November 6, 2023

The Mortgage Loan Process

Buying a home can be scary and overwhelming. If you are a first-time homebuyer, you may be intimidated by the whole process. Let’s review the eight steps of the life of a loan so you understand how it works and can be prepared when you find your dream home.

Step 1: Pre-Approval Consultation

The first step is to speak with a loan officer for a pre-approval consultation to assess your credit and figure out what your budget is. This is a great time to consult with your loan officer and evaluate what purchase price and monthly payment you are comfortable with. Don’t forget to take into account your other monthly expenses such as food, utilities, and entertainment. After your loan officer reviews your application and credit, he or she will send you a pre-approval letter. Now you’re off to the fun part, house hunting!

Step 2: Application/Gather Documents

Congratulations, your offer got accepted! Now it’s time to complete the application process. Here is where your loan officer will ask for your W-2s, pay stubs, bank statements, etc. The loan can only move forward once all of these documents are submitted. Your Initial disclosure package needs to be signed by you to move the loan to the next step.

Step 3: Processing

Next your loan is submitted to processing. You will be assigned a processor who will work with you throughout the loan and prepare your file for underwriting. A processor will review your loan application to confirm and verify all of the information you’ve provided is correct. He or she will also request extra documentation from you, if needed, in order to get your file submitted to underwriting. The processor assigned to your file will reach out to you in regards to the next steps!

Step 4: Appraisal

The next step in the process is to order the appraisal. A licensed appraiser will come out and inspect the home. The value of the home will be calculated by examining the current local housing market and the comparable properties that have recently sold. It will also include the features of the home, square footage, number of bedrooms and bathrooms. Once the report is in your lender’s hands, you should be notified and receive the report.

Step 5: Underwriting

After processing comes one of the biggest steps in the process, Underwriting! The underwriter will review your loan application and confirm it meets all the current guidelines based on the loan program for which you have applied. They will review your credit report, all of your documentation and evaluate your debt to income ratio. Once the Underwriter has finished reviewing your file, they will send out what’s called a conditional mortgage loan approval, or in other words your commitment.

Step 6: Conditional Mortgage Loan Approval

Congratulations, your loan has been approved with conditions. What this means is, your loan is conditionally approved as long as your lender receives the documentation they’ve requested from you for the underwriter. The conditions could be something like an updated pay stub or updated bank statements. Once your lender has the documentation they’ve requested from you, the underwriter will review to confirm the conditions have been met, and they will clear the file for closing! Now you can take a deep breath…the hard part is over! Off to closing!

Step 7: Clear to Close

Clear to Close are the best three words to hear during this process! You will receive an initial Closing Disclosure three days prior to your closing date. Please sign this immediately. This document is a rough estimate of what your closing fees will be. A few pointers when reviewing your initial CD, page 2 will reflect all the fees which are being charged for the transaction, that’s also where you’ll find your seller or lender credit listed as well as your total cash to close figure! At this time, check in with your attorney or title company to see if they’d like you to wire the closing figures or have a certified check with you for closing! Don’t forget your photo ID! You’re almost at the finish line!

Step 8: Closing/Funding

Closing day is the best day! You will go to your attorney or title company’s office, sign the documents and leave with keys in your hand! Congratulations! You are now a homeowner!

By: Jon Iacono
A Family

Advisors is a multi-state mortgage banker that believes in delivering a seamless, stress-free mortgage experience to all of our customers.

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