It is critical to get your “ducks in a row” before even beginning to look at homes. First so that you are fully aware of what you can afford and how much a lender will loan you based on their lending criteria. And second, so that you truly understand what the purchase will cost you out of pocket…this is something that you really need a Good Faith Estimate (GFE) for and a lender is usually very happy to provide a preliminary GFE based on a specific purchase price. Additionally, selecting the right lender goes beyond simply finding someone with a good rate. You should consider other things in addition to the rate, such as fees and points charged, do they apply excessive risk “overlays” in addition to standard guidelines that could make it difficult to get full loan approval for certain types of properties and how accessible and responsive the loan officer is. Credit Unions often have good rates, but you will almost never get the same person on the phone to discuss your loan status…they do not worry about contract deadlines as much, nor do individual agents have much visibility into the full process of the loan…this can delay settlement or worse, cause default. It is important to deal with a lender that has great rates AND provides great customer service, availability, is very knowledgeable and has a number of loan products so that they can help you select the right one.
All that said, below is a (basic) description of the mortgage process (note: this is not the overall purchase process…more on that in another post 🙂 ):
1) Pre-Approval: Crucial first step and a necessary document to provide sellers in the offer process. This is relatively easy and gives you great visibility into the size of mortgage you can afford and what the purchase will cost you.
2) Loan Application: You will actually apply for the loan once your offer is accepted…in Virginia, this step is required to be completed within seven days of ratification of the contract. As part of this application you will need to provide income documentation and other important asset information.
3) Processing: The processor verifies that the information that you provided is correct and all supporting documents are in tact. For this to go smoothly and quickly, it is critical that you provide ALL information requested in a timely manner. As the sales contract says “time is of the essence” and this holds true with getting the lender your documentation as well. If all items are in place and verified, the processor will prepare your loan for underwriting.
4) Underwriting: An underwriter compares your loan to standard guidelines. If the guidelines are met, an approval and loan commitment are issued. Note: additional documents may be requested by underwriting at this time
5) Closing: At closing, you will sign the mortgage promissory note and other required documents transferring ownership (title) from the seller to you.
Hope this is helpful and as always, don’t hesitate to reach out to me with any questions. I am always happy to help!