Know the Steps on the Home Loan Approval Process
Like most Americans, you’ll most likely need financing if you’re looking to purchase your own home. This isn’t always easy, but with the right planning and effort, the path to obtaining a mortgage can be smooth and rewarding. Arm yourself by gathering as much information as you can to understand and successfully complete each step of the home loan process.
Step 1: Obtaining a Preapproval or Prequalification Letter
While there are some legal distinctions between prequalification and preapproval letters, both state that – based on preliminary information you provide to a lender – they are willing to lend you up to a certain amount. Most sellers will not take you seriously as a buyer until you have been preapproved by a lender.
Essentially, pre-approval takes the prequalification process one step further. You will be required to complete a loan application in order to become pre-qualified. You must provide the mortgage lender with documentation such as pay stubs, tax returns, and bank statements to prove income, debt, and assets as well as confirmation of cash available for down payment and closing costs. The lender will also run your credit report at this stage. The lender should have enough information to advise how much of a loan you qualify for as well as what your interest rate will be. In some cases, you’ll even have the ability to lock in an interest rate.
Step 2: Achieving conditional approval
Once you’ve been preapproved, your application and supporting documentation will be sent to underwriting for review. The underwriter will likely set forth several conditions to be met in order for your loan to close, including an adequate property appraisal and income verification. Receipt of conditional approval is typically a strong indication that you are well on your way to owning your dream home.
Step 3: Getting final approval
You’re in the home stretch to mortgage approval! You’ve satisfied all of the conditions set forth by underwriting and now only have a few last-minute loose ends to tie up before obtaining the “clear to close.” Then and only then will you be ready to close and set a firm closing date. But beware, changes to your credit reports and scores can derail the process at any time. So continue to be prudent with your spending during this time. At closing, you’ll be expected to sign mortgage documents and produce the specified funds and proof of homeowner’s insurance. Best of luck in your new home!
For more information on home loan pre qualification and approval contact Cliffco Mortgage at (516) 408-7300.