If you want to buy a new home, what is one thing that may be holding you back? Is it the thought of going through the mortgage process? Even if you are a repeat home buyer, the rules may have changed since your last home purchase, and it seems too overwhelming. No worries! We are here to help you make the mortgage process easier to understand.

According to the Home Buying Institute, there are six steps in the mortgage process. Let’s take a look at each step.

Financial Preparation and Self-Evaluation

If you don’t already have one, you should create a household budget. This will help you figure out how much you have to spend on a house payment. Your credit score will help determine your interest rate, so be sure to check it. By federal law, you are entitled to a free copy of your credit report, every 12 months, from each of the three companies: Equifax, Experian and TransUnion. Visit www.annualcreditreport.com to request your copy. If you aren’t already, start saving for the down payment and other expenses for your new home. You will need at least 3.5% of the cost of your new home. Start gathering those financial documents.

Applying for a Loan/Pre-Approval

You will want to see how much a bank will allow you to borrow. Your real estate company may have a preferred lender, so you can start there or with your current bank or mortgage lender. Those financial documents you gathered will come in handy right about now! During the pre-approval process, the mortgage company will evaluate your credit and income to determine if you qualify for a loan, and how much you would be allowed to borrow.

Origination and Processing

The lender takes your application and the financial documents and starts, or originates, your loan. Once you find a house you want to purchase, you will talk to the lender to start the processing of the loan.

Underwriting Process

The loan will be sent to an underwriter to see if you are worth the risk for the lender. The underwriter will look at your income, debts, credit score and money down to make this determination. You definitely do not want to make any major purchases during this time or establish any new lines of credit. No car purchase, no furniture. No major purchases on credit or even using cash. The lender wants to know that you are responsible with your money, and spending sprees may send the wrong message.

Conditions to Approval

The lender may ask for more documents before approval. They might also ask you to pay down some debt before they can approve your loan.

The Closing

This is the day that everything comes together! You sign papers, pay your down payment and closing costs, then the deed and keys are transferred to you. You are officially a homeowner!

Whether you are looking to buy or sell a home in Northern Virginia, we are always here to help! If you are unsure of your home’s value or if you are thinking about buying or selling, contact Jason at 703-298-7037 or SandersNoVA@gmail.com.