Being a first-time home buyer can be very exciting and scary all at once. In many cases, the stress is amplified because buyers are unaware of the complex process of loan approval for a home. If you are buying your first home in Atlanta, here is a quick overview of how mortgage approval works and what you can expect.
Pre-approval
Before you begin house hunting, you should get pre-approved for a loan by the mortgage company. This is a fairly simple process that starts with providing the lender some basic information about your finances, running a credit check and paying a small fee. Pre-approval is not a guarantee of a loan, but rather a way for the banks to give you a ballpark figure of how much money you should be able to borrow, and by extension, how much home you can afford. The mortgage company will also issue you a pre-approval letter which shows sellers that you are a qualified buyer with a reasonable expectation of being able to secure a loan.
Mortgage application
You’ve found a great home in your price range and made an offer, and that offer is accepted. Once you’ve signed the contract to purchase the home, the mortgage approval process begins in earnest.
Your mortgage application will involve giving the lender detailed information and documentation about your income and expenses, your assets and your debt, including tax records, employment history and other proof of your financial situation. The lender may come back several times during loan processing to ask for more information. This is normal and is not a bad sign—it is simplythe loan processors attempting to gather as much information as possible to secure approval for your mortgage loan.
Loan processing
Between signing the contract and closing on your new house, the mortgage company will go through the complicated stages of processing your loan. At this stage, the lender will take steps to verify the financial and employment information you have provided, and may run an additional credit check near closing to be certain nothing significant has changed in your finances. (You should avoid applying for additional credit or making large purchases during this time, or at least notify the lender before doing so.)
In addition, the lender will begin evaluating the property you wish to buy to ensure that it is worth the amount they are preparing to lend you, as well as ensure the seller actually has the right to ownership. This process involves ordering a title search on the home as well as an appraisal. We also strongly advise getting a home inspection for the property during this time in order to avoid any costly surprises.
Loan underwriting and approval
Once all of the information has been gathered and packaged, your loan goes to an underwriter, the person who will make the final approval on your mortgage loan. The loan will usually be either approved or rejected, or sometimes more information or qualifications will be requested prior to final approval.
Closing
Once your mortgage is approved, you will receive a settlement statement showing the exact amount of your loan, your down payment and closing costs. You will probably also do a final walkthrough of the home to make sure no significant changes have been made to the property. At this point, you will go to the closing (usually at the offices at the title company), where you and the seller will sign off on lots of paperwork. You will bring checks to cover down payment and closing costs, and when the process is complete, you will receive the keys to your new home!
If you are buying your first home in Atlanta, we would love to help! Give Atlanta Fine Homes a call today at 404. 237.5000.