The mortgage loan process is a straightforward process when you break it down into manageable pieces. So, let’s break it down into manageable pieces.
For fun and excitement, I’ve included a highly simplified graphic to follow along. (Note: The graphic is a bit simplified and doesn’t reflect every step but is meant as a summary of the process.)
Step One: Define your goals.
Are you looking for a townhome, single-family residence, condo, acreage, ranch, duplex, or triplex? Are you looking for a place to live or an investment property or both? Do you want land or a yard for your dogs?
Step Two: Find a Loan Originator You Trust
If your loan originator is telling you they have no fees, no closing costs, and the lowest rates, they don’t and they are lying to you.
Step Three: Apply for A Mortgage
Most lenders have an online portal to apply for a mortgage and upload documents that are required securely. My online portal is here:
Step Four: Provide Financial Docs
Generally Speaking the Documents that are required (one set for each borrower)
Photo ID (Usually a Driver’s License
30 Days of Most Recent Paystubs
60 Days of Most Recent Bank Statements
Most recent 401k/IRA/Pension or other Retirement and/or Investment account Statement(s)
Two years of Residential History
Two years of Employment history (along with contact information for all employers)
Most recent two years of W2’s and/or 1099’s
If you are self-employed, most recent two years of Tax Returns including business returns, K1’s, and/or Schedule C’s
Step Five: Have your credit Pulled
For a full pre-approval AND to close your mortgage, a hard pull on your credit is required
Step Six: Get Pre-Approved
After providing all of the required documentation and having your credit pulled your mortgage loan originator will be able to do an initial loan structuring including estimated rates and mortgage insurance costs (if any).
Step Seven: Find Your Home and Go Under Contract
Work with an amazing realtor to make your search easier and successful! Having someone legally obligated to put your interests first is critical and advised!
Step Eight: Initial Loan Estimate Sent Out (potential lock period starts)
Once you are under contract your lender has 72 hours to get out initial documents and a loan estimate. Review these documents to be completely informed about the costs and fees associated with the purchase. Make sure you sign them.
Step Nine: Deliver Earnest Money
It is recommended to deliver earnest money by a personal check to title and if you don’t have personal checks do a wire.
Step Ten: Property is Appraised
Your lender will order an appraisal. The appraiser will reach out to the listing agent or owner to schedule the appraisal inspection.
Step Twelve: Appraisal is Delivered
Once the appraisal is delivered to the lender it is delivered to you as well! If the appraisal comes in below your purchase price you will need to renegotiate the contract purchase price or you will need to bring additional funds to make up the difference between the appraisal value and the purchase price; called an appraisal gap. Note: The lender can only lend on the lower of the purchase price or appraised value.
Step Thirteen: Initial Closing Disclosure Out (loan must be locked by now)
The appraised value is usually the last piece of information the lender needs to send out the initial closing disclosures. To send out initial disclosures you must have your rate locked and the initial Closing Disclosure must be sent, received, and signed no later than three days before closing.
Step Fourteen: Final Loan Approval
Once all information is in for the loan, the final price based on the appraisal, and the loan is locked the loan will be sent back for final loan approval. During this process, you may need to provide additional or updated docs. Be on the lookout for these requests. Any delays in getting this information back in a timely fashion may delay closing.
Step Fifteen: Clear To Close
After final approval, your loan is officially Clear to Close! Yay! Take a deep breath. The hard part is done and the lender has agreed that you are good to go!
Step Sixteen: Final Numbers Balanced with Title
After final approval, your lender will have a bit of a back and forth with the title company to settle all of the costs and fees associated with the purchase and balance everything out. Once balanced your lender will be able to get you your final cash to close.
Step Seventeen: Final Documents sent to Title for Closing
Get your signature hands limbered up. This is the home stretch!
Step Eighteen: Cash To Close Cashiers Check or Wire obtained
When you get your cash to close amount, if any, you will need to get this ready. If you are wiring in these funds your lender will securely send you a wiring instructions document. Make sure you call the number on the document to verify the wiring instructions. If you want to do a cashier’s check make sure you aren’t over the title company’s limit for a cashier’s check. Additionally, both the wire and cashier’s check MUST be drawn from one of your previously disclosed accounts. If you do otherwise it will delay closing and additional documentation will be required. If you are getting gift funds make sure you verify the process with your lender. Different loan types have different requirements and attempting to do something outside of the rules may delay closing and require additional documentation.
Step Nineteen: Go to Closing and Sign a LOT of Documents
And keep the pen! Title companies have the best pens!
Step Twenty: Funding Approved and You Own a Home!
After you sign everything your lender may require a review of the signed and provided documents. This may take a bit of time as the title company has to verify, scan and send the documents to the lender securely for review. Once reviewed the title company will get the thumbs up that funding is approved and CONGRATULATIONS you now own a home!
This is a long and complicated process but a good realtor and lender team will make this process go by very quickly and smoothly. After all, you are asking the lender to give you, possibly, hundreds of thousands of dollars. It is important to begrudge them their due diligence. They want to make sure their investment in you is a good investment. Finally, and this is very important, lenders do NOT invest in real estate, you are doing that. They are investing in you!