Sixty-four percent of Americans don’t really understand how to qualify for a mortgage. So if the loan application seems somewhat elusive to you, you’re not alone.
Here are the important steps to understand during the loan application process.
Getting Pre Approved
It’s important to know what type of budget you’ll realistically be working with before you even start looking for a home. This is what the preapproval process is for. During this process, the lender evaluates all of the financial and personal information they will analyze during the official loan application step.
Choosing a Home and Making an Offer
Once you understand the type of mortgage you can expect to get approved for, and the amount, you can start the fun part: the home search! While you’re looking for a home, consider additional costs like HOA fees and property taxes, to get a realistic idea of what an affordable monthly mortgage payment looks like for you. Also consider what home maintenance will look like. For example, a home with a pool or a large yard with professional landscaping will likely cost more to upkeep.
A real estate agent or an attorney will submit the offer and create the purchasing agreement. The more you have to offer a seller upfront, the more appealing your offer is likely to be.
Once the purchasing agreement is complete, your lender will send your official loan application through for underwriting. The underwriting process is very similar to the preapproval process. If you are applying for a loan within 90 days of getting preapproved, your lender won’t have to pull a credit report again.
If you haven’t made any significant purchases, or have had any major life changes since the preapproval, there shouldn’t be any surprises during this process.
Home Appraisal and Inspection
To ensure that the property is a safe investment for all parties involved, the lender will have the home appraised. During this process, the home is compared to other, similar homes in the area to see if the home price is competitive.
If the home is appraised for less than what you have applied for, it is the responsibility of either you or the seller to accommodate the changes to push the sale through. Either the seller will have to take less than their asking for, or the buyer will have to come up with the difference.
Getting a home inspected is also suggested. Most states have a limited grace period for buyers to be able to hold a seller liable for issues with a home. Even if there aren’t noticeable issues, an inspection will spot hidden and future problems.
The right real estate agent makes all of the difference during the home application process. It’s especially important to partner with a regional expert, who understands the market and can negotiate a competitive home price. It’s a terrible feeling when you get all the way to the appraisal, only to be told that the bank won’t give you the amount you need for the home you want.
If you’re looking for a home in the Twin Cities, partner with a team that values customer service and experience to avoid home buying mistakes as much as possible. Click here to learn more about our team!