After your offer to buy a house is accepted, you’ll need to apply for a mortgage within a few days to fulfill the purchase contract.
Before applying for a mortgage, you need to do two things:
1. Know your own financial needs and choose the appropriate mortgage product.
For example, do you need a conventional loan or an FHA loan? Would you prefer fixed rates or floating rates? Do you want to pay off your mortgage over the 30 years or 15 years?
2. Compare mortgage interest rates.
You should ask at least 3 to 5 mortgage lenders the best interest rate they can offer––although this could be a time-consuming process. Every time you talk to a loan officer, you’ll be asked the same questions, such as your income level, down payment, details of the house you bought, and so on.
To save some time, you can also use the websites that help compare mortgage rates on the Internet. The problems with most mortgage shopping websites are that after you submit your information, you would be directed to a display rate page, which is not the real rate quotes for you. Then you will receive multiple calls from different lenders. They will ask you the same questions like your income, SSN, etc and at the end give you a rate that is so much higher than the rate page the website showed you.
To make mortgage rate shopping much easier, MRateQuote.com will instantly connect you with loan officers who have a good rate for your loan. And get you real rate quotes to compare.
Compared to the process of house hunting, mortgage application is much easier. Most of the work will be done by the loan officer, loan processor, or underwriter. You just need to make sure to submit the required materials in time.
Here is the process of mortgage application and things to pay attention to:
1. Fill out the application form
The first step to apply for a mortgage is to fill out the application form. Many times the loan officer will do this for you over the phone and it only takes a few minutes. Your social security number is required because the lender needs to check on your credit history. Some lenders would ask you to pay for the credit report, which usually costs about $20 to $30.
You will receive an estimate of the mortgage costs within 3 days of submitting the application form. This is not the final cost, but should be very close.
2. Submit application materials
The materials required by banks and mortgage companies are usually very similar.
● Property purchase contract
● Tax records for the past two years
● Proof of income, for example, your W-2 or 1099 form, payroll stubs, etc.
● Bank statement
● Other potential supplementary materials
3. Purchase property insurance and choose an escrow firm
After applying for a mortgage, the loan officer would ask you for the contact information of the insurance provider and escrow company that you chose. Each company charges different fees, so it might be worth it to compare prices and pick what’s the best for you.
Property insurance generally costs a few hundred dollars each year and the price from different companies should be pretty similar. The escrow fees include title insurance and other processing fees, which could add up to a few thousand dollars and the total costs might come out quite different for different companies. Consult 3 to 4 companies to compare their prices. Escrow companies usually have a fee table, so it should be pretty easy to compare prices.
4. Mortgage underwriting
After submitting all the materials, you just need to wait for the mortgage review to be completed. The results are usually available in 2-3 weeks. In the meantime, the lender will do an appraisal, assessing the market value of the property you just bought. Some lenders might ask you to pay for the appraisal, which usually costs about $500 to $800. The appraisal and credit check is usually paid by the homebuyers. If the lender covered those costs in advance, they might charge you at the end of the transaction. The lender might also call your employer to verify your work-related information.
5. Lock the rate
Just like stocks, mortgage interest rates are constantly changing. Once you submit the mortgage application, however, you’ll be able to lock in the interest rates at that time. This means if the interest rates rise in the future, your mortgage won’t be affected.
6. Mortgage approval
Congratulations! Now you’ll soon become a homeowner. Once the mortgage application is approved, the loan officer will help you complete the transaction. You will receive a closing disclosure three days before the transaction takes effect, with all the costs listed there. You should check the fee tables carefully and reach out to the loan offer if you have any questions.