The Loan Process - Step by Step

Step One - Organize your documents

  • Two years W-2 and one month of paystubs or if self-employed, provide two years tax returns (all schedules attached).
  • Two months statements for each bank, stock, mutual fund account, and 401k.
  • If you own rental real estate , provide all rental agreements and two years tax returns, including Schedule E.
  • If divorced, provide a copy of the divorce decree and property settlement agreement (if applicable).
  • If you are not a US citizen, provide a copy of your green card, or H-1 or L-1 visa.

Step Two - » Get Qualified

Understand how much you can borrow before you apply for a loan A pre-qualification is normally conducted by your mortgage specialist after he has interviewed you and determined, based on the information you've verbally provided him, the dollar amount you can be approved for. Your mortgage specialist will then issue you a pre-qualification letter. Mortgage specialists, however, do not make the final approval, so a pre-qualification is not a commitment to lend.

A pre-qualification letter is used when you are making an offer on a property. The pre-qualification letter indicates to the seller that you are qualified to purchase the house you are making an offer on. Pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is then submitted to an underwriter and a decision is made regarding your loan. If your loan is pre-approved, you are then issued a pre-approval certificate. Getting your loan pre-approved allows you to close very quickly when you do find a house. A pre-approval can help you negotiate a better price with the seller, since being pre-approved is very close to having cash in the bank to pay for the house! It's highly recommended that you get pre-approved before you start looking for a house.

Step Three - Shop Loan Programs and Rates

How long do you plan to keep the property? Factors like when you plan to sell the property can affect the type of loan that fits your needs.

Understand the relationship between rates and points. One point is equal to 1% of the loan amount. The more points you pay, the lower the rate will get. Consult your tax advisor for applicable tax deductions. Compare different programs. This can become confusing and difficult because there are so many different programs to choose from. This is why it's important to speak with an experienced mortgage specialist who will help you make the best decision for your situation.

Step Four - Obtaining Loan Approval

Once you have filled out a loan application, your mortgage specialist will begin the loan approval process immediately by:

  • Running your credit
  • Verifying your employment
  • Verifying the property value
  • Verifying your assets

Tips for getting a faster loan approval

  • Respond promptly to any requests for additional documents, especially if your rate is locked or you need to close by a certain date.
  • Fill out your loan application completely.
  • Do not make any major purchases until your loan closes. This can have an adverse affect on your current application.
  • Do not transfer money into your account that can not be traced.

Step Five - Closing of Your Loan

Once your loan is approved, you will attend your closing appointment with your title company or attorney. This is where you will be required to sign your final disclosures and pay your closing costs.

  • Bring a cashiers check for the payment of closing costs. Personal checks are usually not accepted.
  • Review the final disclosures. Check the interest rate, terms and the name and property address for accuracy.
  • If refinancing or receiving a home equity loan, federal law requires you are given a 3 day right of rescission before your loan transaction is officially closed.