How to Navigate the Mortgage Process in 10 Steps
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The mortgage process kicks into high gear after your purchase offer is accepted. Every move you make, from reviewing a loan estimate to managing paperwork hiccups, brings you closer to getting those coveted house keys.
Here’s an overview of each step in the mortgage loan process.
- Step 1: Review the loan estimate
- Step 2: Make sure you want to move forward
- Step 3: Meet your mortgage approval team
- Step 4: Prepare for the unexpected
- Step 5: Avoid mistakes that could derail your loan approval
- Step 6: Provide final documents and information
- Step 7: Finalize your title paperwork
- Step 8: Choose your homeowners insurance
- Step 9: Review the closing disclosure
- Step 10: Sign closing documents and pay closing funds
Step 1: Review the loan estimate
You typically can’t request a mortgage rate lock until you’ve found a home, and your loan officer is required to provide you with a new loan estimate within three days of receiving your application (with the address of the property you’re buying). Mortgage rates change daily, so the rates you and your loan officer were discussing for your pre-approval may be better or worse than when you started.
The interest rate and lender fees on your loan estimate may also change depending on the type of property you end up buying, how much you put down and what type of loan program you’re approved for.
Step 2: Make sure you want to move forward
Just because you receive a loan estimate doesn’t mean you have to follow through with the loan. You’ll have several different federal and state lending documents to review related to your rights as a borrower. It can take some time to read through all of the disclosures; pay close attention to charges you may be required to pay upfront, such as the home appraisal or an application fee, as well as closing costs and loan terms.
In many cases, you’ll be able to sign mortgage documents electronically and acknowledge your “intent to proceed.” This gives your lender the green light to begin finalizing your loan for a full credit approval.
One important note: a lender can only charge you a credit report fee until you confirm your intent to proceed. If you have doubts, though, this is the time to speak up and hit the brakes on the process.
Step 3: Meet your mortgage approval team
Although a loan officer will likely be your primary contact throughout the loan process, you may get a call from a number of different people who will shepherd your paperwork to the finish line. Here’s a brief who’s who of the mortgage process:
Loan officer. Your loan officer should be in contact with you from the initial mortgage application process until the day of closing. There may also be an assistant assigned to help, but the loan officer should still be available to answer questions about the loan program, paperwork process or any changes you want to make to your loan term or interest rate.
Compliance specialist. Mortgage lenders have to comply with an abundance of federal and state laws, and many companies employ compliance specialists to make sure all of your paperwork is accurate. A compliance specialist can also help if you run into difficulty signing or accessing the electronic documents.
Loan processor. Besides your loan officer, you’ll probably be in regular contact with your mortgage processor. The loan processor collects paperwork requested by the loan underwriter to finalize your conditional mortgage loan approval.
Mortgage underwriter. During the mortgage underwriting process, a trained expert in lending guidelines will review all the aspects of your credit, down payment, income and the property you’re buying to evaluate your loan for approval. Once the underwriter issues a conditional loan approval, you can expect a call from your loan officer or loan processor to go over any final items you’ll need before closing.
Loan closer. When your loan is cleared for closing, you may get a call from a loan closer at the mortgage company to set up a time to sign your final paperwork and confirm figures before your closing disclosure is issued.
Quality control specialist. Before your loan goes to closing, a quality control specialist double checks that you meet all of the loan’s specific requirements. Your employment and credit can be reverified up to and including closing day.
Step 4: Prepare for the unexpected
The mortgage process sometimes comes with a few hiccups you’ll have to navigate. Here are the most common roadblocks borrowers might encounter:
The appraisal comes in low. Your mortgage financing assumes the value of the home being purchased will either match or be higher than the sales price. If the appraisal comes in below the sales price, you’ll need to ask the seller to lower their price, meet you halfway or dig into your pocket and pay the difference. You can also dispute the appraisal value, or request a new appraisal. If you had an appraisal contingency in your contract, you can cancel the purchase and find a different home.
The underwriter suspends your loan. Sometimes when an underwriter reviews your loan, they may not have enough information to provide the full approval. In that case, they’ll suspend the loan for additional explanations and documentation and clear it once you respond to their requests.
There is a title problem. Title insurance protects the lender from financial loss if an unforeseen ownership claim arises. A separate (and optional) owner’s title insurance policy protects your investment. It’s a title examiner’s job to look for any issues before closing. Maybe an old lien didn’t get removed properly, or there’s a judgment that needs to be resolved before you can close.
Step 5: Avoid mistakes that could derail your loan approval
Just because you were preapproved for a mortgage doesn’t mean the lender won’t continue to verify and re-verify information. Avoid these common mistakes homebuyers make during the loan process if you want a pain-free mortgage approval.
- Don’t open new accounts or make extra charges on your credit.
- Don’t change jobs or quit your current one.
- Don’t make large cash deposits, considered to be a deposit equal to 50% or more of your monthly gross income.
Step 6: Provide final documents and information
Although you probably provided the bulk of documents needed for a mortgage during the preapproval process, your lender might need more paperwork. Here are items you might be asked for during the final mortgage approval process.
- Updated paystubs. Lenders usually need the most recent paystub you’ve received.
- Letters of explanation. Underwriters may ask for a letter of explanation about your credit, fluctuations in income or for any large deposits in your bank accounts.
- Verification of funds to close. Whether you’re getting a gift for a down payment, taking out a 401(k) loan or have cash saved, you’ll need to provide bank and account statements showing proof of the funds. Be prepared to explain and document any large deposits you’ve made in the last 60 days.
- Pay for your appraisal. Buyers are typically responsible for paying for an appraisal, and you may be required to pay this fee upfront instead of at closing. The fees vary depending on loan type; expect to pay more for FHA and VA appraisal fees.
Step 7: Finalize your title paperwork
Title companies typically send out information packages to determine how you’d like to title your home. Whether it’s a joint tenancy with rights of survivorship or tenants in common, the way you hold title is important when you go to sell or refinance your home in the future. The title structure also provides guidance for what happens to your home if you or another owner dies.
Before you close on your house-to-be, you’ll want to get specific instructions on how to wire your down payment funds at closing. Many homebuyers have been duped by criminals in mortgage wire fraud schemes — in fact, according to FBI data, in 2018, homeowners lost more than $150 million in down payment money due to wire fraud.
Don’t respond to an email from someone claiming to be your real estate agent or title company who says the wiring information has changed. Call the title or closing agent directly to verify wiring instructions verbally.
Step 8: Choose your homeowners insurance
Your lender will need proof of homeowners insurance with their name added to the policy to ensure that the home — and, in turn, the lender’s investment — is protected against loss or damage outlined in standard coverage policies.
Get this set up early in the mortgage process; the lender won’t be able to prepare your closing disclosure unless you’ve finalized the homeowners insurance. Shop and compare homeowners insurance quotes from several companies to get your best rates and adequate coverage.
Step 9: Review the closing disclosure
Lenders are required by law to issue a five-page form called a closing disclosure three business days before your closing. Have a copy of your loan estimate handy to compare the rate and lender fees, and ask your loan officer to clarify any discrepancies. Make sure your personal information is spelled correctly and the paperwork is free of errors.
Step 10: Sign closing documents and pay closing funds
The process for closing on a house includes signing paperwork with an attorney or escrow officer (depending on your state’s laws). You’ll pay the amount due at closing with a cashier’s check or wire, and review the paperwork one last time for any errors.
Depending on the state you live in, you may have to wait until the title company has recorded the new title before you can get your house keys. Once that happens, the mortgage process is officially complete and you’ll have a new title: homeowner.
Mortgage loan process flowchart
The mortgage process can be complex. Here’s a simplified look at how it works from start to finish.