A Step-By-Step Walkthrough of Purchase Loans

The loan process to purchase a home has many steps. The walkthrough below provides an overview of that process. We are more than happy to answer any questions you may have along the way.

STEP 1 | PRE- APPROVAL

Get pre-approved for a mortgage and know in advance exactly how much payment you can afford. Completing this step will also increase your negotiating power since you'll be viewed as a "cash buyer."

STEP 2 | LOAN APPLICATION 

It's crucial to supply the lender with as much information as possible, as accurately as possible. All outstanding debts, as well as assets and income, should be included.

STEP 3 | DOCUMENTATION 

Paperwork supporting the application must also be submitted. Information commonly sought includes pay stubs, two years' tax returns, and account statements verifying the source of the down payment, funds to close, and reserves.

STEP 4 | APPRAISAL

Lenders require an appraisal on all home sales. By knowing the true value of the home, the borrower is protected from overpaying.

STEP 5 | TITLE SEARCH

This is the time when any liens against the property are discovered. A lien may have been placed on a property to ensure payment of outstanding debts by the owner. All liens must be cleared before a transaction can be completed.

STEP 6 | PROCESSOR & UNDERWRITER REVIEW

All pertinent information will be packaged by your mortgage professional and sent to the lending underwriter, including any explanations that may be needed, such as reasons for derogatory credit. Based on the information put together by the loan professional, the underwriter makes the final decision regarding whether a loan is approved.

STEP 12 | APPROVAL, DENIAL OR COUNTER OFFER 

In order to approve a loan, the lender may ask the borrowers to put more money down to improve the debt-to-income ratio. The borrower may also need a bigger down payment if the property appraises for less than the purchase price.

STEP 13 | INSURANCE

Lenders require fire and hazard insurance (often referred to as Homeowners Insurance) on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone.

STEP 14 | SIGNING, FUNDING and CLOSING

During this step, the final loan and escrow documents are signed. At this point, the lender will send a wire or check for the amount of the loan to the title company. Documents transferring title will now be officially recorded by the County Recorder.