You managed. After shopping for weeks or even months, you’ve found it the one. The house that checks all of your boxes and a few more. Now that the fun part is over, it’s time to do the not-so-fun part, the process of getting approved for a mortgage loan.
You cannot buy your dream home without a mortgage. That means you have to choose a lender, submit all of your documents, and wait to find out if you are approved for the best terms that will suit your budget. Here’s what you can expect from the beginning to the end of the mortgage insurance process.
What is Mortgage Insurance?
After you apply for a mortgage loan, the application is sent to the underwriting team for processing. The loan officer or mortgage broker will collect all necessary documents from you, which will be presented to the insurer. The underwriter then determines your creditworthiness, risk ratio and your ability to repay the mortgage on time and in full.
The mortgage insurer will take into account your creditworthiness and financial situation, including:
- financial assets
- Cash reserves
- Credit score
- Debt-Income Ratio
Most underwriters use automated underwriting, which uses computer programs to certify things like your employment, income, and creditworthiness. Under certain circumstances, e.g. For example, if you have high net worth but no credit history, manual underwriting may be required.
Read: Compare Today’s Best Mortgage Rates
Important steps in the mortgage insurance process
The underwriting process when applying for a mortgage can be lengthy, but that’s because it involves many steps. Here’s what to expect when getting a mortgage:
- Prequalification – A prequalification takes place before looking for a house. The lender will check your debt, income, and credit score to determine how much home you can afford.
- Income verification – Pay stubs, bank statements, and tax returns are used to confirm your amount of income and ensure that you are earning enough to repay the mortgage on time each month.
- Rating – Used to determine if the condition of the home and similar neighborhood sales match your listing and loan amount requested. The valuation assigns a value to the home that the insurer uses to determine how much the lender is willing to let you borrow to buy the property.
- Title search and title insurance – A title company will investigate the property’s history, including claims, mortgages, ordinances, relief rights, unpaid taxes, and any legal action against the property or the previous owner. The company will then issue an insurance policy confirming the accuracy of what it found to protect you as the new owner and / or lender.
- Subscription decision – After your application and all documents have been checked, the insurer will decide whether you are eligible for the loan.
- Approved – When approved, you will be given the green light to continue closing. This is the final step before the property is officially yours.
- Denied – You could be turned down if the underwriter determines that lending you money is too risky. This could be because your debt-to-income ratio is too high or your credit score is too low. If so, check your credit report for errors and work on reducing your debt and improving your credit score.
- Suspended – This usually means that some documents are missing or cannot be verified, such as: B. Your income or employment. The application will be on hold and may be reopened and processed by providing the required information.
- Approved with conditions – Conditional approval means you qualify, but something is missing. This could be proof of insurance, additional pay slips, or tax forms that are required for final approval.
A deadline is planned after approval. On the final day, you sign the mortgage loan documents. Take these keys now and enjoy your new home!
What do I need to start the mortgage insurance process?
If you are looking to buy a home or refinance your existing home, having your documents ready can speed up the mortgage insurance process. You may need to request certain items which can delay the process if you wait until after you apply.
To be proactive, here are some of the documents you should provide:
- Employment information: Pay stubs from the past 60 to 90 days, past two years from W-2 or 1099 and tax returns, business records if you are self-employed
- Account information: Printouts or account statements for CDs, checks, savings and money market accounts and for retirement or asset accounts
- Additional information: Child support or child support (received or paid), bonus or commission statements, pension or dividend income, pension or social security statements
If someone is giving you money to pay for the down payment at home, it is best to transfer that money to your bank account at least 30 days before applying for the loan. The lender also needs a gift letter signed by the person who gave the money to certify that it was given and not loaned.
Every lender has different requirements. So be sure to check this out before applying for a faster experience.
Read: Compare today’s refinancing rates
How long does the mortgage insurance process take?
According to the Home Buying Institute, the average mortgage underwriting process takes anywhere from five to eight business days. However, depending on the application and documentation, it can take several weeks before approval is granted.
It is not uncommon for the underwriter to issue conditional approval with a documentary requirement, which means that they expect the loan to be closed. Sometimes this is as simple as having proof of insurance or a letter of explanation through a bank transfer. An unconditional approval results in a faster mortgage insurance process than a conditional approval. It is therefore important that you have your documents ready before submitting an application.
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