Step-by-step: The home loan process
The loan process to purchase a home has many steps. The walkthrough below provides an overview of that process. We are more than happy to answer any questions you may have along the way.
Prequalified - Get prequalified for a mortgage and know in advance how much payment you can afford. Completing this step will also increase your negotiating power since you'll be viewed as a credit-qualified buyer.
Loan Search - Put yourself in the hands of an experienced mortgage professional, someone who will help you determine which financing options best suit your needs today and in the future.
Loan Application - It's important to supply the lender with as much accurate information as possible. These include employment information, pay stubs and asset account statements. If self-employed, provide the last two years of tax returns.
Documentation - Paperwork supporting the application must be submitted. Information commonly requested includes pay stubs, two years tax returns and asset account statements verifying the source of the down payment, funds to close and reserves.
The Hunt - Begin shopping for a house. Once you find the right one, the terms of the sale can be negotiated, including the price and the terms of the loan being sought.
Appraisal - Most lenders will require an appraisal on all home sales.
Title Search - This is the time when any liens against the property are discovered. All liens must be cleared before a transaction can be completed.
Termite Inspection - Most purchase loans require a formal inspection for termite damage. If problems are found, repairs may be necessary.
Underwriter's Review - Based on the information put together by the loan professional, the underwriter makes the final decision regarding whether a loan is approved.
Mortgage Insurance - Lenders usually require private mortgage insurance when borrowers put down less than 20 percent on a loan.
Approval, Denial or Counter Offer - In order to approve a loan, the lender may ask the borrowers to put more money down to improve the debt-to-income ratio. The borrower may also need a bigger down payment if the property appraises for less than the purchase price.
Insurance - Lenders require fire and hazard insurance (often referred to as Homeowners Insurance) on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone. Some lenders require earthquake insurance on condominiums.
Signing - During this step, final loan and escrow documents are signed.
Funding - At this point, the lender will send a wire or check for the amount of the loan to the title or escrow company.
Closing - Documents transferring title will now be officially recorded by the County Recorder.