Thinking of purchasing a home?
We specialize in financing the purchase of new and existing homes, construction, condos, townhouses and investment properties. Area Home Lending is also familiar with HUD Homes, Bank Repos, Foreclosures and other government owned properties in the Baton Rouge area. See the easy steps below:
Step 1: Mortgage Pre-Approval
Before you hop on Zillow or start asking your friends about homes for sale in their neighborhoods, it is better to get pre-approved. This step happens before you even begin working with a realtor in most cases.
Pre-approval is when a lender reviews your financial situation (particularly your income, assets and debts) to determine if you’re a good candidate for a loan. This step will require you to apply and turn in some documents for your lender to review. They will give you a range of loan limit you could be approved for and provide you with a pre- approval letter to that effect.
This a beneficial step in the mortgage approval process, because it allows you to narrow your home search. If you were to skip the pre-approval and go straight into the house-hunting process, you might end up wasting not only your time but getting your hopes up for homes outside your qualified price range.
Step 2: House Hunting + Purchase Agreement
This is the step HGTV makes great content around. No one watches a 3 season series on the application process, but the home hunting part is the fun part! At Area Home Lending, we make every step of the loan process as easy and quick as possible so you can get right to finding your dream home.
We leave this part to the experts-the realtors.
Once you have found a home you love, we step back into the picture to help you with the next step of the mortgage approval process— filling out an application.
Step 3: Mortgage Loan Application
Step 1 and 2 are complete! You’ve found a home you love and with the help of your realtor, made an offer. Great news! The seller has accepted your offer. Now it’s time for the next step of the mortgage approval process— the loan application.
This is a straightforward step in the process, because most lenders use the same
standardized form. They use the Uniform Residential Loan Application (URLA), also
known as Fannie Mae form 1003. The application asks for information about the
property being purchased, the type of loan being used, as well as information about
you, the borrower.
Step 4: Mortgage Processing
Once you have a purchase agreement and a completed loan application, your file
will move into the processing stage. Loan processors collect a variety of documents relating to you, the borrower, as well as the property being purchased. They will review your file to ensure it contains all of the documents needed for the underwriting process (step 5 below). These
documents include bank statements, tax records, employment letters, the purchase agreement, and more.
The exact steps performed by the loan processor can vary slightly from one company to the next. It also varies based on the type of mortgage loan being used. But this is usually how it works. After this, you’ll move into one of the most critical steps during the mortgage approval process — underwriting.
Step 5: Underwriting
Don't underestimate this step. The underwriter is the key decision-maker during the mortgage approval process. The underwriter will double-check to ensure both the property and the borrower match the eligibility requirements for the specific mortgage product. The underwriter’s job is to evaluate the level of risk associated with your loan. They will review credit history, debt-to-income ratio, assets, and other elements of your financial picture to predict your ability to make your mortgage payments. It all comes down to risk.
Mortgage underwriters focus on the “three C’s” of underwriting — capacity, credit
and collateral:
Capacity — Do you have the financial resources and means to repay your debts, including the mortgage loan? To answer this question, they’ll look at your income history and your total debts.
Credit — Do you have a good history of repaying your debts, as evidenced by your credit reports and scores?
Collateral — Does the property serve as sufficient collateral for the loan,
based on its current market value? The underwriter will use the home
appraisal report to determine this.
If the underwriter encounters issues during this review process, they might give the borrower a list of conditions that need to be resolved. This is known as a conditional approval. However, if the underwriter discovers a serious issue that is outside the eligibility parameters for the loan, it might be rejected outright. Some borrowers sail through the underwriting process with no issues whatsoever. We do our best to set our clients up for a successful underwriting experience.
Step 6: Approval to Close
If the mortgage underwriter is satisfied that the borrower and the property being purchased meet all guidelines and requirements, he will label it “clear to close.” This means all requirements have been met, and the loan can be funded. Technically speaking, this is the final step in the mortgage approval process, though there is one more step before the deal is done — and that’s closing.
Prior to closing, all of the supporting documentation (or “loan docs,” as they are called) are sent to the title company that has been chosen to handle the closing. And heads up, there are a lot of documents. The home buyers and seller review all of these and sign all the pertinent documents, so the funds can be disbursed. This happens at the “closing.”
Prior to closing, borrowers receive a Closing Disclosure. This is a standardized five-page form that has finalized details about your mortgage loan. It includes the terms, your projected monthly payments, and the amount you will need to pay in fees plus possible closing costs.