Step 1: Mortgage PreApproval
The first step in the preapproval process is to fill out an application with your lender. It's best if you speak with your loan officer and he/she will guide you on the best way to apply.
Once the lender has your completed preapproval application they will then run your credit report. This is required to get preapproved. Yes, this is a hard inquiry on your credit.
Now that the lender has your application and credit report he/she will need to review your financials. For financial documentation, you should expect to supply:
-30 days of your most recent pay stubs
-2 years of your most recent W2s, (some programs also require 2 years of federal tax returns)
-2 months of your most recent bank statements.
Once your lender has an application, credit report, and financials at that point they can determine your loan options and what you are preapproved for. In most cases, a lender can complete this the same day and if you have more involved financials it could take a full day. If the lender did not run your credit and request the documentation above then chances are you don't have a valid preapproval.
It's important to get preapproved before you go shopping for homes. The last thing you want to do is fall in love with a home and find out you can't get preapproved for it, or you need a day to get preapproved and the home already sold.
Step 2: Shopping For A Home
Now that you are preapproved you are ready to start shopping for a home. This is the point where you want to get a realtor involved. Your realtor will help you with the home search process. As a buyer, there normally isn't a cost to use a realtor so let them do the work and find your dream home. When you sell a home the seller normally pays the real estate agent fees. If you don't have a realtor please ask your lender for a referral. You can also ask a parent, sibling, or friend as well. It's important you use someone you are comfortable with. It's also important to use someone in or near the geographic area you are buying a home. They will have the most knowledge of the local properties and more than likely be more accessible.
Once you find the right home your realtor will help negotiate a price and enter you into a purchase contract. Once you have a contract signed by the seller you will be asked to put a deposit down on the home. This is called earnest money. Normally the earnest money must be paid right away so be prepared to move quickly. This is what secures your contract.
Step 3: Home Inspection
Now that you are under contract your next step is a home inspection. The objective of a home inspection is to uncover any existing issues with the home before you purchase it. If you find any issues your real estate agent will help you with the process.
Step 4: Underwriting and Appraisal
Now that your home inspection process is complete the next step is a property appraisal. The appraisal is much different than the home inspection. The home inspection is to look at the condition of the home whereas the appraisal determines the value of the home. The lender will order the appraisal on your behalf so don't worry about this step.
While the lender is waiting on the appraisal to be completed they will finish up the underwriting process. Once the lender finishes the formal underwriting process and fully approves your loan they will issue a clear to close. A clear to-close means the loan is ready for closing.
Step 5: Closing
Once the loan is clear to close your lender will notify you, your realtor, and your attorney. You will coordinate with your attorney and realtor to set up the closing date/time. Once the closing date/time is finalized your lender will go through the closing process with you and review a form called a Closing Disclosure (CD). This form lays out all of the final figures that you will be expected to pay at closing. Depending on how much money you need to bring to closing you could be asked to wire the money directly to closing or bring a cashier's check. It's important you ask your lender what is required.
