The Home Loan Approval Process

Before you can even begin searching for your new home, you must get preapproved for a mortgage. This process allows lenders to assess your credit, income and debts in order to decide how much money they are willing to loan you.

As you begin your home search, use this as a starting point to determine what you can afford. From there, you can focus on finding a house that meets all of your needs while still getting the best rate possible on your mortgage.

Your lender will review your application and issue you a preapproval letter, outlining how much you can borrow and an estimated interest rate. Having this document in hand puts you ahead of the competition so that you can begin searching for your dream home sooner.

The next step in the mortgage process is underwriting. This stage can be one of the most intricate, as it requires numerous verifications and documents. To ensure a smooth flow throughout this step, make sure you respond promptly to all requests as they come in.

In addition to verifying your financial details, the mortgage underwriter will also inspect your home’s value and title. This guarantees you are purchasing a property worth the agreed upon purchase price, with no liens or issues on the property.

Once the appraisal is complete and the lender is content with all the data, you can submit your loan file for underwriting. This requires ordering all necessary credit reports as well as title and tax transcripts.

Once you submit the loan file to your lender, they will send it to their underwriting department for review. The underwriter will look for any red flags or missing items and assess your application thoroughly.

At the underwriting stage, your lender may require additional documents such as pay stubs and bank statements for the past two years. They may also inquire about your employment history or Social Security and disability income levels.

At this stressful time, it’s essential to take everything one step at a time and not rush into making any purchases or changes while your loan application is underwriting. Doing so could adversely impact the mortgage approval process or even result in its denial.

After reviewing your application for several weeks, the lender will order an appraisal and title search. The appraiser will examine the home’s current market value to ensure it is comparable to the purchase price of the house you’re interested in.

Title searches also look for any liens on the home, which could affect loan approval. If there are any, your lender must contact the lien holders to remove them before approving your loan.