An informed buyer is a successful buyer. The mortgage process is much less complex if you know how to prepare and what to expect along the way. That’s why we’re explaining the mortgage process steps and what it takes to get your loan from application to closing.
Mortgage Process Steps
As you can see from the “Loanopoly” illustration above, the mortgage process has several steps. All mortgage process steps happen during 5 major phases of the home buying process:
Now that you’re familiar with the timeline, let’s take a closer look at what happens during each phase.
Phase 1: Application
The application process begins with Quickstart. Quickstart helps organize and store your application information. You can apply from any location, and at your convenience. If you have to step away from your application and come back later to add more information, Quickstart will help you pick up right where you left off.
Everything, especially the mortgage underwriting process, depends on the loan application. You can improve your chances of an accurate approval dramatically by providing the correct documentation up-front. If your loan application has erroneous or incomplete information, our team will not have the tools they need to issue your approval.
A computer process saying is “junk in junk out.” It’s the same thing when buying a home. Beginning with a “junky” application will cause “junky” results in the end. So, stay in close contact with your loan officer, ask questions, and complete the application with accuracy to set yourself up for a streamlined mortgage experience.
Mortgage Pre-Approval Process Explained
Once your credit is pulled, lenders usually run the application and credit report through an automated pre-approval system like Fannie Mae (Desktop Underwriter) or Freddie Mac (Loan Prospector). These systems provide a mortgage pre-approval within minutes. A solid pre-approval tells a buyer which items are required for full underwriting approval and closing. Plus, it allows a buyer to start the home shopping process.
A very common request from a home seller is a mortgage pre-approval letter. Sellers what to know that you have the financial means to move forward with financing their home. You should care about this too. Why look at homes without knowing how much you can finance?
Just remember, for the best and most accurate pre-approval findings, it still starts with a complete and precise application. This part is on the buyer and the loan officer. The better this small team works together, the better the results.
Phase 2: Shopping For Your Home
When you are armed with a preapproval, you can begin shopping for your new home. During the shopping process, you will:
- Meet with your real estate agent
- Make your wish list
- Begin touring homes
- Make an offer on a home
Once your offer is accepted, your home is officially “under contract,” and things kick into high-gear on the mortgage-side.
Phase 3: Inspections
Once your home is “under contract,” it’s time to schedule all necessary inspections. Some inspections are required by OVM, while the others are up to you. Both are important to move forward with the mortgage process.
Lender Required Inspections
The loan program guidelines will dictate what inspections are necessary. For instance, government loans like USDA, VA, and FHA have more safety and condition requirements than conventional appraisals.
Additionally, government programs require water or septic inspections when applicable.
Finally, if the buyer uses a VA loan for the purchase, a termite inspection is required.
Although the above are required inspections, they are also great resources for you as the future owner of the property.
Home Inspections Chosen by the Buyer
- Home Inspection
- Well Inspection
- Septic Inspection
- Radon Inspection
- Appraisal (even cash buyers may want an appraisal)
- Termite Inspection
If an inspection is not a requirement, it doesn’t mean you should skip it. Septic or well inspections typically fall into this category. Imagine closing on a home and learning that the water has bacteria. Maybe the septic tank is backed up, needs pumping, or even needs replacing. That is not something you want to find out a year into owning the home.
Furthermore, there have been buyers who skimp on the $50 – $100 termite inspection cost, only to find out the home is infested after closing is not the time to learn that a house is termite infested.
The home inspection is strictly for the buyer and should not be taken lightly. First of all, remember that an appraisal is not a home inspection. Expect the inspector should crawl underneath, on top of, and through the whole house. Many inspectors encourage the buyer to attend the home inspection so areas may be pointed out and discussed on the premises.
It’s a good idea to perform any desired or required inspections during the due diligence period of a contract. Get everything out of the way early. If there is a significant issue, the buyer may choose to request repairs, cancel the contract, or switch to a renovation loan.
Phase 4: Underwriting
The underwriting process involves comparing the borrower’s application, credit report, and documentation to loan program guidelines. The underwriter will examine the fine details of your application to confirm that you are prepared for loan approval. Remember earlier how we mentioned providing an accurate application and documentation? This is why. Everyone’s goal should be a quick, clean underwriting approval.
Underwriting Clear to Close
This is what everyone wants to hear. We have final underwriting approval and clear to close. Final underwriting approval means any underwriting stipulations have been satisfied. The earlier this can happen, the better. Next, the file moves to the closing department. So, everyone should feel very good at this point. Yet, it’s not done yet.
Phase 5: Closing
Once the underwriting “clear to close” is received, your loan is in the hands of our closing department and your settlement company. The settlement company may be a closing attorney or title company. In addition to the other processes, closing also involves a series of steps.
- Insurance binder finalized
- Review invoices
- Set closing date
- Prepare closing documents
- Final verbal verification of employment
- Coordinate with a settlement company
As always, stay in close contact with your loan officer and title agent during this phase. Additionally, make sure to coordinate with your insurance agent and finalize your homeowners insurance policy. A home insurance policy is required for a lender to send the closing package. Best practices include taking care of insurance very early on. At least having the quote and application completed.
At this stage, the closing disclosure must be provided to all borrowers at least three business days before closing. The initial closing disclosure usually does not have final, accurate figures yet. But, while the above-listed steps are performed, the final figures are completed. Then, the closing package is sent to the settlement company.
Prepare For Closing Day
On the day of closing, all required signors should bring an ID, any necessary funds, and warm up the arm for signing. The settlement company representative explains closing documents and the borrower(s) sign. If it is just a notary closing, ensure that your loan officer, realtor, or settlement company explains the documentation. It would be best if you did not close without a thorough explanation of what you are signing.
Once signed, the funding process takes over. We send funds to the settlement company. Once the settlement company has the funds and the OK, the deed and mortgage are recorded. That’s when the property is officially in the buyers’ name, and the mortgage is owed! At this moment, the mortgage process is complete.
Hopefully, this has shed some light on what goes on behind the scenes before becoming a homeowner. Now that you’re familiar with the mortgage process steps, you will know exactly what to expect and how to prepare. We will be just a click away when you’re ready to start your mortgage journey!