Buying a house, at least for most people, means getting a mortgage. Unless you’re planning on paying cash for your new home, you’ll need to go through the mortgage approval process. That will get you qualified with a lender, so you can select a house that falls into your price range and move toward the closing table. A lot of sellers don’t even want to see an offer from a buyer who doesn’t have a pre-qualification letter, because they want to be sure that anyone they enter into contract with has a very good chance of closing the loan. The pre-approval letter isn’t a guarantee, though, and even if you have one of those to give to the seller, you’ll still need to navigate the mortgage approval process.
Why isn’t pre-approval enough?
The process of buying a home takes time, and it starts with the pre-approval. That’s sometimes also called a conditional approval, and it tells the seller and your real estate agent that the lender has taken a look at your finances and credit. Based on what that lender saw, they believed that you would be able to qualify for a loan for the amount you want to borrow to purchase the home. Still, they haven’t done an extensive review of everything, and something in your financial profile could change before closing. The lender must make sure that doesn’t happen, and they also need to check out the value of the house you want to purchase, to make sure lending you money on it is a smart investment for them.
What comes after going under contract?
As you move through everything that’s needed for the purchase of a home, you may feel like things aren’t moving quickly enough. Other times, it can feel like things are moving too fast and getting stressful. The approval process for a mortgage can take a while, and the more you understand it the better you’ll feel about it. After you go under contract with the seller, the actual mortgage approval process really begins. The lender will do a more thorough check of your credit and finances, and you’ll likely be asked for up-to-date information on your bank balance, income, and employment. The sooner you can provide those things, the smoother the process will generally go for you and for the lender.
How many conditions will you need to meet?
Be sure to talk with your lender about the process of getting a mortgage, to help avoid surprises as much as possible. There’s nothing like getting back a big list of conditions you need to meet, and feeling overwhelmed when you see them. If you know that’s common, though, you’ll be less likely to panic about it. Most of the conditions that lenders require are relatively easy to meet. They include things like the most recent bank statement, or proof that you paid off a particular debt that you agreed to pay in order to qualify for the loan. The number of conditions you’ll have depends on your lender and the loan you’re getting, and even once you’ve met them there could still be a few more as underwriting moves forward.
When will you get the final approval?
Most people get the final approval, also called the “clear to close,” a day or two before their actual closing date. That can be a very stressful part of the mortgage approval process because you naturally want to know if you’re going to be approved. Having to wait so long to hear something can mean that you’re getting nervous, since your closing date is fast approaching and your lender hasn’t told you anything. Be prepared while waiting for final approval. If there are any last minute conditions that need to be met, they will likely show up when it’s just a day or two before you close. If you can meet them quickly, you can get your clear to close a bit faster and have less to worry about going into your closing day.
What kinds of things can go wrong?
Unfortunately, there are things that can go wrong with the approval process for your mortgage right up until the very last minute. There have been deals that have fallen apart right at the closing table. Those kinds of problems are rare, though, and you’ll generally not have that kind of trouble or risk. If there are going to be problems, they’re much more likely to be early on. The appraisal could be a problem if it doesn’t come in high enough, for example, because your lender isn’t going to loan on a house that isn’t worth what you’re planning to pay for it. You can help keep things from going wrong in your mortgage approval by working with your real estate agent and lender, and getting any requested documents to your lender quickly. Most approvals take 30 to 45 days.
2 Point Highlight
The approval process for a mortgage can take a while, and the more you understand it the better you’ll feel about it.
Be sure to talk with your lender about the process of getting a mortgage, to help avoid surprises as much as possible.
