FORMALLY APPLY FOR THE LOAN
There are several players in the mortgage approval and closing process.
Loan processor - Gathers all necessary documents to process your loan.
Underwriter - Evaluates your credit, assets, debts and the property appraisal, then decides whether to approve your loan.
Title company - Checks the title of the house to make sure it's free of liens associated with previous owners.
Appraiser - Determines the fair market value of the home.
Inspectors - Assess the home to make sure it's in good condition, free of things like pests, structural problems and more.
Homeowners insurance agency - An agency, chosen by you, that will insure the home against damage or loss. Your home must be covered by homeowner's insurance in order to close on your mortgage.
Closing attorney or settlement agent - An individual or agency responsible for registering the transfer of the property with state and local governments, disbursing the closing proceeds and completing the transaction between you and the seller.
WORDS OF WISDOM
Here are some actions to avoid between pre-approval and closing:
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Taking on new debt: This will affect your debt load and debt-to-income ratio, which could disqualify you for your preferred loan.
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Making major purchases: Resist the temptation to buy a new car, new furniture, or expensive new vacations — especially if you're planning to use a credit card. You're better off waiting until after you've completed the purchase of your home.
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Opening a new line of credit: This includes credit cards, loans, or store lines of credit. Opening new credit might lower your credit rating.
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Closing out credit accounts: This might seem counter-intuitive, but closing old lines of credit might actually lower your credit score, especially if you shut down lines of credit that help establish a long credit history for you.
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Paying off old delinquent payments: Again this might seem strange, but your credit rating can be hurt when you pay off old debts, because those accounts are bubbled back up into your recent credit history, where they have more of an impact.
APPLY FOR MORTGAGE
For your pre-qualification letter you provided income and debt figures to the loan officer and they ran a preliminary evaluation to determine if you qualify for a home loan based on the information you provided. Now you need to formally apply for the loan where they will verify the all the information you provided.
FORMALLY APPLY FOR THE LOAN
Once you have a binding purchase agreement, you can formally apply for your mortgage.
To apply for a mortgage, you need to prove your identity, document your income and assets, and show that you're able to pay the mortgage back. You will need documents like:
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Pay stubs and W2's
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Tax returns (if applicable)
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Investment and retirement income documentation
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Bank statements
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Purchase agreement
Shortly after you complete your application, we'll provide you with a formal estimate of your closing costs to get the mortgage, called a Good Faith Estimate. You'll also receive a Truth-in-Lending Statement, which summarizes your loan terms, interest rate and finance charges to show what the total cost of borrowing will be.
Finally, decide when to lock in the interest rate on your home mortgage. Rates change daily, so it's important to watch trends. If it looks like rates will drop, you may want to wait. If rates are rising, lock in as soon as you can. Typically, you can lock in any time in the mortgage process between the submission of your application and five days before closing.