5 Steps in the Mortgage Process

Without a doubt buying a home is a complicated legal and financial process that can send even the coolest head spinning with confusion. Here is an easy breakdown of the 5 steps in the process that most every mortgage goes through and how you can help make these steps go smoothly.

1. The Preparation:
   
   Be prepared! It's more than just a Boy Scout motto, it should also be the way anyone approaches the mortgage and home-buying industry. If you don't have up-to date, legible or legitimate copies of your social security cards, passports (if you have one), IDs, phone numbers and addresses and names for former employers, references and your tax filings for the last five years then you need to get to work digging all that information up. In addition you will want to have all documentation for your personal assets like investments, other properties you may own, and bank account statements. It is possible to get too much information that you won't be asked for, but better that than not having something you need and having the whole thing slowed down while they wait for you to retrieve it.
2. Pre-approval:
   
   Getting pre-approved for a loan before you shop means improving your buying power and being taken much more seriously by home sellers when your agent tells them you are interested in seeing their house. The process of getting approved requires only a minor application and credit-check of the very basics of your ability to pay. The amount you are pre-approved for is a general estimate and not a fixed amount, but it should be enough to get you pointed in the right direction and neighborhood of homes you can afford. Keep in mind that just because you are approved for a $300,000 home, doesn't necessarily mean you need to be looking at $300,000 homes.
3. The Application:
   
   Once you have found a home that you are interested in buying your agent will enter negotiations for you with the other agent until a fair price is reached. Once that is done, it is up to you to go to your lender and fill out more paperwork, at an extensive level, agreeing to be thoroughly checked out and investigated in the process of determining whether or not the bank can loan you this large sum of money. You should take all of the paperwork from step 1 to this meeting and offer copies of it there and then. This will save you time and phone calls from the underwriters requesting the information later. It is at this stage where you can lock in your interest rate for the loan if you wish, or you can wait until any point up to the actual closing.
4. Underwriting:
   
   Underwriting is a long and exhaustive process, during which every aspect of your current financial health will be evaluated for reliability and ability to pay off the new loan at the rate you have locked in or at current rates if you haven't. Your employers and references will be called, the information you provided for your investments will be verified, other lenders (such as for your car loan) may also be contacted for verification of balance due and, of course your credit report will be thoroughly scrutinized. Every late payment in the last few years will raise some eyebrows and delinquent accounts or accounts in collections may so severely hamper their efforts that they may call you up and ask that you pay them off before the underwriting process can be completed.
5. Closing:
   
   This is the light at the end of the tunnel. In order to close you will make an appointment to actually return to the escrow company or bank and put your signature to the papers that will officially make you liable for the entire loan at the terms that were agreed upon. You should read the documents, extensive as they are, carefully and plan to be there for at least two to three hours. Under normal circumstances the mortgage paperwork will be exactly what you expected, but sometimes things get added, taken away or changed that you may not like. If things aren't the right way then you need to bring it to the attention of your mortgage professional and have them correct it there and then if possible, if not, then don't be afraid to walk away without signing and come back at a later time when it is fixed. This is thirty years of your life we're talking about here; you can afford to wait another week or two if that's what it takes to get it right.