The Mortgage Loan Process Explained

Mortgage Loan Process

Buying a home is the one of the most emotionally-charged decisions you’ll ever make; right after shopping for a home. Whether you already have that dream home in sight or are still looking, TexasLending.com is here to prepare you and balance your decisions with expertise, responsibility, and compassion.

We designed this guide for first-time clients to fully understand the process of obtaining a home purchase mortgage. We’ll walk you through each step of the home loan process so you can confidently finance your piece of the American Dream.

Let’s get started!

Contents

Application Process

First, we need to get to know you. We’ll arrange an initial meeting for you with a loan consultant who will guide you through the entire loan process. Loan applications require a lot of personal information, so we’ll outline exactly which documents we need to start the process.  If you have any questions during this time, don’t hesitate to ask—there are no bad questions.

Here’s a snapshot of the various steps in the application process so the loan consultant can design the proper loan scenario for you:

  • We’ll complete your loan application
  • We’ll pull your credit report
  • You sign the application
  • You sign the proper disclosures
  • You provide supporting documentation to TexasLending.com to validate the information provided for the loan application
  • An automated or manual underwriting service performs underwriting pre-approval
  • The mortgage company presents you with a pre-approval letter with conditions. Now’s the fun part—house hunting!

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Shopping for a Home

House hunting is fun, exciting, and maybe a little overwhelming, but that’s OK! At TexasLending.com, we’ve seen the home-buying process thousands of times—here’s our recommendations for making the process as smooth as possible. And this is important—don’t forget to have fun!

Review your budget

A home is likely the most expensive thing you’ll ever buy—this is not the time to go off your budget. Make a list of your obligations such as credit card payments, student loan debt and other expenses. Don’t forget to consider additional expenses that pop up like school taxes, potential HOA fees, or unexpected home repairs.

Hire a Reliable Realtor

Driving around the neighborhood looking at For Sale signs isn’t a realistic way to find your new home. A dependable, knowledgeable realtor can add a lot of value to your search—your Realtor can check out comparable homes before they’re shown to you, suggest properties for you to consider, and most importantly, assess your lifestyle and find a home that matches your vision for your future.

Realtors also provide community information regarding schools and property tax rates, handle the negotiations, and present your offer. Remember, you don’t pay a realtor for his or her services—they’re compensated from commission by the seller of the house.

TexasLending.com has worked with many reputable realtors over the years and will gladly provide a recommendation.

Perform a home inspection

A home inspection will pinpoint any issues with the house and help protect you in the event any unforeseen issues that may arise in the future. We strongly recommend finding an inspector that has plenty of experience. Note: You can be present for the inspection.

Home inspections generally cover:

  • Plumbing
  • Appliances
  • Attic and roof
  • Structural elements like walls, ceilings and foundation
  • Exterior elements like fences, doors, windows, and landscaping
  • Water heaters, A/C units, furnace/fireplaces, sprinkler systems, etc.
  • Electrical components like the main panel, wiring, ceiling fans, light fixtures, etc.

You and the seller will get an inspection report with the findings. It’s up to you to decide if you want to request the seller to repair anything before closing the sale.

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Loan Processing

Assuming all of the above went to plan and you’re ready to make your move, it’s time to plan the financing! OK, we get excited about these things, but we don’t necessarily expect you to—that’s why TexasLending.com makes this process seamless and fast.

Home Appraisal

We’ll start by conducting an appraisal of the home. A professional appraiser will visit your prospective home and inspect the size, condition, function, and quality of the home. The appraiser will then compare the home to similar homes in the area that have recently been sold to determine a fair market value.  The appraiser will provide an opinion of value in the final appraisal report we give to you, along with other data and research used to estimate the value of the home.

Details and additional info

While the appraisal is happening, we order the following items for you to speed things along:

  • Wiring instructions for when the loan has closed
  • An insured closing letter
  • A termite inspection (if applicable)
  • Title to the property
  • A survey (if applicable)

We’ll also order verification of employment, verify the funds to close the home, and any rent/mortgage history over the last 12 months.

Tip: Try to avoid any behavior that might affect your credit at this time like applying for a new credit card, applying for a different loan, etc.

We will also receive further documentation to update any pending questions (divorce decrees, etc.) while taxes are certified for the proper amount for the property with the title company.

At this point, two more things need to happen:

  • The homebuyer needs to obtain an insurance quote that is typically paid when the loan closes. The Mortgagee clause (A property insurance provision granting special protection for the interest of the financial institution) is sent to the insurance company.
  • A declaration page is produced and the realtor/title company/builder needs to transfer information about any homeowners association or condo dues to the mortgage company.

Whew—almost done with the loan processing!

All the information listed above is sent to TexasLending.com. The loan consultant and our processing department review this info to confirm it matches the loan application, to confirm it will meet the guidelines of the loan program, and to determine if more documentation is required. Any necessary changes to the documentation that require attention are relayed to the homebuyer, buyer’s agent, builder, seller’s agent, client, landlord, title company, employer, surveyor, termite company, bank, etc., when applicable.

When these conditions clear, the loan is sent to underwriting for approval through our secure documentation portal.

As you can see by now, it’s a complex process with a lot of dotted “i’s” and crossed “t’s.” The great part about working with TexasLending

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Down Payment

Down payments for homes have changed a lot in recent years, and they’re generally getting smaller. That said, some home loans do require a down payment. The amount of a down payment on a home loan is calculated with several factors like loan type, credit score, type of property, income and asset documentation, and the debt ratio as related to income.

The point is—you have tons of options for your down payment! Our expert staff can show you, down to the dollar, what effect the down payment has on your monthly payments and the amount of interest you pay.

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Underwriting

During this phase, an underwriter reviews the loan package and documentation provided by the processor to determine whether the information provided is acceptable to offer the loan to the applicant. The underwriter checks credit history, calculates housing and debt ratios, evaluates the value of the home, and the applicant’s assets and/or funds available for down payment.

After reviewing all information, the underwriter calculates the risk in making the mortgage loan and decides whether or not the application fulfills the requirements necessary for approval. The underwriter can approve the loan with conditions, suspend the loan, or deny the loan.

There are many other actions taken during the underwriting process:

  • They obtain updated pay stubs from the homebuyer, along with updated financial statements to make sure they are dated within 30 days of closing.
  • If the credit report is over 60 days old they will request a new one.
  • Any gift funds for down payment are to be verified by the donor from the account of origin.
  • They review the 4506T (IRS form) to verify if the tax returns supplied have actually been sent to the IRS.
  • They perform a fraud check to verify if paystubs/W-2s are real.
  • They verify the earnest money deposit to have cleared the bank account of the homebuyer.
  • Any updates to the title, appraisal, survey, bank statements, etc. required by the underwriter are translated to the appropriate parties.
  • They add proper names, addresses and mortgagee clauses to the title.
  • They verify the insurance to be appropriate to the lender and program.
  • They verify the flood certificate to characterize the flood zone status.
  • They perform an appraisal review to validate the appraisal is within acceptable limits.
  • They obtain a certificate of occupancy for any new home construction.
  • They ensure a final inspection is ordered for any subject-to conditions.
  • The processor obtains the title fees, lender fees, HOA dues, and all other fees they can think of from the appropriate parties.
  • The processor figures the appropriate prorating of taxes that will come from the seller.
  • The processor determines if the taxes are on improved or unimproved property.
  • They check seasoned funds (available reserves as reported on application) to be sure there are sufficient funds to close.
  • After all conditions under the sun are cleared, the loan is cleared to close.

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Set a Closing Date

Once the underwriter clears the loan for closing, we set a closing date after consulting with you and your title company.

When an agreed-upon closing date has been set, a fee sheet is sent to our loan closing department. The closing department then draws the closing documents and send them to an attorney for review. When the documents have been reviewed, the closing department orders the wire amount for the loan. The closing department will send closing and funding conditions to the title company.

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Closing on Your Home Loan at the Title Company

Grab your favorite pen—you have a lot of closing documents to sign!

Trust us, the feeling of setting foot inside a home that you paid for is worth the potential hand cramps you can get from signing (or initialing) a few dozen documents you’ll sign at the designated title company. This is your last step to buying a home, because the funding actually depends on all the closing documents having been executed properly.

A closing agent from the title company will walk you through the entire process, and often your real estate agent will meet you just in case you have questions or they need to communicate quickly with anybody else involved in the home sale or loan process. The title company will have all the papers reviewed by your mortgage loan consultant here at TexasLending.com to make sure the numbers are accurate. Lastly, you’ll hear from your loan processor before closing so that you know exactly how much money you need to bring to closing in the form of a cashier’s check.

Sometimes, if you’ve also just sold a home, your closing may be funded from the home sale.

If it hasn’t already been provided to the title company previously, you may need to bring proof of homeowner’s insurance. Some real estate agents will help with that prior to closing. Don’t forget to bring the photo ID for each person signing the closing documents!

The title company will notarize all necessary forms and make sure all documents are properly executed. On the day of closing, TexasLending.com will wire the purchase funds to the title company. The title company will then distribute the money to the seller, the real estate agents, and any other parties who are owed a portion of the money.

If the wire transfer is completed and the forms are all verified as valid, sometimes you can pick up your keys right then. Keys in hand, it’s time to cross that threshold into your home.

Congratulations—you’re officially a homeowner!

If this process sounds long and complicated, it is! But guess what? With a TexasLending.com loan consultant and a great realtor, we’ll ensure that every step rolls out smoothly with no mistakes. We’ll make sure you’re 100% prepared—just bring your favorite pen and you’ll be done in less than an hour.

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Current Rates

VA Purchase
30 Year Fixed

As of: August 17, 2018

4.500%
RATE
4.667%
APR

Rate/Term Refinance
30 Year Fixed

As of: August 17, 2018

4.375%
RATE
4.435%
APR

Rate/Term Refinance
15 Year Fixed

As of: August 17, 2018

3.750%
RATE
3.889%
APR

Cash Out Refinance
30 Year Fixed

As of: August 17, 2018

4.875%
RATE
4.964%
APR

FHA Purchase
30 Year Fixed

As of: August 17, 2018

4.375%
RATE
5.134%
APR