The Loan Process
The home loan process can be a straightforward, simple and easy process to navigate when you have a thorough explanation of what to expect AND when you have an expert mortgage lender to guide you along the journey. At Sente Mortgage, it is our intention to make the process as seamless and transparent as possible. Our team is here to guide you through each step in the process and ensure that you know what to expect during each phase.
If you’re just getting started, or if you’ve already been through this before, we find it’s helpful to have an overview of the process and key milestones. Let’s look at the simple 6-step process as a guide to what you can expect during the process.
Step 1. Pre Qualification
Pre-qualification is one of the most important steps in the process as it helps you determine how much you can afford in order to identify your price range so that you can begin to search for your new home in earnest. During the pre-qualification phase, your Mortgage Banker will discuss different loan programs and the down payment options that are available to you. They will help you make some initial decisions about how much house you would like to purchase and give you a realistic idea on what your monthly payments will look like.
At the end of the pre-qualification process your Mortgage Banker will arm you with a pre-qualification letter. With this letter in hand, you can begin your house hunting process knowing exactly how much you can afford.
Step 2. Finding your dream home
Now that you have a pre-qualification letter and know your price range, it’s time to find your dream home, and enlist the right Real Estate Agent to help make your dreams a reality.
During your house hunt, a good Real Estate Agent should provide helpful insight about the neighborhood, community and the specific homes that meet your needs that are in your price range. They’ll be by your side through the process, showing you homes that meet your criteria, , connecting with the sellers agents, and best of all, once you find that dream home in your ideal neighborhood they will help you negotiate the sales contract and purchase price. Once you have found your ideal home and negotiated the purchase contract, it’s on to the next part of the home buying process: the full loan application.
Step 3. Mortgage Application
After finding and negotiating your dream home, you’ll need to submit a full mortgage application. This is where the paperwork gathering phase starts as the loan application will ask for detailed information about you, any co-borrowers, the property, and your personal finances. All of the information provided in the loan application is protected and confidential, and will be used to determine your strength as a borrower and your ability to repay the loan. This is the phase where you dig-in and get your bank statements, W2’s, tax returns and other necessary documents ready to submit.
During this phase, you will be working with your Mortgage Banker to select the right mortgage product for your financial situation and settle on a down payment amount.
Once you select a mortgage product you will also be given a Loan Estimate which will outline the loan terms, including the loan amount, interest rate and total monthly principal, interest, projected payments and closing costs. It’s important to carefully review this document for accuracy and review any questions or concerns with your Mortgage Banker. Once you’ve reviewed your initial documentation and signed your initial disclosures, your file will move to processing for the next step of the process.
Step 4. Processing
Now that you have completed the loan application process, the next part of the process involves processing the loan information to ensure that all requirements are met so that you can purchase the home and assume the mortgage loan.
Buying a home takes a fair amount of paperwork and coordination with several different entities. At this point in the home purchasing process your loan processor will coordinate the necessary paperwork and work to verify all documentation that you have provided in your mortgage application. They may ask for additional documentation about your history, assets, and debts as they work to prepare your file for underwriting. It’s important to respond to these requests as quickly as possibly so there aren’t any delays.
During processing you can also expect that an appraisal will be ordered on your new home. The appraisal is performed by an independent 3rd party who will assess the current market value of your home. This allows the lender to determine that the value of the home covers the loan amount.
Once all documentation has been verified and packaged by your processor, it will be sent to underwriting for step 5 of the process.
Step 5. Underwriting
During this phase in the process, the underwriter will review your file for accuracy and go over the information submitted with a fine tooth comb. The underwriter’s role is to review all information submitted in order to determine the capability to repay the loan. It is their job to ensure a sound investment on behalf of the mortgage bank. After reviewing your file, an underwriter will typically do one of three things:
- Issue a Clear to Close. Clear to Close means that you are approved and ready to close on your new home. It’s rare that a file will get a Clear to Close the first time it goes to an underwriter, it’s best to be prepared for a few more questions or requests.
- Issue a Conditional Approval. This is a request from the underwriter to provide additional documentation or satisfy certain conditions before they issue a Clear to Close. Conditions vary from one file to the next, but a common request is additional pay stubs, more tax returns, or a letter of explanation on a late or missed payment. If you are asked for additional documentation, get this information back to your Mortgage Banker as quickly as possible. The goal is to satisfy all conditions so a Clear to Close can be issued.
- Deny the File. It’s very rare that an underwriter would do this, but if the loan terms don't match up it is possible that an underwriter could deny the file. If there is a potential issue with your file, in most circumstances your Mortgage Banker would already be working with the underwriter prior to your file ever reaching this point in the process.
Step 6. Closing
Once you have a Clear to Close, you are finally in the home stretch and the keys to your new home will soon be yours. Prior to closing day, there are several things that will happen. The first thing is preparation of the Closing Disclosure (the CD). At least three days before closing, you should receive a copy of the Closing Disclosure. The CD is a 5-page document that gives you specific information about your loan, its key terms, and how much you are paying to obtain your mortgage and buy your home. Typically, your Mortgage Banker will review this document with you for accuracy and ensure it matches what was quoted in the Loan Estimate (LE). The Closing Disclosure is the information that will be used to prepare your final closing documents that you will legally sign on closing day so it is a critical step in the process.
With all of the final paperwork prepared it’s time for closing day! Get your writing hand ready, your signature and initials will be required. There are two primary things that happen at your loan closing. First, you’ll sign the legal agreements between you, the lender and the seller, to transfer ownership and agree to the terms and conditions of the sale. Second, you’ll pay any closing costs and escrow fees that you’ve agreed to pay out of pocket as part of your loan terms. With all of the paperwork completed and wire transfers made, you’ll be presented with the keys to your new home.
Time for celebrating, you did it! Now it’s time to make your castle your home.