The Mortgage Approval Process
August 15, 2019

You have decided it’s time to buy your first home! This is can be an overwhelming, confusing but exciting process. As a realtor I never want you to feel confused or overwhelmed so I put together the 6 step Mortgage Approval Process guide. I am confident this will answer many of your mortgage process questions!

The 6 Step Mortgage Approval Process is as follows: 

  1. Pre-Approval
  2. House Shopping & Purchase Agreement 
  3. Mortgage Loan Application 
  4. Mortgage Loan Processing 
  5. Mortgage Underwriting and Approval
  6. Closing

Let’s dig into these steps a little more closely.

Step 1: Pre-Approval 

While not required, it is extremely beneficial to get pre-approved by a mortgage lender. This is when you find out how much money you qualify for. This is called pre-qualification and it is the first step in the loan process. You will talk with a loan officer and answer certain questions such as marital status, income, debt, credit score etc. They will determine how much money you qualify. 

After you qualify, you will need documentation to verify the information you provided and to move along with the loan approval process. Documents you might need include 

  • Tax returns, 
  • W2/s 
  • Work history 
  • Bank statements 
  • Current rental information 
  • Divorce decree 
  • Bankruptcy documents 
  • Etc

It is important to note that getting pre-approved does not guarantee that you will be approved for a loan later down in the process but it is an important first step. Pre-qualification is an important first step because you will receive a pre-approval letter that will show realtors and sellers that you are a serious buyer.

After you qualify, you will need documentation to verify the information you provided and to move along with the loan approval process.

Step #2: Home Shopping and Purchase Agreement 

After you know how much you qualify for you get to start shopping for your new home! Your realtor will help you find homes that are in the price range outlined by your pre-approval.

You can search for available homes using Zillow, Trulia, and Multiple Listing Service (MLS). However, it is always recommended that a first time home buyer works with an agent so that they can walk you through the home buying process. 

When you have found what you think might be the home of your dreams it is time to make an offer! Your agent will help you put together an offer letter. Once the terms are approved by both the seller and the buyer, the purchase agreement is signed.

Decide on what you want in a home 

Make a quick list of the things you want/need in your first home. This list can include 

  • # of bedrooms 
  • # of bathrooms 
  • stairs/no stairs 
  • School district 
  • Yard size
  • Kitchen layout 
  • Etc 

Rank your needs/wants in order of importance. This will help you during the home buying process later!

Step #3: Mortgage Loan Application 

It is now time to work with your mortgage lender to fill out a mortgage loan application. A mortgage loan application is called a Uniform Residential Loan Application (URLA) or Fannie Mae form 1003. 

This application will include information about you, your finances, and details about a potential mortgage. 

This form can be confusing so I recommend that you work closely with your lender to ensure that you are filling it out correctly. After this application is filled out you will receive a loan estimate which will include an estimated interest rate, monthly payment, and closing costs. These are the loan terms that your lender expects to offer you once you are approved for your mortgage.

Step #4: Mortgage Loan Processing

 A loan processor will gather together necessary documents about you and the property you intend to buy. 

Required Documents will likely include

  • W-2’s from past two years 
  • Paycheck from most recent pay period 
  • Two years of signed Federal tax returns 
  • Two months statements from all bank accounts and assets 
  • 401k and other investment documents 
  • etc 

 The loan processor will review the information and organize it for the underwriter. They will also start verifying your income, employment, credit reports etc.

Step #5: Mortgage Underwriting 

This is the most important step of the mortgage approval process. This is when a mortgage is either approved or denied. Mortgage underwriting is the process used to assess risk as well as ensure that a borrower meets all the minimum requirements for a home loan. 

The underwriter will examine all the documents collected by the loan processor and investigate your credit history to predict whether you will be able to make your mortgage payment. 

The underwriter can approve, approve with conditions or deny your loan. 

If your loan has been approved you will receive a commitment letter which will include 

  • Type of loan program 
  • Loan amount 
  • Terms 
  • Interest rates 
  • Any conditions for approval 

You will also receive several disclosures, including the closing disclosure which will explain the details about your mortgage loan and closing fees.

Step #6: Closing 

During closing you will be an escrow officer, your attorney as well as the seller’s attorny, the closing agent, and your agent. You and the seller will sign many documents. You will need to pay for the down payment and closing costs (if not included in the loan amount). Once all this has been taken care of you will be given your keys and the mortgage approval process will be over! At this point you are officially a homeowner!

Don’t Forget! 

Your agent should be there helping you every single step of the way! As your realtor, I will help you with the home buying processes with everything from the home search, paperwork, escrow and up until the moment you have keys in hand! Contact me today so we can get started!