Updated Sept. 28, 2018.
Congratulations! You’ve made one of life’s biggest decisions by choosing to buy a house. This is the most important step, and it’s just the first. What happens next might feel like a whirlwind of data and deadlines. But even in the midst of an information overload, buying a house doesn’t have to be hard. Understanding the steps of the home loan process can make it easy.
3 things that need to happen before you get approved for a loan
Here’s what you can expect between deciding to buy and moving into your new home:
1. You’ll submit your application.
Homebuying officially starts with your loan application. Using the information you provide, your loan officer will review your credit history and help you choose the right loan. Whether it’s a conventional fixed-rate loan, an adjustable-rate mortgage (ARM), or one backed by any number of government programs such as Veterans Affairs (VA), Federal Housing Administration (FHA), or United States Department of Agriculture (USDA), they’ll make sure it fits your unique needs.
2. You’ll get prequalified.
The prequalification form is one of the first forms you’ll complete. The result of prequalification is a dollar figure based on your income and financial history that’s like a credit line for your home purchase. This allows you to know how expensive a house you can responsibly afford, even before you start shopping. Prequalification usually expires after 90 days. So, you’ll need to contact your loan officer if it’s going to take longer than that to find and purchase your new home.
It’s at this time that your loan officer will help you set your purchase price and your estimated monthly payment. This is a big reason why it’s a good idea to meet with a loan officer before you start house-hunting. During this phone, email, or face-to-face meetup, you’ll learn about your loan options and price range and find out how much house you can afford. Once you know that, you can house-hunt smarter, without wasting time looking at homes you may not be able to or want to buy.
The good news is that getting prequalified only takes about 15 minutes.* You can also do it from anywhere by downloading a free app, or you can call your loan officer to schedule an appointment or fill out a form online. Once you’re prequalified, it’s time to start gathering your personal docs like bank statements, pay stubs, tax returns, W-2 forms, and employment and residence history. If you used an app to get prequalified, you have the added convenience of uploading these personal documents, checking your loan status, and even searching for homes remotely.
To leverage more of your buying power during the house-hunt, you can also ask your loan officer about Early Bird Approval. An Early Bird Approval mortgage program gives you full loan approval before you make an offer on a house. In a competitive market, this advanced loan approval is as close to cash as you’re going to get — without having to front the cash.
Why not get prequalified now? You can find out how much house you can afford before you start shopping.
3. You’ll find your dream house and submit your purchase contract.
With all the info you gathered, and a mortgage prequalification on your side to make you look like a more serious buyer in the eyes of a seller, you can start working with your realtor to find your new house. Make an offer, let your loan officer know when it’s accepted, and send the contract on over. Your purchase contract will go straight to your mortgage team. After the contract is accepted, you’ll sign and return all the necessary disclosures and processing documentation. Next, your loan officer will order an appraisal and title for the property.
This may also be the time when you and your loan officer review interest rates and rate lock options — again, either in-person or over the phone. Your mortgage interest rate will determine your monthly mortgage payment. A mortgage rate shield may also be available to lock in your rate for up to 270 days, proving extra-helpful for buyers building a new home or trying to sell one house before closing on another. Rate lock loan fees may range from 0.50 to 1.0 percent and depend on a rate lock term ranging from 120 to 270 days. Considering that 38 percent of buyers funded their down payment with the profit from the sale of their current house, using a rate lock during this buying-and-selling period can have major advantages.
3 things that need to happen before closing day
1. Underwriting takes over.
By now, you should have had a professional home inspection, scheduled by your realtor. After the inspection and appraisal, your loan officer will send you a copy of your appraisal via email if you opted to receive electronic documents. And, your loan officer may remind you that it’s time to choose your homeowner’s insurance. You’ll need proof of this insurance before you can officially close on your house.
Then it’s time for underwriting to start your loan file review. Your lender’s underwriting department will check and double-check all materials gathered to this point. If the application submission is complete and a loan can be approved, underwriting sends all necessary loan materials to the title company. Your loan officer will contact you for any information that might be missing or is still needed. This process is important to you and to your lender. They’ll keep you updated along the way to make it as smooth and streamlined as possible.
2. You’ll schedule your closing date.
After underwriting has approved your loan, you’ll be notified by phone or email. Now, you’re ready to close on your house. Closing is when the funds for your loan actually purchase the house, and the title to the property is transferred. Working with a lender that offers a few closing day “perks” — like making it their number one goal to meet your closing date on-time and offering 10-Day Ready closing** — can make this often complicated process much easier. Ellie Mae’s Origination Insight Report estimated an average mortgage closing time of 41 days in 2018, so a 10-Day Ready closing could be a significant time-saver.
Your lender’s closing department will also get in touch with the title company to prep your Closing Disclosure and let you know how much money you can expect to pay at closing. Your loan officer will review your Closing Disclosure with you to make sure it all makes sense. Closing costs can be paid by cashier’s check or wire payment, and you’ll need both your driver’s license and your payment to finalize your purchase at closing.
3. It’s (finally!) your big day.
Today’s the day you show up at the title company at the date, time, and location confirmed by your lender. The title company will record your closing documents, and your loan will be funded on the date of closing. A mortgage lender that offers Express Closing may make your closing day even faster and easier. A process like Express Closing eliminates up to 40 percent of the documents you normally have to sign at the closing table by allowing you to e-sign in advance. Lightening up this paper-load could get you in and out — with keys in hand — in 15 minutes.***
Then you become a homeowner. Whether it’s your first or fifth (or even fifteenth) time buying a house, there’s something special about the moment you’re handed the keys, and the property’s all yours.
If you’re ready to get started, get in touch with a local loan officer who can help. Or, if your prequalification and loan application are already underway, thanks for choosing and trusting Cornerstone as your home lender. Our in-house processing, underwriting, and funding resources, combined with our commitment to on-time closings and superior customer service, help deliver a one-of-a-kind mortgage experience that gets you home happy and fast.
*During normal business hours.
**Timeframe not typical. Not all loans will close in 10 days.
***Some loans may take longer than 15 minutes to close and not all loan programs will qualify for the 15-minute closing.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.