What to expect when applying for a mortgage
The typical timeline
You have found a home and made an offer. Now, you are ready to apply for a mortgage. While you may have dipped your toe in by getting preapproved prior to home shopping, the process of formally applying for a mortgage is much more involved.
You can expect the first step — applying and deciding what lender to work with — to take “up to one week,” said U.S. News & World Report. After that, you can anticipate another “three to four weeks” for underwriting and loan processing, and then “up to one week” to wrap everything up and close on your new home. Here is the exact timeline breakdown.
1. Submit your application for a mortgage loan
Once you’ve “had your purchase offer accepted and you’re under contract for the property you want, you can get official loan estimates from the lenders you got preapproved with,” said U.S. News & World Report. This requires filling out a mortgage application, usually online, and providing a great deal of information, including information on your employer and income, your assets and debts, your credit history and the property you intend to buy. Be prepared to provide supporting documentation, which ideally you will have compiled during your preparation for applying.
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Once completed, you will need to sign and then submit your application. “Sometimes, to begin processing of your application, the lender may require a fee of $100 to $500 that covers the cost of pulling your credit report and obtaining an appraisal of the property’s market value,” said Kiplinger.
2. Review loan estimates and select a lender
If a lender accepts your application, within three business days, they will provide you with a loan estimate. This is an “estimate of the final loan costs at such a point in time based on the information relied upon by the lender,” said Zillow, and it is an essential document for accurately comparing total costs between different lenders.
Pay special attention to “compare their closing costs and interest rates, using the best offer to try to negotiate your loan terms, because some lenders will match interest rates or offer discounts,” said U.S. News & World Report. This can lead to major savings.
3. Undergo loan underwriting and processing
Once you have committed to a lender, the process of loan underwriting begins. This usually takes “between 30 and 45 days,” though potentially much longer, and is a time during which “your lender verifies your financial situation before deciding whether to approve your loan application,” said Rocket Mortgage. Specifically, the lender will “review your documents and details of your income, assets, debts, credit and the property you’re applying to buy,” and this will include ordering a property inspection. You may be asked to provide additional information.
After this process is completed, underwriters will give the final word on your loan application, which may be “to accept the loan as it is proposed, reject it or approve it with conditions,” such as that “you supply more information about your credit history,” said Investopedia.
4. Review your Closing Disclosure and close on your home
At least three days prior to closing, the lender “issues a Closing Disclosure outlining your finalized loan terms, monthly payment and closing costs,” said Kiplinger. Review this carefully to make sure there are no discrepancies or surprises. If everything looks good, you can move forward with scheduling your closing and a final walkthrough of the house that is about to be yours.
