Are you considering purchasing a new home and taking out a loan to finance it? Buying a home is an exciting and often overwhelming process. From knowing how much home you can afford, right through to closing, let's explore everything you’ll need to know.
This step-by-step breakdown of the mortgage process will provide you with the knowledge and insight to make informed decisions throughout your home buying journey – and put mortgage solutions within reach.
The Importance of Mortgage Prequalification & Pre-Approval (They are Not the Same Thing)
A mortgage prequalification is often the first step in the home buying journey. A prequalification is based on the financial data you submit and usually can be completed online or in person. Taking this step helps you understand what size loan you could qualify for – and helps you focus your search on properties within your financial reach. (If you’re not exactly where you want to be before buying a home, take this opportunity to discover ways to improve your finances.)
A pre-approval holds more weight than a prequalification and involves a lender examining your financial background and determining a specific loan amount they’re willing to offer. Once you’re ready to start seriously looking, securing a mortgage pre-approval letter is an indispensable next step that arms you with a powerful tool when entering the real estate market. It shows sellers, and their agents, that you are a vetted and capable buyer and could be the ticket to your offer standing out above the rest, especially when there are multiple offers on the table.
Exploring Loan Options and Rates
Exploring your loan options is an important stage for tailoring your mortgage to fit your unique financial situation and goals. Options include fixed-rate to adjustable-rate mortgages, government-backed loans, and jumbo loans for larger purchases. A mortgage expert can explain all available mortgage options and help you select the best choice for your lifestyle.
Remember, the choice of loan and rate isn't just about affordability now, it's about sustainability over the life of the loan. Ensuring your loan selection aligns with both your current financial situation and future goals will pave the way for a successful homeownership journey.
This period of exploration is also the time to look at the numbers. Start by viewing current rates for mortgage products. Your loan amount, interest rate, and mortgage term will all impact your monthly payments and the amount you will eventually pay for the mortgage. Our helpful calculators can help you estimate what to expect.
Submitting Your Mortgage Application
You’ve found your dream home and your offer has been accepted. The next step in your homeownership journey involves officially submitting your mortgage application. This stage transitions your intent to a concrete commitment toward purchasing the home. Your lender will meticulously review the submitted application with your financial data previously provided during the pre-approval stage. This verification process includes a comprehensive credit evaluation to ensure your financial standing aligns with the lender's criteria. The lender may request recent pay stubs, updated bank statements, or additional tax returns for review.
Navigating the Home Appraisal and Inspection Process
A professional appraisal of the market value of the property you intend to purchase is required by your lender. This evaluation safeguards the lender's investment by ensuring the loan amount does not exceed the home's worth. It's also a beneficial step for you as the buyer, to provide peace of mind that the investment is sound.
Parallel to the appraisal, organizing a detailed home inspection is a proactive measure to uncover any hidden defects or necessary repairs needed. While the appraisal focuses on value, the inspection zeroes in on the condition of the home, examining everything from the foundation to the roof, and the systems in between. This assessment can reveal issues that could cost you significantly in the future, giving you the leverage to negotiate repairs with the seller or even reconsider the purchase if major problems are identified.
Understanding Underwriting and Final Approval
Next, an underwriter examines all facets of the financial information you provided, along with a detailed analysis of the property you aim to purchase. This comprehensive review is designed to assess the level of risk associated with lending to you. It's during this time that any conditions for loan approval are identified, which might require you to provide additional documentation or clarification.
Closing On Your New Home
The culmination of your mortgage journey arrives with your closing day – the momentous occasion marking the transfer of homeownership to you. You’ll finalize the deal by signing legal documents, including the mortgage and deed, and solidifying the loan. Before you sign, it’s important to conduct a final walkthrough of the property to ensure all agreed-upon repairs have been completed and the home is in the expected condition. During closing, you will also be responsible for paying any remaining closing costs, which can include attorney fees, title insurance, and escrow deposits.
Once every document is reviewed and signed, you will receive the keys to your new home, marking the successful completion of your mortgage process and the beginning of your new chapter as a homeowner!
Let Us Be Your Guide
The dream may be big, but the process can be simple. Our dedicated mortgage representatives are here to help guide you through it. Connect with a Lakeland Mortgage Representative today.
You can also join one of our interactive webinars and events that are designed to answer your questions and guide you along the journey to homeownership, download our Home Buying Guide, and follow Lakeland Mortgage on Facebook.
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Applying for a Mortgage: A Checklist for First-Time Homebuyers