How do you Apply for a Mortgage?
After doing your homework on lenders, obtaining a preapproval, and locating a property you want to purchase, it’s now time to submit a mortgage application. Overall, it could take two weeks to two months to complete the entire procedure from application to closing.
1. Fill the Application for a Mortgage: Applying will require the same paperwork if you have already completed the preapproval process. Applying to several lenders will provide you with a variety of pricing and terms, just like with preapproval. Your credit score won’t be impacted by applying to three or four lenders any more than it would be by one application as long as all of the applications have been submitted within a 45-day window and count as only one hard credit inquiry. You can apply completely online through the application portals that many lenders have on their websites. Depending on your preferred lender, you might also be able to apply over the phone or in person at a branch location if you’d prefer to go through the procedure with a live person. Even though financiers do not mandate them, it is a good idea to schedule a home inspection right away in order to evaluate the property’s condition.
2. Examine your Loan Projections: You have options now that you have applied to multiple lenders. Now compare terms and pricing using your Loan Estimate forms. Find out if the interest rate is “locked” or subject to change by looking at the expiration dates shown in the upper right corner of the first page. Since you have to lock in your rate before closing, you should do so as soon as possible. This guarantees that from your first bill, you will know precisely what you are paying and that there won’t be any surprises. A section with an estimate of closing costs will also be present. Request clarification from the lender on any points you find unclear.
A “Comparisons” section on the third page of the Loan Estimate has important data that you can use to contrast offers:
- Total Price Over a Five-Year Period: This covers every expense you will have over the first five years of the mortgage, including interest, principal, and mortgage insurance.
- Five Years to Pay Back Principal: In the first five years, you will have paid down this amount of principal.
- Annual Percentage Rate, or APR: This amount includes any fees or points in addition to your interest rate. The APR is typically greater than your rate.
- Percentage of Interest Paid: This shows the amount of interest that went toward the loan’s total outstanding sum. It is not equivalent to the rate of interest.
Choose the loan estimate that best fits your needs after comparing them, then get in touch with the lender to let them know you’re prepared to proceed. They might request more proof of identity. In addition, you should get homes insurance because you will require it in order to get final clearance.
3. Processing of Loans: During this phase, your mortgage application’s accuracy is examined, and every statement you provide is carefully examined. To make sure the property’s worth matches the purchase price, your lender will request an appraisal of the property. To keep things going forward, be ready for inquiries and requests for documentation, and reply as soon as possible. Any actions that could damage your credit should be avoided as they may make it more difficult to get approved for a mortgage. Pay all of your bills on time, refrain from opening any new credit accounts, and avoid making any large purchases.
4. The Underwriter Considers your Documentation when making a Determination: The underwriter will use the information that the lender has now validated in your application to assess the risk of lending you money on this property.
- What is your loan-to-value ratio, or how much you are borrowing compared to the worth of your house?
- Do you have enough money coming in each month to cover the payments?
- How long have you been paying on time?
- Is the house in good shape, has a clear title, and is the valuation accurate?
- Have you had a sporadic job history?
You might need to submit further documentation if the underwriter needs more information to decide whether to approve the loan.
5. The Loan is Approved for Closing: The lender needs to take action in this last stage before you can proceed. You receive the good news from the lender with time to spare (ideally) before your closing date: “You’re cleared to close!” Three working days prior to the day of your planned closing, the lender is obligated by law to provide you the Closing Disclosure, another form. It displays the entire cost of your mortgage, in detail.
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