How do I get a mortgage?
Step One: Pre-Approval
The first step towards homeownership is to talk to a lender for a Pre-Approval. RMN offers many options to best work with you and your schedule: in-person appointment with a lender, online, or via phone/email. A lender will help you determine which loan program will best suit you and your situation. In this step, your qualification range, down payment requirement (if any), grant availability, credit score etc. are all discussed. We always recommend in-person, if possible, you’ll typically feel a bit less “confused” when you are able to sit and talk out options. This part can also be done via phone, email or online as well if in-person does not fit your schedule!
Your credit score is an important piece to mortgage qualification. Most loan programs require at least a 640-credit score, but, every lender and every loan program have different requirements. Don’t fear the credit report process! Let your lender guide you along the way. There are often helpful tips a Loan Officer can provide regarding ways to improve your score.
Your lender will review your income and debt to calculate what’s called a “debt-to-income” (DTI) ratio. The DTI limits vary with loan programs and lenders, so we do not recommend calculating this on your own.
Your idea of income may vary from a lender’s perspective. Overtime, bonus income, hours worked per week, etc. are all parts of your income that are considered by your lender. Lenders typically require two years of steady income, though some programs only require 12 months. Education does count towards the 12-to-24-month history. A lender should always request income verification prior to issuance of a Pre-Approval letter to confirm your eligibility for a mortgage.
Documentation is a key component within the mortgage process! Your lender will require Paycheck Stubs, W2s, Federal Tax Returns, Bank Statements, Photo ID, Divorce Decree/Stipulations (if applicable), DD214 (if Veteran) and child care expenses (if Veteran). Providing your lender’s requested documentation in a timely manner is key to an accurate and quick Pre-Approval process.
Step Two: House Hunting
Once you have completed the Pre-Approval process the second step is working with a Realtor to find a house! Your lender will provide your Pre-Approval letter so that your Realtor knows you are officially qualified. They will then present that letter with the Purchase Agreement so the sellers also know you are qualified.
Step Three: Accepted Offer
Once you have a fully executed Purchase Agreement, your lender will receive a copy from your Realtor and this starts the full Loan Approval process. Documentation may need to be updated from Pre-Approval if there was a gap in timing between step one and step three. Your lender will stay in communication with you regarding any updated documentation needed in this process. Your lender will have documentation for you to sign in this step, including your official Loan Estimate. If you are within 60 days of closing your lender will lock in your interest rate at this time. This step can be done in-person or electronically. If you did not meet with your lender at pre-approval, this may be a good time to circle back and get together. Again, this helps avoid “confusion” in the long run if you’ve met prior to closing.
Step Four: Loan Processing
Once documents are signed in step three, we move on to step four – Loan Processing! The appraisal is ordered and file checked by Loan Analysts for any further documentation needed. The appraisal typically takes about two weeks to get back to the lender once ordered. As soon as it is back, you and your Realtor are notified!
Step Five: Underwriting
Step five is submitting the file to Underwriting – that means the Underwriter is reviewing to approve the loan. It’s always best to work with a lender that has in-house underwriting, like RMN! This means your file doesn’t go anywhere and your dates for loan approval are very closely watched so the deadline agreed upon in your purchase agreement is met. If the lender you are working with is a broker or is sending the file out for Underwriting, it can add days or weeks to the process!
Step Six: Loan Approval
Once the file is underwritten, that brings us to Loan Approval. As soon as the Underwriter is done and the loan is approved you and your Realtor are notified! This is a great day! This also starts the process for Closing, as it’s usually only a week or so after Loan Approval in RMN’s normal 30-day window from accepted offer to closing. There is typically nothing more for you to do, as the buyer, but wait for Closing Day. This step really focuses on title work and getting final numbers buttoned up with the seller’s side. You will get a Closing Disclosure at least three days prior to Closing to review. Your Loan Officer will go over the Closing Disclosure with you again at Closing.
Step Seven: Closing Day!
Closing happens at your lender’s office and possession of the property is usually given at the closing table. This step is almost always done in-person. The market is moving towards the ability to do this electronically but, it isn’t quite there yet. During Closing, your Loan Officer will go through the many documents you will be signing and what each document entails. Your Closing Disclosure is included in these documents. After Closing is complete and your documents have been signed keys to your new home are handed off to you to begin the moving process! Congratulations, you purchased a home!