The Mortgage Process: Setting Expectations
Written by Jason Nelson on October 30, 2017
For many first-time homebuyers, finding and buying a home is an exciting, though equally scary prospect. That’s because buying a home is often a step toward the unknown. As getting a mortgage is an essential part of buying a home, here is a succinct step-by-step guide to the mortgage process.
Getting pre-approved for a mortgage before looking at properties allows a potential homebuyer to obtain an estimate of the mortgage amount he or she could qualify for. During the pre-approval process, mortgage brokers look at the income, employment history and credit situation of each applicant. Based on this initial assessment, the brokers will indicate the type of mortgage that best suits the financial goals of each applicant along with the maximum amount he or she can afford to borrow. Mortgage pre-approval shouldn’t be confused with mortgage pre-qualification.
A reputable realtor can help a homebuyer locate the right house for his or her family, in a good neighborhood, while considering some other essentials, such as amenities and features, price range, and proximity to work, schools, hospitals, markets, shops and entertainment options.
After a buyer finds a home in his or her price range, and the seller signs the purchase agreement, he or she can complete the application process. As part of this process, mortgage brokers typically require a home appraisal to be performed by a qualified professional. The appraisal will establish the actual market value of the property in question, preventing prospective buyers from paying more than the home is actually worth. At North Florida Mortgage, we encourage our customers to have the home checked out by a professional home inspector as well. Although home inspections are optional, they provide a thorough home evaluation, indicating all the problems that should be addressed prior to the sale.
If the home appraisal value supports the sale price, the broker will pass the application along to the underwriter, who will review all the documents, including paycheck stubs, W-2 forms, 1099 forms, federal tax returns and bank statements, in order to determine the creditworthiness of the applicant. The underwriter can issue one of three dispositions to an application: approved, denied or suspended. Typically, underwriters approve mortgage applications when borrowers represent an acceptable level of risk. Sometimes, underwriters provide conditional approvals, requiring applicants to submit additional documentation in order to obtain full approval. Depending on the terms and conditions of each mortgage, the borrower might also need to set up an escrow account with the mortgage company.
Also referred to as the settlement, the closing is the final step in the mortgage process. Before signing the closing documents, the borrower has the opportunity to review the expenses associated with the mortgage, the monthly mortgage payments he or she will need to make and the closing costs required, among other things. After all the paperwork is finalized and signed, the funds covering the mortgage amount will be distributed as agreed.
Getting a mortgage is one of the most important steps involved in turning the dream of owning a home into reality. Because the mortgage process can be overwhelming and confusing particularly for first-time home buyers, the experienced mortgage brokers at North Florida Mortgage are honored to have the opportunity to help you make sound financial decisions. Thus, if you have any questions about the mortgage products we make available or need help with your mortgage application, please don’t hesitate to contact us.