Mortgage Process Guide

A home buyer's step-by-step guide for what to expect from the mortgage process
Determine How Much Home You Can Qualify For and Afford

Before you even begin looking at homes, find out how much loan you can qualify for. Your mortgage professional can guide you through this analysis. It helps to have the following information handy: income, monthly debts, your assets to cover down payment and closing costs, and credit score.

Unlike determining how much you qualify for, which is based on objective loan officerlines and financial ratios, figuring out how much you can afford requires a thorough examination of your situation. What kind of lifestyle do you lead? Do you like to travel and dine out often or are you more of a homebody? Only you know what your monthly expenses really are, above and beyond what shows up on your credit report, and how much you can afford to pay monthly for your new home.

Get a preliminary look at your home affordability with our Mortgage Calculator
Get Pre-Qualified

No home seller will consider you a serious buyer if you're not pre-qualified. In fact, most real estate agents won't begin working with you if you're not already pre-qualified. A serious pre-qualification involves an in-depth self-assessment of your financial situation and a thorough conversation with a mortgage professional to discuss your options.

We make getting a thorough pre-qualification letter easy with our Affordability Report, which breaks down what assets you can use toward your down payment and closing costs for home purchases, how much of your income you'll be able to use for loan qualification, and what debts will be counted toward your debt-to-income ratio.

Find a Home
Find a home

With your pre-qualification in hand, you are now ready to get out there, find your dream home, and successfully negotiate a purchase offer. We recommend working with a good real estate agent who will not only help you identify a property but will also work with you to structure the purchase offer and negotiate a solid purchase contract. With our Build Your Team feature, you'll be able to coordinate your real estate agent, lawyer, inspector, and financial professional to make a solid offer.

As soon as you have a purchase contract signed and agreed by all parties, you should send it to your mortgage professional. Having a purchase contract in place is the trigger that allows you to start the mortgage application process.

Submit Your Initial Application

In addition to the fully executed purchase contract, most lenders will require the following documents before giving you a preliminary approval:

  • 1003 Mortgage Application: Our recommendation is to work on your 1003 application while you're looking for a home. That way it's ready to be submitted once you identify your property and update the application with the property information required. By using MortgageHippo, you will have already provided most of the information needed for the 1003 at this point.
  • Signed initial disclosure package: Your mortgage professional is responsible for providing you multiple disclosures required by law – both federal and state-specific. Some examples of these disclosures are the Good Faith Estimate and the Truth-in-Lending Statement.
  • Complete set of documents verifying your income, assets, and overall health of your finances: Those documents include but are not limited to: pay stubs, W2s, tax returns, and account statements. Our automated Closing Plan will figure out exactly what documents are needed, which you can upload straight to your dashboard for review.
Allow the Lender to Process Your Loan

With the initial application packet submitted, the lender can start working on your loan, verifying all of the information provided in the application, ordering the appraisal and property title report. That work is done by a processor, and once he or she feels they have a solid file, it is sent to the underwriter for review. Sit back, relax, and don't forget to go grocery shopping. Your loan should be conditionally approved soon.

Clear Conditions to Close

"Conditions to close" are requirements the underwriter places on your loan application before giving it its final stamp of approval. Not to fret – this is typical of all mortgage applications. At this point, the process becomes very specific to each borrower; the lender will ask for documents relevant only to your personal circumstances.

Clear conditions to close on your mortgage

For example, if you've been divorced, the lender will probably ask for a divorce decree. Other requests we typically see at this point are the following:

  • Letters of explanation: If, for example, you've had a large deposit in your bank account recently, the lender will want an explanation for that deposit (e.g. where it came from and what it was for).
  • Information about other financed properties
  • A clarification regarding items on your credit report

Keep in mind that a lot of these documents can and should be obtained at the point of loan application and submitted to the underwriter in anticipation of being needed. An experienced mortgage professional and a good processor should work together on identifying those items upfront so that the process later on is a lot smoother.

Closing

Get your signature hand ready because you'll be doing a lot of signing, but make sure you understand what it is that you're signing. Don't let the process overwhelm you and definitely don't let anyone rush you or pressure you into signing something with which you don't feel comfortable. The lawyer or agent conducting the closing should carefully explain everything to you. If you have your own lawyer, even better. You may even request copies of the documents you'll be signing before the closing so you and your lawyer (if you have one) have time to carefully review them beforehand.

These are some of the documents you can expect to sign at closing:

  • The Deed – Transfers the property from the seller to the buyer and determines the form of ownership in which you take title (e.g. individually, joint tenants in common, in trust, etc.).
  • The Bill of Sale – Transfers the personal property being sold with the house, such as the HVAC unit or security systems.
  • The HUD-1 – Settlement statement that shows all the money transfers at closing.
  • The Note – Evidences your debt to the lender and states the details of the loan (interest rate, repayment term, etc.)
  • The Mortgage – states the terms of the lender's interest in your property (since the property is collateral for the loan), including, for example, the lender's right to foreclose upon the property if you don't make your loan payments.
Move Into Your New Home

You're at the homestretch now. If at all possible, hire professional movers, and that doesn't include friends (unless you're willing to sacrifice some valuable friendships). Remember to change your address with the post office and other important service providers such as banks, credit cards, and, of course, Netflix. Enjoy your new home!

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