Unless you intend to purchase your home for cash, buying a home means arranging for financing—starting with a mortgage application.
The mortgage application process can be challenging, especially if you’re a first-time homebuyer.
But understanding what to expect when searching for the best mortgage can not only help you streamline the process but can also help you make a successful home purchase.
Let’s look at how you can get started on your mortgage application.
Get pre-approved before you make an offer on a home
Mortgage pre-approval letters demonstrate you’re a serious buyer and have the financial ability to complete a successful home purchase. It’s a significant relief to many sellers who can be afraid buyers will back out of the deal.
And according to California-based real estate agent Rosanne Nitti, in an interview with Realtor.com, you might even find some real estate agents “push back” against showing homes to buyers without a mortgage pre-approval letter.
Mortgage pre-approval is a more detailed mortgage prequalification process that your mortgage lender will walk you through.
It’s a preliminary mortgage offer from your lender based on a hard inquiry of your financial information—income, debt (including credit cards), credit score/credit history, and down payment.
Most lenders will provide a pre-approval letter detailing the maximum loan amount borrowers are prequalified for, based on the loan program they want to use and their debt-to-income ratio (DTI).
Your mortgage pre-approval can also help you plan your budget as a homeowner by providing an interest rate and monthly mortgage payment estimate.
What documents do I need for the mortgage application?
While you can begin a mortgage application online, it’s important to know that you’ll still have to provide documents supporting the initial information for a mortgage application and a pre-approval.
These documents can include
- employer contact information, pay stubs or bank statements, and employment history
- driver’s license, social security number, or other documents that verify your identity
- tax returns, W-2s, and
- addresses you’ve lived at for the past two years.
Additional documentation showing alimony or child support payments, bankruptcy disclosure documents, etc., may also be required depending on your financial situation.
A pre-approval letter gives you leverage
A mortgage loan pre-approval puts you in the best possible position for a successful offer on a house.
The mortgage pre-approval process requires a review of your finances and credit report to uncover potential issues that would prevent you from purchasing a house—like covering closing costs and monthly payments.
Sellers often feel more comfortable knowing a lender has done a credit check and reviewed your information. This way, they might consider you a safer financial risk because a mortgage lender has already pre-approved your mortgage application.
Additionally, in highly competitive markets or situations where a home can receive multiple offers, some sellers will only consider an offer to buy if accompanied by a mortgage pre-approval letter.
What are the six steps to applying for a mortgage loan?
There are six main stages to applying for a mortgage loan:
- Mortgage loan pre-approval
- House hunting
- Mortgage application
- Mortgage loan processing
- Underwriting and closing
Mortgage loan pre-approval
Getting a mortgage pre-approval is arguably the best place to start when you consider buying a home or refinancing your current mortgage.
When you know your price range—how much you’ll be able to borrow—you can confidently look at homes online or attend open houses.
If mortgage pre-approval is the most crucial part of buying a home, house hunting might be the most fun.
Looking at online real estate listings, like Zillow or Realtor, is a great start, but it’s also a good idea to work with a local real estate agent, especially since many online listings aren’t updated in real time. It can be heart-wrenching to find your dream home online only to learn it sold a few days earlier.
Because your real estate agent works with you to find the type of house you want, they’ll keep you in the loop of potential listings—sometimes before they’re posted online.
Your mortgage lender will walk you through the entire mortgage application process. Because you already have a pre-approval letter, the application process itself will likely be significantly streamlined.
There are various loan products worth considering, each offering different advantages to homebuyers, such as:
- Fixed or adjustable-rate mortgages
- Conventional loans
- Government-backed home loans such as VA loans or FHA loans, FHA Streamline, etc.
The type of mortgage you decide on can impact the application process and any information you provide.
For example, VA loans offer a zero-down payment option for eligible veterans, military service members, or surviving spouses—but they must provide a Certificate of Eligibility (COE) as part of the application.
In comparison, conventional mortgages require a downpayment but aren’t restricted to military households.
Mortgage loan processing
At this stage of the mortgage application, loan processors review the loan application and ensure they have all the necessary information and documentation before sending it off to the underwriter.
You might be asked for additional information if discrepancies are noticed or clarifications are needed.
Underwriting and closing
The underwriter is the principal mortgage application decision-maker, and the underwriting process is the stage where mortgage loan approval happens.
Underwriters carefully evaluate your application, cross-checking to ensure you and your property meet all the loan program eligibility requirements. In addition, they review your credit history and your ability to repay the mortgage.
Once they’ve completed their review and determined that you and the property meet all necessary conditions, the underwriter approves the mortgage application.
This point is the final stage of the mortgage application process and when you’ll receive the closing disclosure documents.
These documents are similar to the original loan estimate you received, except that your closing disclosure confirms your purchase price, mortgage rates, and other loan terms in writing.
Within 24 hours before you take possession of the property, you’ll get to do the final walk-through to ensure nothing has been damaged and that any repairs you may have requested were completed.
Start your mortgage application with Assist Home Loans
Whether you have questions about the mortgage application process, your financial situation, or want to find out how much you might be eligible to borrow for a new home, reach out to a loan officer at Assist Home Loans today.
Backed by a streamlined process and technology, we make choosing, processing, and closing your loan as easy as possible.
Photo by Mikhail Nilov