What are the Steps to Qualify for a Mortgage?

If you are thinking about buying a home and applying for a mortgage, there are a number of steps to complete. While these are the basics, you need to realize that you could be asked for more or different documentation at any point.

 

Documentation

This is a preliminary step to see how much financing you would qualify for. Once you realize your limits, you will be able to narrow your search to the homes that are in your price range. It is very difficult to find that perfect house only to find out that the lender will not cover its cost.

You will probably be asked to provide proof of income like wage statements, pay stubs, most recent tax returns, and two months’ worth of bank statements. The company will also run a credit report.

The documentation will be reviewed and you will have a general idea of the amount of the loan that could be issued. Your realtor will have access to this figure and allow him or her to locate appropriate properties. The house hunting process can often take quite a while and realizing that situations change, you may be asked about transactions that occur during that period.

As the application is processed you may be asked for clarification about any issues on the credit report, documentation on large deposits,

 

Underwriting

Underwriting is when the loan company reviews the entire package and either asks for clarification, more information, or approves the package. This includes verifying the information already submitted like calling your employer.   A new credit check will be run.   While the pre-approval gives you a rough idea of what you can afford, the underwriter verifies and finalizes the amount you can be lent.

 

Negotiating

During all this time you are looking for the best property possible. The amount of the house listed with the realtor may not be the final price.   Often it is up for negotiation.   Several factors go into the process.   Part of it depends on the real estate market at the time you are looking. If there are more people wanting to buy, the initial price of the house can increase because there are more people making offers and you might want to outbid them. On the other hand, there could be lots of comparable homes on the market and you can negotiate to reduce the price. Other factors include issues that come to light during the inspections, the willingness of the parties to cover closing costs, etc.

 

The Deal

Even when you agree on a price, the deal is not over. A mortgage processor will again review the materials and order a review of the title to the property to be sure the people have the legal right to dispose of it, there will be an appraisal, and possibly other work if there is a homeowner’s association or condominium questionnaire.

 

The Finale

Once the lender is satisfied, lots of papers will need a signature. These include loan documents, deeds, and others. The lender will issue the payment. All of the papers must then be filed with the Register Office at the courthouse. The seller will receive the funds and you will be notified when you can take possession of your new home.