Are you ready to start shopping for a home? Here’s what to expect from the home loan process, from start to finish.
Get Your Documents In Order
You’re going to need to prove you can take on the responsibility of a home mortgage. To prove your ability to buy a home, you’ll need the following:
- Proof of identity (photo ID, usually your drivers license or a passport)
- Proof of employment and income (paystubs, W2’s / tax returns for 2 years)
- Proof of assets ( 2 months bank statements – but remember, you don’t have to have 20% down)
- Proof of credit history (a poor credit score doesn’t automatically rule out getting a loan)
Complete a Loan Application
Completing a loan application can be easily done online with most lenders. Using the information above you should have all the information you need to complete the application to the best of your ability. Try to be as accurate as possible; but if you’re unsure if you’re answering a question correctly, don’t worry as this is not your final application. A Loan Officer will be reviewing everything after submission and go through items that they need clarified.
Completing an application does not obligate you to working with that specific lender, and should not cost you any money up front. However, before going through the application process, you should be confident that you want to work with the lender you’re completing the application with. Whether it’s researching online or talking to a Loan Officer prior to completing the application, it’s advisable to do proper due diligence.
Once you complete the loan application, your lender will request the supporting documentation listed above to verify and validate the information you have provided. A prequalification is simply reviewing the information you enter on the application, and estimating what size of loan you may qualify for. A preapproval is a more thorough review of your income, assets and credit. During the preapproval process, your credit is pulled, your information is verified, and it’s established that you are a serious candidate.
Most good Realtors in a busy market will require a preapproval prior to showing you homes, and any seller prior to accepting an offer will want to see a preapproval letter that proves you can purchase the home. A Sammamish Mortgage Loan Officer (LO) can help you get preapproved so you can start house hunting with confidence.
Making an Offer/Earnest Money Deposit
Once you’ve found the perfect home, you’re ready to make an offer. After you go through the negotiation process and have an accepted offer, timelines now kick in, and getting everything lined up in a timely fashion is essential to having a smooth transaction. One of the first steps is a deposit of the earnest money negotiated in the contract into escrow. This usually is 1-5% of the purchase price depending on how competitive the listing was.
Official Loan Application
Once your offer is accepted, the next steps happen quickly. Generally, your contract will specify that you have a certain number of days to formalize an application and start the loan process with a specific lender.
Hopefully you’ve already compared rates with lenders you’re interested in working with, as now you should finalize this decision. Sending a copy of the purchase and sale agreement to your lender and letting them know you’re ready to proceed is sufficient if you’ve already completed an application for preapproval.
Loan Options and Locking a Rate
Once you’re under contract and have decided to move forward with a lender, your Loan Officer should update you with your current rate and cost options. Ideally, your lender has an online tool that allows you to see real-time rates and costs so you have an idea of what’s available to you already.
After going through your options you will have the option of locking in your rate to protect you from rate fluctuations during the loan process. In almost all situations it is advisable to lock a rate upfront rather than gambling on rates moving lower during the loan process.
If you don’t lock, and rates move higher, you will still have to proceed with buying the home but at a higher rate and with a higher payment. If you lock, and rates move down dramatically, there are often rate renegotiation options your lender can provide that will give you a rate between what you locked and what’s newly available before final loan documents are prepared.
As soon as you’re under contract, your real estate agent will coordinate a home inspection. This will help confirm that the property is in good condition, and doesn’t have any major issues that will need to be addressed after you purchase the home.
The home inspection is for your protection and is not a step you want to skip. If the inspection finds issues that cause you to want to back out of the purchase, there should be contingencies negotiated in the purchase contract that allow you to cancel the transaction and get your earnest money back with no financial loss.
Initial Disclosure and Loan Estimate
Once you’ve decided to move forward with a lender, you will receive your official loan disclosures. This will include your loan estimate, which breaks down the details of your rate, closing costs and prepaid items, and covers other state and federal disclosures as well as your intent to proceed. These documents can usually be e-signed and it’s important to complete this process quickly.
Once your loan is moving forward, you will be assigned a loan processor who will be working with you to get any additional documentation needed that wasn’t obtained during the preapproval process. They will request anything like pay stubs and bank statements that need to be updated. They will also order an appraisal. The appraisal is different from the home inspection, and is usually required by the lender to determine the value of the home and validate that the value is at least as high as the purchase price.
If the appraisal comes in low, you will either need to negotiate a new purchase price with the seller or put more money down. The down payment will be based on the purchase price or appraised value, whichever is lower. If your value comes in high, then you got a great deal; however, the higher appraised value does not allow you to lower your down payment.
After your documents are updated, disclosures signed, appraisal finished,and title report completed, your file will be sent to underwriting. At this point a designated underwriter will review the full loan file to ensure everything meets the program requirements. The underwriter will either approve, deny, or suspend the file pending additional documentation.
If you’ve been preapproved already, your loan will likely be approved (unless there was an issue with the property, appraisal, or title report.) Once the loan is approved, the underwriter may provide a list of final conditions that need to be met prior to closing. Your loan processor will contact you if any of these conditions require information from you.
Final Loan Approval/Loan Commitment
After all loan conditions are submitted and the underwriter has signed off on everything, you will receive your final loan approval or loan commitment. At this point, the lender will order your final loan documents and they will be sent to closing either with an escrow company or an attorney depending on your state requirements.
Around the time of your final loan approval you will receive your closing disclosure or CD. This form is the final version of the loan estimate you received at the beginning of the transaction with final terms of the loan.
Unless there was a valid change of circumstance, your closing disclosure should be very close to your loan estimate as far as the costs being charged. The rate and lender fees should match and the third-party fees are required to be within 10% of the original loan estimate. Your prepaid items for taxes, insurance, and daily interest can change but should be pretty close to the estimate you received once the property was specified.
The closing disclosure will also show the funds due at closing. Your loan processor will work with you to determine the final amount you need to bring to closing, taking into account your funds in escrow that may be applied.
Transfer of Funds
Depending on your closing date in relation to when you sign your final loan documents, you will either bring the funds due at closing to the signing table with the notary or attorney or you will send the funds prior to closing. These funds are usually transferred via wire or cashiers check.
Signing Final Loan Documents/Closing
After all the steps above, it’s time to sign your final loan documents. Signing can take place at the escrow company’s office or attorney’s office, or a notary can meet you at a convenient location. Currently remote online notarizations are not widely accepted in the mortgage industry, but the COVID pandemic has pushed the remote signing to the forefront so expect to see that change in the coming years.
Once your final loan documents are signed your loan will close and you will be able to move into your new home. You may receive your keys at that time, or shortly thereafter depending on your agreement with the seller.
Your Sammamish Mortgage Loan Officer Can Help You Start the Preapproval Process Today!
We’ve fine-tuned the preapproval process to make it one of the easiest experiences you’ll have in the whole home buying process. Buying a home should be fun and exciting, not stressful. Get preapproved today!
Sammamish Mortgage has been in business since 1992, and has assisted many home buyers in the Pacific Northwest. If you are looking for mortgage financing in Washington State, we can help. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon and Washington.
Contact us if you have any mortgage-related questions or concerns. If you are ready to move forward, you can view rates, obtain a customized instant rate quote, or apply instantly directly from our website.