Applying for a Mortgage (Important Info + 6 Steps)

Buying a house can be stressful. For first-time homebuyers especially, there is a lot of uncertainty around applying for a mortgage. That is why preparing for and understanding the process can decrease some of the stress of applying for a mortgage.

There are many reasons why as a borrower, you would want to apply for a mortgage. The most obvious is that you cannot afford to buy the house in cash and need to make installment payments on it over the next 15 to 30 years.

Applying for a Mortgage: 6 Steps

Pre-Approval The pre-approval stage of getting a mortgage is typically relatively pain-free. First, a loan officer will ask you some questions and get basic verification of your income and credit score.

Getting a Property Under Contract Getting a property under contract is a prerequisite to moving forward with the lending process because the bank will need to consider the property you are buying. So after you’ve found a home, made an offer that both parties have agreed to, you can move to the next step in applying for a mortgage.

Application Most lenders will use what is called a 1003 Uniform Residential Loan Application. If you do not see this application and are going through a conforming loan process, there is a good chance that you are going through a bank’s questionnaire and filling out details so that their software can fill out the form for you.

Underwriting This phase is where the loan officer takes your completed application package with all the documentation and delivers it to an underwriter for review. The underwriting process is where the lender seeks to understand you and the property as a borrower and get comfortable giving you a loan.

Loan Commitment Once the loan is underwritten and the lender has gone through their checklist of requirements for the loan to their satisfaction, they issue a loan commitment.

Closing At closing, there will be a giant stack of documents to sign. The most notable documents will be the note and the mortgage. The note is what says you agree to pay the bank back. The mortgage is the document that secures their interest in the note to the property.

If you do not pay the note, the lender will exercise their rights in the mortgage and start the foreclosure process. Besides the note and mortgage, you will likely have to sign a whole bunch of disclosures. You will likely have to sign a document stating that you intend to be the owner-occupant of the property.

The process of getting a mortgage can be time-consuming and feel cumbersome. But, in the end, there can be many benefits to the borrower. First, having a clear understanding of the process and the bank’s requirements has the best chance of running smoothly.

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