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Purchasing a home, whether it's your first or fifth time, is an exciting experience. However, it can also be stressful due to the many tasks to complete and milestones to meet between prequalifying for a mortgage and receiving your funds. Understanding the requirements can help make the process seem a little less daunting. Here’s your guide to understanding the home loan process and a timeline to help you visualize it.
Before contacting a real estate agent and viewing homes, you need to take the first step in the home loan process—prequalifying. While prequalification isn’t a guarantee that you’ll get a loan, it allows the lender to review your finances to determine if you’re a good candidate. It also gives you an idea of how much you can afford to spend on a home. This process usually takes several days.
Some homebuyers start out looking for their dream home, locate a real estate agent, and find the perfect place. However, if they aren’t prequalified for a mortgage, the seller may accept an offer from someone else, and they could lose out on their dream home.
Imagine you’re selling your home, and you have two offers. One buyer is prequalified for a home loan while the other isn’t. Which buyer has more credibility? So, be sure to get prequalified before you go shopping!
When you find a home that you like, you'll make an offer to the seller and also pay an earnest money deposit. Your offer will include items such as:
Unless it’s a tight market, you probably won't offer to pay full price, which leads to the next milestone on the home loan timeline.
In many cases, the seller may not accept your first offer but counter with one of their own. This negotiation can last anywhere from a day to a week or even longer. You may not be able to reach an agreement without compromising. Essentially, you'll need to decide how much you’re willing to give up in concessions to get your new home.
With an accepted offer in hand, you will now move on to completing your mortgage application. You’ll also receive disclosure information that includes the loan estimate. This document provides essential info, such as:
You’ll need to sign the application before it moves on to the loan approval department. Even if you were prequalified and preapproved, it needs to be reviewed to receive final approval and get your home loan funds. You should expect this part of the home loan process to take around three days.
Your lender needs to know that the home is worth the amount of money they’re loaning you. A house appraisal determines the value of the home. In some cases, the appraisal may come in lower than you expected. If this happens, you may need to decide if you want to provide a larger down payment or abandon your goal of purchasing that particular home. This step takes between seven and fourteen days.
Typically, your lender requires a home inspection, revealing things you may not have noticed during your visit to the home. If the inspection reveals issues, you can renegotiate the sale price or ask the seller to make repairs before closing. This process can take three to five days.
Your loan has to go through underwriting for final approval. Once approved, you'll receive a Closing Disclosure, a five-page form that outlines essential information about the mortgage, including the terms and payments. This step in the home loan process takes around five days.
Once you sign the paperwork, you'll close on the house. However, you won't receive your funds on the same day as the closing. It usually happens the next day or during the next couple of days. Once you receive your funds, the title gets recorded.
"Closing on your new home is an exciting milestone. While you won't receive your funds the same day, expect them within the next couple of days, at which point the title will be officially recorded."
From beginning to end, the home loan process takes around 30 days. Buying a home isn’t a quick process unless you’re paying cash, and the seller agrees to this. Since the prequalifying process is a complex one, it's essential that you work with the right lender. The right mortgage company will help you at every step of the home loan process, answer all of your questions, and address your concerns.
The world needs innovators and problem solvers who turn challenges into greater opportunities.
Connect with Caroline Shook from CMS Mortgages, a licensed mortgage broker, for expert mortgage advice and services.
