Steps to Getting a Mortgage Loan

Buying a house can be a complicated process, especially if you haven’t purchased a home before. The key to home-buying success is knowing what to expect during the mortgage process. This way you can make wise decisions about your purchase.

1. Preapproval

A pre-approval is an application for credit and the lender's written commitment of how much they'll let you borrow. Getting preapproved for a mortgage loan at the beginning of the house-hunting process can help you determine how much home you can afford and make shopping easier.

Lenders consider many factors when deciding whether or not to approve a loan. Some of the most common items include your:

• Credit score
• Down payment amount
• Employment history
• Income and assets
• Existing debt

2. The offer

Once you find the house you want, you or your real estate agent will prepare an offer. Offers typically include the purchase price, closing date and how long the offer is good for. The seller then will accept, counter or reject the offer.

Once your offer is accepted, you can arrange for the home inspection, which should be done by an independent, qualified professional, and either apply for a mortgage if you have not already done so or let your lender know you found a home if you were pre-approved.

3. Loan application

After you and the seller have settled on a price, you are ready to finalize the terms of your mortgage. This includes determining the loan program (Conventional, FHA, Jumbo, etc.), completing the loan documents and providing any additional documents requested by the lender. You may be asked to provide W-2s, pay stubs, bank and investment statements and tax returns.

4. Rate locking

When it comes to interest rates, you want to ensure you get the lowest one available. One way to do this is by locking in the rate. This will guarantee the rate doesn’t go up while the loan is being processed because rates can fluctuate daily. Most rate locks are between 15 and 60 days, giving you, the seller and the lender plenty of time to complete the paperwork.

5. Loan processing

There are three major steps between application and closing:

• Appraisal—The home will be appraised to ensure you are paying a fair market value.
• Title and escrow—A title company will hold all documents and funds until the mortgage has been approved. They also will ensure the title to the property is clear and then prepare a mortgage note and deed.
• Underwriting—The lender will review the application, supporting documentation, financial information, sales contract, appraisal and title to be sure all necessary criteria and regulations are met.

6. Closing

The mortgage documents will be sent to a title company for you and the seller to sign. In many states, this process is handled by the title company. Otherwise, a closing company or attorney manages the process. You will need to bring photo I.D. and funds for closing costs and the down payment. There is also a hefty stack of paperwork to review and sign—documents such as the loan note, deed and an itemized list fees and charges related to the mortgage.

Some lenders, like Mountain America, allow you to close electronically. With Quick Close, only a handful of documents are printed. The rest are securely stored on a flash drive and can be reviewed from home. At the title office, you provide a digital signature that is applied to all of the documents, saving time and effort.