You’ve taken the first step into homeownership. You’ve gathered your documents and financial information and submitted the mortgage application. So, what happens next? We know waiting can be the hardest part, we’ll take you through all the steps to obtain your mortgage and what you can expect next.
Once your loan file is sent in, it will move to underwriting which is the analysis process that looks at your documentation including credit, income, financial history and assets as well as the value of the property. The lender will come up with your debt-to-income ratio, which will determine how much house you should be able to afford based on your monthly expenses and income to ensure you’re not buying a home that’s too much for you to financially manage. In addition, an appraiser will be sent out to evaluate the home you are interested in and make sure it’s worth the price based on the market conditions and location.
Once your application is approved and a closing date is scheduled, you’ll receive a closing disclosure, which provides the final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments and how much you will pay in fees and other costs to get your mortgage (closing costs).
If there are any repairs that need to be made, this is the time it will need to be done. These can typically be foundational or structural problems like a leaky roof or termite damage. Once these issues are addressed, your loan will move into processing and pre-closing.
During pre-closing, title work will be prepared to check the history of the home and if there are any liens against it. This is also a time that an escrow account could be set up to ensure the proper disbursement of funds for taxes and insurance.
At closing, you’ll be asked to sign a number of documents and pay any closing costs. You’ll need to submit a check for the downpayment, taxes and insurance into the escrow account. That money will be held there until the transactions are complete, then it will be transferred to the appropriate parties. That is called disbursement and generally a lawyer or title agent will coordinate that process with the seller and/or the seller's attorney. After the funds are disbursed, the loan will be managed by your lender and all mortgage payments throughout the life of the loan will be handled by the servicer.
While this process can take a few weeks, by keeping on top of each stage and being responsive to any communication you may receive, you can make the process move quickly through each stage.