The Mortgage Loan Process

The 1-2-3-4 of Closing Your Home Loan

To provide you with financing for your home purchase your lender must follow four steps:

1. Pre-qualification – Determines the limits of your borrowing power and identifies any potential credit issues that may need attention.
2. Pre-approval – Your loan professional works on a preliminary commitment based on several assumptions. While this is not a firm approval, it serves as a guideline to help you and others understand how much you may qualify for under certain circumstances.
3. Full Credit Approval – This is the formal credit approval of your loan, providing a firm commitment from a lender that you can take with you when shopping for a home. Key steps typically include:
   • Obtaining a title report on the property
   • Verifying your personal, employment, and financial information
   • Completing an appraisal of the property
4. Closing – A third-party professional, such as an escrow officer or attorney chosen by you and the seller, coordinates all the paperwork required to fund your loan and provide you with clear title to the property.

Documents We’ll Need From You

To get started with your pre-qualification or pre-approval, your lender will need a few key documents. Having these ready will make the process faster and smoother.

• Proof of Income: W-2 forms, recent pay stubs, or tax returns if you are self-employed.
• Purchase Contract (if buying a home): Signed by both you and the seller, showing the closing date and any seller-paid costs.
• Debt Information: Include balances and monthly payments for obligations such as car loans, credit cards, or child support. Utilities and insurance are not required.
• Mortgage or Rental History: Documentation of any current mortgage or rental payments.

Having these documents ready allows your lender to quickly evaluate your financial profile and move you one step closer to your new home.

Closing - The Final Step

After you've applied for and been approved for your home loan, you can finally set a date to close on your new home. At the closing, your first mortgage date is set and you are given the keys to your new home. Here are some of the hurdles to be crossed in the closing process:

• Title Search and Insurance - To protect all parties concerned a title search is done on the property to insure that there are no defects in the title that will hold up the sale. The defects can range from liens to judgements to other legal claims, which may be legitimate or fraudulent. The insurance also protects a lender from a fraudulent sale.
• Survey - A survey is usually performed by the title insurance company (always in the case of ALTA type policies) on the property. This survey insures that the property lines are correct and that the improvements do exist.
• Homeowner's Insurance - This insurance policy protects your new home from fire and other dis asters. Other coverages are available from the agent of your choice.