Applying for a Mortgage
Published on June 28, 2023 | 4 Minute read
Melanie
Ortiz Reyes
Content Specialist
If you’re considering buying a home, you probably have many questions about the mortgage application process. This can be an extremely overwhelming process considering this is most likely the biggest purchase you’ll ever make. However, most people can’t pay the total cost of a home out of pocket, so applying for a mortgage might be the most essential step in purchasing a home.
One of the most common stressors during this process is feeling uneducated about how things are done. Therefore, it’s important to do your research along with working with a highly qualified real estate agent. Most agents will even offer to connect you with a loan officer they’ve done business with, or you can ask for recommendations from friends and family. If this is the case, make sure you check their reviews on not only search engines but their social media as well.
A good way to make this process less stressful is by having a list and checking off the steps as you go along. Having a visual list will help you stay focused on the end goal and help provide a sense of relief as you check off the different steps.
We’ve put together the most important steps of the mortgage application process to help you create your list:
Check your Credit Score - Lenders have minimum credit score requirements, and a higher score will increase your chances of approval because it indicates you’re more likely to pay the loan responsibly. In addition, a higher score will help you secure favorable terms on a home loan.
Evaluate your Financial Situation - Calculate your monthly income and expenses and determine your budget and possible downpayment.
Take a look at your spending habits. Is there anything you can do without? An excellent place to start is your monthly subscriptions. With so many streaming services available, it’s easy to forget to cancel those that we don’t need or enjoy anymore.
Calculate how much you spend, on average, on necessities like groceries, car payments, and health and car insurance.
Research - There are different mortgage options available, and it’s crucial you understand the pros and cons of each one before making a decision. Doing your research will help you choose the best mortgage to suit your situation.
Pre-Qualification / Pre-Approval - It’s best to get at least pre-qualified before you start looking at homes. This will prevent you from loving a house to later find out you can’t afford it. A pre-qualification letter is an estimate of how much you’d be able to afford. This will show as a soft inquiry on your credit report. A pre-approval letter will tell you how much the lender is willing to lend you.
Documentation - Your lender will require several documents to evaluate your financial eligibility. You’ll need to provide proof of income, bank statements, identification, employment verification, and details about your debts.
Submit Application - Submit your mortgage application once you’ve selected a lender. You’ll be asked to provide information about the property you intend to purchase and the loan amount you’re seeking.
Loan Estimate and Underwriting - Your lender will review your application and documents, evaluate the property’s value and assess your creditworthiness.
Approval and Closing - You will receive a loan commitment letter once your application is approved. It’ll specify terms and conditions and the loan amount you got approved for. Review the terms thoroughly and ask any questions you may have. Once you’ve understood the terms and conditions, you’ll sign the documents, pay closing costs and obtain the mortgage.
Educating yourself, staying organized, and maintaining good communication with your lender will help streamline this process. Take time to do your research and shop around for rates and weigh the pros and cons of each option. This will help ensure you’re ready to start the mortgage application process, taking an exciting step toward owning your home!