Navigating the home loan process is not particularly difficult when you are paired with a skilled loan officer. However the process can be tedious. With a little knowledge of the process and common issues to avoid you can improve your mortgage loan experience.
3 Steps to Getting a Home Loan
Step 1: Meet with a loan officer to get pre-qualified.
The loan process starts with a meeting with a loan officer to properly review your financial picture and qualify you into the optimal loan program. For pre-qualification 3 areas are reviewed:
- down payment (liquid assets)
Step 2: Find your future home.
Once you are pre-qualified it is time to start looking for a home. At this point the loan officer sits on the side lines waiting until you are ready to write an offer on a property or have questions. Sellers want to know prospective buyers are qualified. With your offer a pre-qualification letter will be sent to document that a loan officer has reviewed your situation and determined full underwritten loan approval is likely.
Step 3: You make an offer that is accepted.
Upon offer acceptance the lender goes back to work assembling title, appraisal and insurance information as well as updating income and asset information as needed. Once all loan items are collected the loan package will be reviewed by an underwriter to confirm all requirements of the loan program have been satisfied and a final approval will be issued. The loan process wrap up includes the production and signing of final loan documents. Once all parties have signed the transaction paperwork the sale and mortgage deeds are recorded which completes the purchase of the home.
Common Mistakes and How to Avoid Them
There are many common mistakes that can be avoided before and during the application process. Negatively changing any of the 3 areas reviewed in the pre-qualification process may have an impact in your ability to qualify for a loan. The most common mistakes applicants make involve changes to income/employment or bank account balances. Prior to moving forward with any of the following actions you should contact your loan officer to determine the potential impact:
- Changes in your employment/income source, status, amount or type
- Large deposits into your bank accounts
- Transferring funds between accounts
- Actions such as late payments that will be reflected on your credit report
- Any increase in your credit card usage, even if the card is paid off monthly
- Additional credit report inquiries as they may impact your credit score
- Large purchases that will be financed or reduce your funds available for down payment and reserve funds
Prior to applying for a loan you should retain pay stubs, W-2s, tax returns and bank/investment account statements. All payments should be made on time so that you will maximize your credit score. Avoid applying for other credit such as store credit cards, personal and auto loans.
The most important step you can take is to meet with a loan officer as soon as you are considering a home purchase. Frequently a call or meeting with a loan officer will reveal steps that can be taken to optimize the loan process or that you are ready to move forward earlier than you think. Most loan officers do not charge for meeting with clients to chart your course to home ownership. If you are considering purchasing a home contact a loan officer and start your path to the American dream.