Get organized – Obtain copies of your tax returns, w2’s, pay stubs and bank statements. Also have statements for 401k and IRA balances. If applicable, have copies of divorce decrees or bankruptcy documents.
Get qualified – You can do this over the phone or in person with a loan professional. A pre-qualification is a simple overview of your situation, but a pre-approval will go into greater detail about your financial background. It will include verification of income and assets, as well as analysis of your credit report. A pre-approval will allow you know exact what you can qualify for and demonstrate to the seller that you are prepared to buy a home.
Find the best rate and programs – think about how long you will keep this loan. There is no reason to take out a 30 year fixed mortgage if you know you are moving in a few years. If you are looking at different lenders, make sure to get a Good Faith Estimate. It is important to make apples-to-apples comparisons of the loan terms. If one deal just seems too good to be true, it usually is. Remember, most loans, especially conforming loans, are all backed by the same entity. A rate by one lender will not be drastically different another lender for the same program unless extra fees or points are involved.
Apply for the loan – once you have decided on a loan program and a lender, you will make a complete application and all of your income, credit, and assets will be verified. Please keep in mind other documentation may be needed once the loan goes through underwriting. During this process, don’t make any major purchases without speaking to your loan professional. Also, don’t move jobs before the loan closes. Employment may be verified again right before closing and a job change will result in the loan approval being withdrawn.
Get ready for closing! – Once the loan is approved and all the conditions are met, the loan is ready to be funded. Before closing, you are entitled to a copy of the settlement statement, which shows all the final closing costs and charges associated with the transaction. Review this document to make sure all costs are what you were promised. Also review the loan documents themselves to make sure terms of the loan have not changed. If you are bringing money to the closing, make sure it is in the form a cashier’s check. Bring your driver’s license or suitable identification.
Final Words of Wisdom – Take your time at the closing! If you have questions, do not be afraid to ask. If the answer is not satisfactory, find someone that can answer it so you will be satisfied. Do not worry about taking up too much time. This may be the largest investment you make, and you will need to know as much as you can about the transaction.