Purchasing a home can be an exciting milestone, but it’s not necessarily an easy one to achieve. There are several important steps to take when getting a mortgage to help ensure the home loan process goes as smooth as possible.
Do Your Research
It’s always best when making a large purchase to see what your household can realistically afford. Making a list of all your current debits, such as bills or loan payments, and credits, such as paychecks or disability payments, is an effective way to see what type of mortgage payment you can afford while still saving for emergencies and other life needs.
It’s also wise to research the different types of mortgage loans available and decide which seems right for you. These include conventional fixed-rate loans or government-backed loans from the FHA, VA and USDA.
This is an essential step and consists of filling out a short application at the financial institution you intend to get your mortgage loan through. At this step, you get a credit report, which is part of the process your lender will use to estimate how much money you’ll be able to borrow. This saves you significant time and potential heartache since it gives you an idea of what houses to shop for and what’s in your price range. While some banks have a fee for pre-qualification, it’s free at OMB (with no obligation)!
Now’s the time to start house hunting! You can visit properties with your real estate agent, check online real estate portals like Realtor.com, or both. Once you find “the one,” or at least something you’d like to try to buy, you want to make an offer on it. You’ll do this through your realtor, who can help fill out the necessary forms and consider any contingencies to help protect you as the buyer.
Apply for a Home Loan
Much of the hard work is done, but there is still aways to go! You will now want to pick out a mortgage loan originator, typically at the institution where you did your loan pre-qualification, and fill out a mortgage loan application in its entirety. This application is longer and will involve a hard credit pull and updated financial information, and will be based on address, sales price, loan amount, and specific loan program.
Your lender will tell you all the information you’ll need to provide, along with any required documentation. You may also want to order an inspection of the property before fully committing to the purchase and typically the property will be appraised.
Processing & Underwriting
Much of this step occurs behind-the-scenes, but after your application has been finalized, a mortgage loan processor will assemble all the information you provided into a loan estimate packet and provide you early disclosures. This allows you to easily digest all the information in front of you and make an informed decision regarding whether to proceed with that particular loan and lender. If you accept the estimate, all the information is then sent on to an underwriter who reviews the information and makes a final determination on the terms of the loan you’ve requested.
You’ve made it to the light at the end of the tunnel! For closing, which is the final signing of all the paperwork for the property transaction, your documents are sent over to a title company or attorney. You then have a period where you can review everything one last time. It’s important you ask any questions you have about the paperwork and never sign something you don’t understand. You may also want to do a final walk-through of the property beforehand, and then sign everything to make it official.
Now that you’ve made it all the way through, congratulations are in order – welcome to the home ownership club! Also, if you're a first-time homebuyer be sure you avoid these 5 costly mistakes and if you're unsure how much home you can afford, check out all of OMB's incredible mortgage calculators.
OMB and its affiliates do not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decision.
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