Taking a mortgage can be a daunting experience especially if you are a first-time home buyer. Knowing what to expect when you take on a mortgage can help you prepare for it. The mortgage process should begin as soon as you start looking for a home and it does not end until you take possession of your new home. Here are the steps involved in the mortgage process.
Step 1: Applying and Getting Pre-Approved for a Mortgage
Before starting to search for a home, you need to know how much you can afford to spend. The mortgage pre-approval process offered by many mortgage providers gives you that estimate, but it also gets a lot of the legwork out of the way. You will need to bring proof of income, and other appropriate documentation when you get pre-approved for a mortgage. This is only needed once, so when you actually need to finalize your mortgage, your lender does not need to go through that part of the process again.
Step 2: Finding and Assessing the Home
Once you find the right home, property appraisal will be done. Depending on the lender, you may have to arrange it or the mortgage lender may take care of it. The main aim of this is to ensure that the value of the home is worth their loan. This means that a property appraisal will be done. In either case, the home buyer often has to assume the cost. Provided the home is valued as high as the bank is being asked to lend based on your offer price as a buyer, the loan should be issued.
Step 3: Closing on Your Home
If anything changes between the time you have put an offer on your home and closing, a lender can choose not to honor a loan. Substantial changes in income, major purchases and more can all be problematic if it may impact a buyer’s ability to afford the home according to lender’s requirements. Home buyers should be aware of this so they proceed cautiously with their finances before closing as nothing is final until that pen has been put to paper.
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