The mortgage industry in the United States comes with so much jargon that it can leave the layperson feeling a little confused. At BrickWood Mortgage, we try to keep the process as simple as possible. As part of this mission, we’ve broken down the steps involved in obtaining a mortgage when purchasing a property. Although every case is different, you can generally expect to go through the stages below. If you want to learn about the refinancing process, feel free to check out the associated page for a refinancing transaction.
If you have any questions or you want to access the best mortgage for your financial position, don’t be afraid to reach out to the excellent team at BrickWood Mortgage. For now, enjoy learning more about the mortgage process.
If you’re looking for the short version, the steps are as follows:
- Get Prequalified
- House Hunting
- Update Loan Figures
- Sign Purchase Contract
- E-Sign RESPA/Loan Documents
- Provide Financial Documents
- BrickWood Mortgage Obtains Third-Party Documents
- Receive Conditional Approval
- Final Document Checklist
- Final Approval
- Closing Disclosure Issued
- Closing Scheduled
- Clear to Close Issued
- Closing – Enjoy Your New Home!
Step 1 - Get Prequalified
Getting pre-qualified is the concept of learning your limitations before you get too far into the process. For example, nobody wants to find the home of their dreams only to then discover that it isn’t within their budget. So, while it doesn’t guarantee that you will get a mortgage, it considers some basic information about your position to determine the sort of mortgage you can afford.
At this stage, we should mention that you can contact banks or lenders directly. However, a mortgage broker is a far more effective strategy because we have access to the best lenders. Generally, borrowers get a better deal when they work with a broker.
Step 2 - House Hunting
This is the fun part – now you’re aware of what you can afford, it’s time to see what’s on the market. If you’re worried about feeling overwhelmed during this stage, write a list of your needs before you even look online or talk to an agent. For example, do you need schools nearby for a future family? Do you need a specific number of bedrooms? Would you like a backyard? Once you have a list of needs, you can filter results rather than reviewing every single property on the market.
Step 3 - Update Loan Figures
Once you’ve found the home of your dreams (congratulations!), you’ll need to update your loan figures. Before, you were working on presumptions and ideas. Now, you know exactly what your dream property is worth and can move forward with accurate information.
Step 4 - Sign Purchase Contract
So long as you’re sure about the property, this stage is where buyers and sellers first put pen to paper. If you have agreed on a purchase price with the seller, you will need to sign a purchase contract to begin the real estate transaction. Normally, this contract will lay out various details including the terms and conditions of the purchase, personal information, and details of the sale, transfer, or exchange.
Step 5 - E-Sign RESPA/Loan Documents
Back in 1975, the US Congress introduced the RESPA (Real Estate Settlement Procedure Act) and it is still an important part of real estate transactions today. In short, it aims to provide settlement cost disclosures to all parties involved in the transaction. Although it might seem like just another document, it protects borrowers from undisclosed loan costs and other predatory lending behavior. Elsewhere, it helps borrowers to make more informed decisions because lenders must provide all available information.
Thanks to modern technology, it’s now possible to e-sign this document as well as other loan documents required at this stage.
Step 6 - Provide Financial Documents
When researching the house-buying process, you probably saw people talking about endless paperwork, and your involvement does get more noticeable during this stage. Essentially, the goal is to provide the financial documents that inform lenders of your borrowing capabilities. With this in mind, you may need to supply:
- Proof of assets and income
- Debt information
- Credit report
- Proof of employment
It can seem stressful when reading about this whole process, but the good news is that BrickWood Mortgage walks you through every step. Rather than going it alone and making life harder for yourself, partner with a reliable broker and instantly reduce your stress.
Step 7 - BrickWood Mortgage Obtains Third-Party Documents
During this step, we’ll obtain third-party documents on your behalf to keep the application moving along smoothly. As an example, you may be applying for a VA loan. If this is the case, we can obtain your COE (Certificate of Eligibility). As the name suggests, this document explains that your military service is sufficient to qualify for the loan. Elsewhere, documentation can also include appraisals, title work from the attorneys, and evidence of home insurance.
Step 8 - Receive Conditional Approval
After you provide financial information for a mortgage, an underwriter will analyze every detail to determine your ability to repay the loan. For example, they will check to ensure that there is no foul play and that all the details provided by the borrower match those found elsewhere. Using the VA example, the underwriter will look at your COE.
Underwriters can seem daunting, but their goal is to determine if a borrower has the capacity to repay a loan. Consequently, they will review the property, the borrower’s credit history, and all other information. If they spot any potential red flags, they will either ask for more information or reject the application.
If the underwriter is satisfied, they can provide conditional approval, which means that you will receive the mortgage amount so long as you meet specific criteria. Once you have the official conditional approval, you know exactly what is required to close on your dream home, so there’s often a real sense of progress at this stage. At this point, you have a final checklist of required items and you’re getting closer.
Step 9 - Final Document Checklist
If the underwriter has asked for more documentation, BrickWood Mortgage will help you to get all this information together promptly. For instance, the underwriter may ask for additional bank statements and income statements to prove your income. Alternatively, it could be verification of homeowners’ insurance, gift letters, or another approval condition.
If you’ve not been through this process before, please don’t take requests for additional information personally. Not only is it common in a mortgage application, but it’s also just the lender and underwriter trying to get a clearer picture of the information. Sometimes, it’s as simple as explaining a late payment on a bank statement.
Step 10 - Final Approval
The sooner you respond to the questions of the underwriter, the sooner you’re likely to get final approval. Once the underwriter has all the information they need, you will then receive final approval. While this isn’t quite the end of the journey, you’re getting closer to starting the next chapter of your life in a new property.
Step 11 - Closing Disclosure Issued
As you near the end of the process, a Closing Disclosure will be issued, and it’s important that you understand this five-page statement. Among other things, the form will describe the loan fees, purchase price, real estate taxes, interest rate, closing costs, insurance, and other components of the mortgage. It’s important to note that you aren’t obligated to anything even after signing this document. Instead, signing the ICD starts the three-day waiting period to allow us to close. In our experience, the initial closing disclosure isn’t always accurate, and it also isn’t final. If you spot any errors in the ICD, they can be corrected during the three-day waiting period.
When working with BrickWood Mortgage, we will try to help wherever possible. If ever you have any questions, just contact the team and we’ll ease your worries. We understand that receiving this document can seem overwhelming, so take your time and reach out if you need help.
Step 12 - Closing Scheduled
At this point, closing is scheduled with the title company or attorney. If you’re happy with the Closing Disclosure, the three-day waiting period begins and closing is scheduled at the end of this period. On closing day, make sure you have sufficient identification and your finances are ready. When closing is scheduled, this means that all parties are happy to close and all the obstacles have been removed or addressed; you need to be ready to close.
Step 13 - Clear to Close Issued
Are you ready to sign the closing documents? In the real estate world, ‘clear to close’ means that the underwriter has approved your application and that you have met all the required conditions to proceed. After weeks or even months of being in the spotlight, the lender is happy with your application and your ability to repay the mortgage.
Step 14 - Closing - Enjoy Your New Home!
On the agreed closing date, the lender will release the funds and you will get the keys to your new property – congratulations. All the hard work was worthwhile and you’re now able to walk around your new home, talk about where the furniture will go, and make plans for a new life.
We know that reading about endless documents and forms can be overwhelming (even to people who have been through the process before!), so we urge you to partner with the right people. The right professionals can make your life infinitely easier, and we have the team to do this at BrickWood Mortgage. Not only have we advised many people through the process, but we’ve been through it ourselves.
What Our Customers Are Saying
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As a first time home buyer, I was nervous about the process. Tim made this so easy to understand and helped every step of the
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