What Do I Need To Get Approved For A Mortgage – First-time home buyers tend to find the mortgage approval process confusing. We know because we receive their questions regularly by email! That’s why we’ve created this guide to walk you through the various steps in a typical mortgage approval process.
Note: The lending process may vary from one borrower to another due to various factors. Therefore, your experience may differ slightly from the one shown below. These are the six steps
What Do I Need To Get Approved For A Mortgage
We’ve found that people understand the mortgage approval process more easily when it’s explained as a series of steps. So let’s talk about the six main stages that occur along the way (as shown in the image above).
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You can think of pre-approval as a kind of financial pre-screening. It has “for” in the name because it happens at the beginning of the mortgage loan approval process,
Pre-approval is when a lender checks your financial situation (especially your income, assets and debts) to see if you’re a good candidate for a loan. They will also tell you how much they are willing to lend you and give you pre-approval for that. The lender may also check your credit reports and score at this stage.
This is a beneficial step in the mortgage approval process because it allows you to narrow down your search for a home. Skipping the pre-approval and jumping right into the home-hunting process could waste time looking at homes that are above your price range.
Once you are pre-approved for a certain amount, you can shop within that price range with more confidence. And that brings you to the second major step in the mortgage approval process – house hunting.
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We’ve written extensively about the house hunting process. Here are some house hunting tips aimed especially at first-time home buyers.
Your mortgage lender is not heavily involved at this stage. House hunting is primarily done by buyers and their real estate agents.
Come back into the picture when you make an offer to buy a house. Then you move on to the next step of the mortgage approval process – filling out the application.
You have received preliminary approval for a loan. You’ve found a home that fits your needs and made an offer to buy it. The seller has accepted your offer. Now it’s time for the next stage of the mortgage approval process, which is the loan application.
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This is an easy step in the process as most lenders use the same standardized form. They use the Uniform Residential Loan Application (URLA), also known as Fannie Mae Form 1003. The application asks for information about the property being purchased, the type of loan being used, and information about you, the borrower.
You can find a sample loan application online: just Google “Fannie Mae form 1003.”
Once you have a purchase agreement and a completed loan application, your file will move to the processing stage. This is another important step in the broader mortgage loan approval process.
Loan processors collect various documents related to you, the borrower, as well as the property being purchased. They will check the file to make sure it contains all the documents needed for the underwriting process (step 5 below). These documents include account statements, tax records, work sheets, purchase contracts, and others.
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The exact steps a loan processor will take may vary slightly from company to company. It also varies depending on the type of mortgage loan used. But that’s usually how it works. Then you move on to one of the most important steps during the mortgage approval process – underwriting.
Underwriting is where the “rubber meets the road” when it comes to loan approval. It is the underwriter’s job to thoroughly review all loan documentation prepared by the loan processor to ensure that it complies with loan requirements and guidelines.
The underwriter is a key decision-maker during the mortgage approval process. This individual (or team of individuals) has the power to reject the loan if it does not meet certain pre-determined criteria. The underwriter will double check that both the property and the borrower meet the eligibility requirements for the particular mortgage product or program being used.
Associated with your loan. It will review your credit history, debt-to-income ratio, your assets, and other elements of your financial picture to predict your ability to make mortgage payments.
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If the underwriter encounters problems during this review process, they can provide the borrower with a list of conditions that need to be addressed. This is known as conditional approval. A common example of a “condition” is when the underwriter requests clarification regarding a particular bank deposit or withdrawal.
Character and the borrower(s) can resolve them in time, then the mortgage loan can move forward and ultimately result in approval. However, if the underwriter discovers a serious problem that is outside the parameters of eligibility for the loan, it can be rejected outright. Some borrowers will go through the underwriting process without any problems. That varies.
Underwriting is probably the most important step in the mortgage approval process because it determines whether or not the loan will ultimately be approved. You can learn more about the process here.
If the mortgage underwriter is satisfied that the borrower and the property being purchased meet all the guidelines and requirements, they will mark it as a “clear close.” This means that all requirements have been met and the loan can be financed. Technically speaking, this is the final step in the mortgage approval process, although there is one more step before the deal closes – and that is closing.
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Prior to closing, all supporting documentation (or “loan documents” as they are called) are sent to the lead company that has been selected to process the closing. And there are a
Documents. Domestic buyers and sellers must then review and sign all relevant documents for the funds to be disbursed. This happens at “closing” or settlement.
In some states, buyers and sellers can close separately by setting up individual meetings with the title or escrow company. In other countries, buyers and sellers sit at the same table and sign documents. The procedure may vary depending on where you live. You can ask your realtor or loan officer how this works in your area.
Borrowers should receive a closing statement before closing. This is a standardized five-page form that will provide you
How To: Mortgage Pre Approval
Mortgage loan details. It includes the terms of the loan, your planned monthly payments, and the amount you’ll have to pay in fees and other closing costs.
We hope this guide to the mortgage approval process has been helpful and we wish you the best of luck with your home purchase.
Brandon Cornett is a veteran real estate analyst, reporter and creator of the Home Buying Institute. He has been covering the US real estate market for more than 15 years. About the autho3 quiz Small steps to big money goals: Ready to buy your first home? What is your mindset about money?
Getting pre-approved for a mortgage from a lender is a critical first step when you’re ready to buy a home. It will help you determine how much home you can afford and show real estate agents and sellers that you are a serious bidder. Find out how to get pre-approved for a mortgage – it’s easier than you think!
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A mortgage pre-approval is a preliminary assessment of a potential borrower’s financial situation by a lender to determine whether the borrower will qualify for a loan. When applying for pre-approval, the lender will review your assets, income, debt level and more. Pre-approval for a mortgage should be the first concrete step in the process of buying a property.
If you’re considering a new home, it’s best to get pre-approved for a mortgage before you start looking. Why so early? Because it tells you how much home you can afford, it shows potential sellers and real estate agents that you’re serious about buying, and it gives you the opportunity to discuss loan options and your mortgage budget with your lender.
Fortunately, getting pre-approved is a simple and straightforward process. Below, we’ve highlighted the differences between pre-qualification and pre-approval and outlined the steps you need to take to get pre-approved before buying a new home.
A mortgage pre-approval and pre-qualification are letters that say a lender has agreed to lend to a borrower, but there is an important difference between the two. Pre-qualification is simpler and only offers a quick overview of the borrower’s finances (along with an estimate of how large a loan they will qualify for). Pre-approval, on the other hand, involves a formal and in-depth look at the borrower’s financial situation.
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Use a home buying calculator like the one below to find out how much home you can get for your desired monthly payment. Remember that most home loans are due on the 15th