How to apply for a mortgage: Your 4-step guide – 4


Source : Open Listings (This article originally appeared on OpenListings.)


Step 4: Close on your home

Once you’re pre-approved for a mortgage, you can start the process of searching for a home, within your pre-approved amount.

The process of closing your home looks like this:

  1. Application: The mortgage application involves submitting the documents outlined in step 1.

Time it takes: 1 day

  1. Loan estimate: The lender analyzes your financial information and produces a loan estimate. A loan estimate describes the details of your loan including the terms and the predicted costs associated with your loan.

The loan estimate does not tell you if you have been approved for a loan. It simply estimates what your loan would look like if you’re approved and will help you determine if you would like to move forward with the mortgage application process.

Time it takes: The law states that you must receive your loan estimate 3 days after submitting your mortgage application.

  1. Open a file: Your file is submitted to a loan processor who analyzes your financial documentation and property information. The loan processor places all this information into a loan package that is to be submitted to the underwriter.

Time it takes: 1 day

  1. Loan underwriting: An underwriter analyzes your loan to determine the risk of approving your mortgage. Essentially, the underwriter is the key-decision maker and determines if you’re a good candidate for a loan based on the likelihood of you paying your mortgage each month.

The duties of an underwriter:

  1. Assess: The underwriter assesses your risk by verifying that your credit, debt, income, and savings information is true. For example, they may call your employer to confirm that you do in fact work x amount of hours and are paid x amount of dollars.
  2. Appraise: This is where the underwriter determines if your desired property’s price is comparable to the prices of similar properties. The purpose of the appraisal is to determine if the money you would like to borrow matches the value of the home you would like to purchase. If the appraisal is less than the loan amount, the underwriter will usually disapprove the mortgage or suggest another loan amount.
  3. Approve or reject: The underwriter considers all this information and then approves or rejects your loan application.

Time it takes: 1-7 days

Pro Tip: The underwriting process generally takes longer and requires more documentation if you’re self-employed.

  1. Mortgage Commitment: If the underwriter approves your loan, you are officially locked-into an interest rate.

Time it takes: 2-4 days

6. Closing: This is the step in the home-buying process where you sign all the necessary documents to own the home officially.