How to Process a Mortgage loan?
With all the people, paperwork and time-intensive steps involved, getting a mortgage can be a harrowing proposition. But if you take the time to understand the homebuying process and come to it with a strong sense of your own finances, you can run the mortgage obstacle course without a scratch.
Get ready to go from homebuyer to homeowner. Here’s how to get a mortgage:
- Examine whether you’re financially ready to buy a home.
- Get preapproved for a mortgage.
- Choose the right mortgage.
- Find the right lender.
- Submit the application.
- Get officially approved.
- Prepare for the closing process.
- Close on the home.
How long it takes to get preapproved, locate the home you want, find the right mortgage and choose the best mortgage lender can vary. But once you’ve submitted your application, it usually takes 30 to 60 days to get the keys to your new home, assuming there are no major roadblocks along the way.
Now let’s dive into each step.
Get ready financially
Before you set off to get a mortgage, make sure you’re financially prepared for homeownership. Do you have a lot of debt? Do you have plenty saved for a down payment? What about closing costs? Take the time to answer the question “How much house can I afford?” before you go further.
Once you’ve thoroughly assessed your finances and decided that you’re able to buy a home, you’re ready for the next step.
When you’re at the starting line, get preapproved for a mortgage, even before you begin looking at homes. Getting preapproved gives you a leg up once you begin looking, because it shows sellers that you can make a solid offer up to a specific price.
You don’t have to stick with the same lender once you’re ready to apply for the loan. But if you do, the process will go a little quicker since you’ve started the ball rolling with paperwork and a credit check.
Once you’ve figured out your price range, you’re ready to look at houses.
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Get advice from a mortgage broker
- Understand what you can afford
- Find the best loan
- Get approved and funded in 15 days
Choose the right mortgage
- Do you want a conventional or government-backed loan? Government-backed loans, such as FHA loans, can make it easier for you to buy a home if your credit score isn’t great or if you don’t have money for a big down payment. Conventional loans come from banks, credit unions or online lenders, and usually require larger down payments than government-backed loans.
- What about the mortgage term? Do you want a 10-year, 20-year or 30-year mortgage? With a 30-year term, your monthly payments will probably be smaller, but you’ll pay more interest over the life of the loan.
- Make sure you know your loan’s annual percentage rate, or APR, which will likely be higher than the quoted interest rate. This is because the APR includes all the associated costs such as origination fees and points. We’ll get into points later.
Find the right lender
- Consider using a broker to help you find a lender.
- Talk to your real estate agent.
- Ask friends and family for referrals.
- Compare at least three lenders. Ask about fees and down payment requirements.
- Check current mortgage rates to get the best deal.
Submit the application
If you’re using the same lender that preapproved you, you’ll have to submit your most recent financial information. If you’re going with a new lender, here’s the information you’ll need:
- W-2 forms from the past two years.
- Pay stubs from the past 30 days.
- Federal tax returns from the past two years.
- Proof of other sources of income.
- Recent bank statements.
- Details on long-term debts like car or student loans.
- ID and Social Security number.