter determines if the loan package provided by the loan processor is an acceptable loan. Your loan is analyzed for four important factors: collateral, capacity, character and capital. Once the loan is approved by underwriting, you are now qualified to receive a mortgage on your new home.
Step 5: Closing
After the loan is approved, it is forwarded to the Closing Department to prepare the documents to be signed at closing. These documents are provided to the closing entity, usually a title company or a closing attorney. Funds for closing are exchanged at this time, usually by cashier's check, draft or wire to the closing entity. After the closing documents are signed, the loan process is completed and the buyer now owns a new home.