The Mortgage Process
Find out how the mortgage process works and what to expect when you apply.
Find out how the mortgage process works and what to expect when you apply.
Buying your first home is a big commitment, and preparation is key. You might consider talking to a housing counselor or mortgage consultant before jumping into the mortgage process. Speaking with a mortgage consultant about different mortgage programs should help you figure out what your expectations should be. On Q Financial makes the process much easier by offering industry exceptional services like our mobile Simplicity App and the On Q Difference.
This article is going to detail the mortgage process from beginning to end. Applying for a mortgage should not be frustrating or stressful, so we’re providing an outline of each step you should expect, hopefully this will make you feel more comfortable and establish expectations up front.
In order to figure out how much house you can afford, you need to look at your finances. You should consider how much money you’ve saved and make sure you will have reserves after your purchase. It’s also important that you have enough money to pay for all of the origination costs along with the down payment
In general, we advise you avoid extra debt while you are going through the purchase process as this can affect your qualification. You can see how much you can afford by calculating your monthly income and comparing your unused earnings against your estimated monthly payments. You can use a mortgage calculator to estimate the monthly costs associated with a mortgage.
Saving for a home can sometimes require years of patience, but there are organizations that assist homebuyers. Down payment assistance programs designed to help with down payment costs can help you get into a home sooner. Each program is going to have different qualifying conditions, so be sure to ask your mortgage consultant if you qualify.
Discuss with an On Q Mortgage Consultant about your specific situation.
Preparation is essential. Being prepared can make the process easier down the road. You’ll need different documentation depending on your situation to qualify for different types of loans. These types of documents include things like tax forms and proof of income. Your mortgage consultant will provide you a list of documentation you will need upfront.
Take the time to locate any requested documents and keep a separate file so you can refer back to this throughout the process. You don’t want to be surprised to find out you don’t have your W-2’s or tax returns. This will keep the process running smoothly and keep stress at low levels for you.
Some examples of documents you will most likely need for a transaction are:
Simply put, you’ll want to be prepared to make the process easier. The truth is, people can hold up the process by not responding to their Mortgage Consultant or not having accurate information about their debts.
Depending on the situation, you’ll need different documentation, and an underwriter might request verification of something after they have reviewed the file.
Occasionally, you won’t know what documentation you need until after your loan application is reviewed by an underwriter. The lender will approve you on the condition that you provide the documentation they request. Sometimes you’ll have to explain a blemish on your credit, or an employer will have to sign a formal letter stating your employment status and income. Whatever it may be, it’s best to stay prepared. Luckily, with your On Q mortgage consultant, you can discuss any possible conditions you may face.
There is often a specific order to the home buying process, usually starting with pre-approval and ending with closing. Depending on what type of loan you want, you will need different qualifying information to present to your mortgage consultant. Ultimately, you will have to put together a plan, look at your finances, and see how much a mortgage you can actually afford. Once your finances are in order, you’re ready to move to the next step.
The mortgage industry average is around 45 days. This process will be unique for each buyer, but it always begins the same. The timeline for your home loan starts the moment you submit all your documents needed. Depending on your situation, it can be started earlier by your MC if you are anxious to get an official approval. The entire process takes days of labor, but for the borrower it should only require a few hours of work. If you are a first time home buyer, it’s highly recommended that you fully prepare for all potential scenarios.
The best way to get ahead of other potential buyers is to obtain a pre-approval letter. A pre-approval letter is a specific dollar amount that a lender is willing to loan a buyer. It does lead to a hard credit check but it is worth it because it carries so much weight. You will need specific documentation such as proof of income and tax documents, which allows the lender to determine how much home you can afford. Most buyers are likely to be approved or approved with conditions.
Prequalification is not the same thing as pre-approval, believe it or not. One of the main distinguishing factors is that pre-qualification is just a soft credit check and is ultimately not a serious commitment. You might want to pre-qualify in order to gauge if you are ready for a home loan or you may want to skip straight to approval.
When house shopping, be aware of your price range that your lender helped you identify. Don’t get too carried away window shopping or talking yourself into a home that falls out of your price range. Make sure you utilize sources that only feature up-to-date listings. Do not get discouraged; the house you’re looking for is out there! Work with your realtor closely to narrow down your options and find your number one choice. Once you find a home you want, you’ll make an offer and begin the application process.
When you’re settled on a home within your budget that you’re sure you want to buy, your real estate agent will submit an offer on your behalf. Your realtor will be able to help you accept the offer or negotiate, and when you come to agreement with the sellers it’s time to celebrate.
You are ready to start signing contracts. You will sign the contract along with the seller and there may be some contingencies. When both parties sign, you will begin the mortgage application process.
Next, a closing date is set and your mortgage consultant will officially begin the funding process. This means that within a month or so you will be moving into your brand new home.
Home inspectors are looking at the HVAC system, plumbing and electrical wiring. Home inspectors will also look over the windows, doors, foundation, basement, and other structural components. They should provide a written report about the results after, so be sure to look it over in detail.
As a buyer, we also recommend you walk through the home with the home inspector in order to ask questions and get a better idea about the state of the home. The home inspection is ordered after you start your application process and have put in an offer on the house.
You can start your application after you’ve made an offer. The mortgage application process takes anywhere from 10-40 days. This is where a lot of the process is out of your hands. When you work with On Q Financial, we make the entire application process easier than ever with our Simplicity mobile app. When using Simplicity, you’ll have multiple touch points throughout the process so you’ll always know where you’re at.
This is the part of the process when On Q begins working on your application. Our goal is to make sure that you are able to breathe easy knowing that we are working to approve your application. Your closing date is set and we make that closing a reality for you. Sometimes other individuals on our team may contact you if we require additional documentation.
Once the home is inspected, and you have started your application process, it’s also important to get a home appraisal. A certified appraisal will help you make sure you’re paying a fair price for the home. It’s also important to note that you would need to pay for this information. An appraisal can help you understand what the seller priced the home at and can sometimes even give you the opportunity to renegotiate, should the appraisal come back much lower than what the sellers have it listed for. Your realtor will be able to assist in negotiations should that occur.
While you’re focusing on the home appraisal, and maybe even looking at furniture, the underwriting process for the lender begins! Loan processing is the first stage for the mortgage loan application. During the loan processing, processors compile information, such as proof of income, social security number, and proof of residence.
Processors will then send out a loan estimate to you. It’s not uncommon for processors to reach out for more documentation. Processors look over your documentation and organize it so that our underwriters can evaluate it properly. This part of the process should take a few days to complete. After your loan is moved out of processing and transferred to underwriting, you will be notified automatically.
Once you’re pre-approved and you’ve started the application process, it is the processor’s responsibility to send you a loan estimate. The loan estimate is specific to the home you want to purchase and it is required within three days of your application for the home, by law (Consumer Financial Protection Bureau, § 1026.19(a)(1)(i)). If you receive any kind of disclosure, it is important to sign and return so you signal your intent to proceed.
If you do not respond, you may not be able to use the rate you locked in at the beginning of the process. Depending on the type of loan you are choosing, you could receive many documents with your first disclosure. FHA and VA loan types are known for submitting long form documentation with their disclosures. Luckily, our E-consent features save buyers all the unnecessary paperwork by delivering it to you online.
At this point in the process, a trained underwriter examines your loan application. Ultimately, the underwriter is the key decision maker. This will be the person that decides the terms and conditions of your loan. Your underwriter will weigh your file, examining every detail of the application, and after a thorough review will issue a decision.
It is extremely common to be issued a decision with conditions. This means that the underwriter will require more information in order to process the loan. Talk to an On Q Mortgage Consultant today to talk about common conditions buyers will need to be prepared for.
There are a number of actions you can avoid in order to feel more assured that your loan will be approved. Stay updated on your loan. With On Q Financial you are updated as your loan moves through the process. Do your best not to miss any payments. Don’t open any new credit accounts either as this could also affect your application.
A few questions to consider:
All these factors will be considered before approval.
Sometimes after reviewing all provided documents and information, underwriters will issue a conditional approval if they need you to provide additional documentation in order to move forward. If there’s a dispute or concern with your credit, you might provide an additional letter of explanation for any marks or issues with your credit. Another instance where you might receive a conditional approval is if you’re paying a portion of your down payment with gifted money. When receiving money for your down payment as a gift from friends or family members, underwriters might request a letter of gift verifying that the money is not a loan.
When your loan is approved (yes!), this is great news as most borrowers feel a greater sense of security at this point in the process. Your lender will send you a CD, or closing disclosure. The Closing Disclosure exists to help you understand your loan before you get to the closing table. The good news is a CD means your loan is all good and cleared to close, however you still have time to go over the fees on your loan. A CD will list all final terms of the loan you’ve selected, final closing costs, and the details of who pays and who receives money at closing. Your lender sends you a Closing Disclosure at least three business days before closing.
You have the right to review your Closing Disclosure (CD) for three days prior to the closing meeting. Your On Q mortgage consultant will be available to review your CD with you and explain any questions or concerns you may need help with. As soon as you review and sign your Closing Disclosure, you’ll be ready for your closing date. When preparing for your closing meeting, make sure to come with a cashier’s check for the closing costs and proper identification so the notary will be able to confirm your identity.
This will be the final meeting you have about your loan besides the hand off of your keys. This meeting should last around an hour, and you will be required to read over and sign a number of documents. You should double check your list with your mortgage consultant and make sure you are properly prepared for closing. You should also be prepared to pay all the closing fees listed on your closing disclosure.
The title agency will coordinate with your team to set up a time for signing. This will be the time that you will sign all the appropriate documents and the title will be transferred into your name. This is the point that you will sit down with your notary at the title agency. You should review all the terms of your loan. The title agency will double check all your loan documents, and your signed documents will be sent to the lender.
When all is said and done and your application is sent to post closing, title insurance will be ordered. Your lender will organize all the files and prepare them to be shipped and sold to investors like Fannie Mae, Freddie Mac, Ginnie Mae, and Ellie Mae. If investors see any issues, they will attempt to rectify problems with the file. This process can often turn into a bidding war which is referred to as scratch and dent loans. At this point, the process takes place all online and there’s little to no paperwork left to do. Your loan will be serviced now. Loan servicing is the process by which a company (mortgage bank, servicing firm, etc.) collects interest, principal, and escrow payments from a borrower.
After your loan is funded, title Insurance will be ordered. They clean up files and prepare them to be shipped and sold to investors. Some examples of investors are Fannie Mae, Freddie Mac, Ginnie Mae, and Ellie Mae. If they see any issues they will attempt to rectify problems with the file. Once your loan is sold you will receive a Goodbye letter from us and a Welcome letter from the investor who has taken over responsibility for your loan.
If your loan isn’t sold to an investor then it becomes the responsibility of the servicing department. The best part about the loan being funded is you will be able to move in!
It can be essential for the mortgage consultant to communicate that the funding took place. After your loan is funded you will be able to arrange with your agents to pick up the house keys. They will let you know when you should expect to pay your first monthly mortgage payment. You will be able to contact the investor who now owns your loan if you have any issues. This is an exciting time in someone’s life, so now it’s time to celebrate you accomplishing this large milestone!
We hope you will keep On Q Financial in mind as you progress in your Home Buying Journey. Even after you have completed your mortgage process, you may need to deal with your lender again if you want to reduce your payments or pay off your loan faster. In a bonus step of the Home Buying Journey, we are going to cover How to Refinance.Next Step: How to Refinance