Explained: The Mortgage Loan Process, In 9 Steps
(5 minute read) — How does the mortgage loan process take you from a dream of homeownership to an actual home you can call your own? That’s what we’ll cover here. Dreams are inspiring, but you’ll need a plan to make them real. A plan, and some financial assistance.
For most of us, paying cash for a home isn’t an option. And even if you could pay cash, it still might not be the best financial decision for you. Enter the mortgage loan.
At first glance, the home loan process might seem intimidating or confusing, especially for first-time home buyers. But the more you know, the more confident you’ll be in making the best decision for you and your family. To navigate the mortgage loan process with confidence, read on about the nine steps from here to your new home.
Step 1: Check and clean up your credit.
First things first: make sure your credit report is correct. Incorrect information on your credit report could cause loan rejections or less favorable terms than you deserve. Before you apply for a mortgage, check your credit with one or all of the major credit reporting bureaus: Equifax, Experian, and TransUnion. If you spot errors, follow each bureau’s dispute policy to correct your records.
If you can, start this step early. It could take several months for the bureaus to remove faulty information. The sooner you dispute it, the sooner you can fix it. This step could save you thousands of dollars as a strong credit score may qualify you for lower interest rates.
Step 2: Join a home buying seminar.
Education and communication do wonders removing your anxiety about the mortgage loan process. For a safe place to learn and talk to someone, join one of Unitus’ free virtual Home Buying Seminars. You’ll learn about the mortgage loan process and get tips to strengthen your offer. These financial education sessions are hosted by Unitus staff and may include other local real estate professionals. They won’t ask for anything or apply any pressure; these information sessions are offered as part of their commitment to supporting people in the community. People like you.
Step 3: Get pre-approved for a home loan.
What does it actually mean to get pre-approved? It’s like an access badge that opens the right doors for you based on your specific situation. The lender checks your credit health and finances (like your income, existing debts, etc.). Then they give you a letter of pre-approval. This verifies that you are eligible for a certain mortgage amount, interest rate, and repayment terms. In other words, it shows you how much budget you can play with while you’re house-hunting. Knowing that, you can funnel your search and shop with confidence and certainty.
As an added bonus, a pre-approval letter can increase your negotiating power with sellers. That means it can help you close more quickly and surely when you find a home you love. It demonstrates you’re good for the purchase, and your lender is backing you. Your pre-approval helps you access to the home of your dreams, whether you’re a first-time home buyer or a seasoned veteran of the mortgage loan process.
“Unitus Mortgage is a dedicated partner for your mortgage needs.”
Step 4: Get clear on your vision for the right home and location.
With your pre-approval in hand, you can search wisely for homes that fit your budget and your vision. Now you need to clarify what that vision is: do you want to live close to work? Do you want to be close to the kids’ school? Do you want to be in walking distance from your favorite local shops? Write down what’s most important to you, and use that as your guide.
After you clarify the right type of home and location, it’s time to look at specific homes. Visit homes in person or through virtual open houses, and note how you feel about each one. If you have a few locations in mind, a real estate agent can help you narrow down your selection based on these and other factors, like crime statistics and development forecasts. Unitus’ HomeAdvantage program sports a roster of thoughtful, specifically selected expert agents who know about these things.
Step 5: Prepare to make several offers.
After you’ve visited homes and decided which ones you’d like to live in, it’s time to make an offer. When you buy a home in a competitive market, expect to submit multiple offers before securing the keys to your dream home. Even though buyers with a pre-approval letter have an advantage, it doesn’t guarantee your first offer will be accepted by the seller. The seller has their own agenda, and might have other interested buyers bidding against you.
If they don’t accept your offer, don’t get discouraged. It might hurt in the moment, but this is part of the process. Continue making offers on homes you could live in. And you will eventually find the right fit with the right seller. You will.
Step 6: Secure a home inspection.
It is important to build an inspection contingency (see #2 here) into every offer you make. (Ask your real estate agent to help here.) It protects you in case your dream home turns out to be a mirage. For example, let’s say you loved the walk-through and you’re certain this is the right home. But an inspection reveals major roof damage. That could change your math in a big way.
The inspection contingency gives you the power to say “I will not move forward with this purchase based on the results of the inspection.” It is a huge source of protection for you. (Read more about contingencies that can help you strengthen your offer.)(Local first-time homeowners Agha and Alycia talk about their path to home ownership and the help they received from Unitus Mortgage.)
Step 7: Get an appraisal.
Your offer has been accepted! Congratulations. Now it’s time to schedule a home appraisal. This helps make sure you’re getting the home at a fair price. At this stage, Unitus Mortgage will request an appraisal of the property you want to purchase. A certified, state-licensed professional will visit the home. They will note its size (square footage), location, floor plan, amenities, and lots of other factors. Then they will consider similar homes which recently sold nearby. Finally, they will produce a figure and a report explaining the home’s dollar value in their objective estimation.
Once you have this appraisal, you can protect yourself from overpaying. Compare the seller’s price to the home’s fair market value and make sure they align.
Step 8: Lock in your interest rate.
This step requires that you got your mortgage pre-approval from step 3.
After the appraisal is complete and you’re happy with the pricing, it’s time to lock in your interest rate. The friendly underwriters at Unitus will help with this. Using all the financial information provided during the transaction, the underwriters will help figure out the best rate for both you and the lender.
Once your mortgage is formally approved, you can lock in this interest rate by signing a Lock-In Agreement. This agreement guarantees the lender will offer you a certain interest rate for a set time period. This will protect you if mortgage rates increase before you close on your home. It gives you peace of mind that no matter where mortgage rates go from here, your financial responsibilities will remain locked.
Unitus Mortgage can help lock in your rate before the appraisal. Talk to us to find out how.
Step 9: Close on your new home.
Let’s recap: The seller has accepted your offer. Your loan has met underwriting requirements. The closing documents are ready to sign. Now, a title company will step in to confirm there are no other liens or claims on the property. Then it’s time to complete the legal transaction.
Several days before your official closing date, your lender will provide you with finalized loan details similar to those you found in the Loan Estimate earlier in the process. An escrow officer at the title company will coordinate the closing date and time.
A few days after closing, the seller will receive payment. And you will receive the keys to your new home. Congratulations, you’ve made it.
What Unitus Mortgage believes in
Unitus Mortgage believes in doing right by people. We walk homebuyers step-by-step through the mortgage process to remove stress and make things easy. We’ve partnered with the HomeAdvantage Program to help save you money, make the process simpler, and get you into your new home fast. Choose from a hand-picked selection of certified HomeAdvantage real estate agents who know your local market. And save more: Unitus members who use the program earn an average of an extra $1,500 cash back at closing.*
To start the move into your dream home, contact a Unitus Home Loan Expert now.
About the author: Brad Goodenough
Brad joined Unitus Mortgage in November of 2013. He began as a dedicated mortgage originator and has developed into a results-oriented sales manager focused on maintaining a high level of service and integrity across the Unitus Mortgage team.
*Cash Rewards are awarded through the HomeAdvantage program to buyers and sellers who select and use a real estate agent in the HomeAdvantage network. Home buyers or sellers are not eligible for Cash Rewards if they use an agent outside this network. Cash Rewards amounts are dependent on the commissions paid to the HomeAdvantage network agent. Obtaining a mortgage or use of any specific lending institution is not a requirement to earn Cash Rewards. If you are obtaining a mortgage, your lender may have specific rules on how Cash Rewards can be paid out. Cash Rewards are available in most states; however, are void where prohibited by law or by the lender. Please consult with your lender for details that may affect you.