Everything You Need to Know About the Mortgage Process

For first time home buyers, the process of finding a real estate agent, finding a home, and getting a mortgage can be overwhelming. Purchasing a house is a huge investment, but the process of getting—and managing—a mortgage doesn’t need to be complicated. Instead, we’re here to untangle some of the mystery and misnomers behind the mortgage process. From pre-approval to money management, here’s everything you should know about getting a mortgage in today’s market.

Buying a House? Start Here.

If you’re reading this, then homeownership is likely on your mind, if not in your near future. Like most eager home buyers, you are probably ready to get the show on the road and find that perfect home for you and your family. While going to open houses and browsing home search engines may feel like the place to start, the truth is, your very first step should be your mortgage process.

Many real estate agents will only begin working with you once you are pre-approved for a home loan. Without that pre-approval, there is no way to know, with certainty, how much house you can actually afford. Like those luxury home teasers on every home show you’ve ever watched, starting your home search before establishing your budget can create both an unrealistic expectation as well as a level of disappointment when you do start looking at homes you can afford.

By starting with the mortgage process, you not only get some of the more tedious work out of the way, but you also set yourself up for a great home buying experience.

Do Your Research

Like almost every aspect of the home buying process, getting a mortgage requires research. There are a lot of different lenders out there, and every single one comes with various qualities: lower interest rates, more flexibility, better customer service. The list goes on.

Finding the right lender is a bit like finding the right real estate agent. Your relationship with your lender is ongoing—at least for the lifetime of the mortgage—and you will want to know that you are working with people you can trust, who are open and honest about your money and the process. Do they respond promptly and politely to questions or issues? Do they offer competitive rates? Are they willing to make suggestions for successful mortgage management?

Mortgage options such as SD Capital Funding provide competitive rates and great customer service across multiple states. They provide transparency with customer reviews and ratings, so you can better research how they might navigate the mortgage process on your behalf.

As you research, bear in mind that lenders will have their own set of questions for you. Once you’ve landed on a lender, you will need to prepare your finances for the pre-approval process.

Get Pre-approved

There are two options within the mortgage process for determining your home buying budget. The first is to get pre-qualified and the second is to get pre-approved. If you are ready to start looking at homes, then pre-approval is the better choice. This more stringent process involves a credit check and a detailed look at your finances. The lender will then issue a letter of pre-approval that will aid you in acquiring an agent and proving to sellers that you are serious about buying.

Pre-approval requires you to submit some key information to your lender. They will wish to review your credit score, employment/income, tax records for the previous two tax years, assets, and debt-to-income ratio. They will also take into consideration how much of a down payment you have saved up.

Lenders are looking to determine whether or not you can afford a home, your history paying off debt, and how much home they are willing to finance. It is safe to assume that lenders will ensure that your mortgage payment and other debt combined will not exceed 36% to 40% of your gross monthly income.

During this part of the mortgage process, it is also important to avoid taking on any new debt or making any drastic changes to your life situation. If you’re looking at changing careers, buying another car, or getting a credit card, consider waiting until after your home purchase has been finalized.

Find an Agent, Make an Offer

You’re finally ready to move onto the fun part of buying a house. With your mortgage process and pre-approval in hand, you can get matched with your LemonBrew agent and immediately start looking at potential homes. Because you did the legwork of finding a lender and determining your budget, the process of finding the right home and making an offer will be that much easier.

Once you’ve found the home you wish to purchase, everything will be in place to finalize your mortgage process and close on your new home.

Finalizing The Mortgage Process

This part of the mortgage process has several steps and in order to keep your home purchase moving forward, most lenders ask that you remain attentive and responsive to their requests for documentation.

Once your offer on a house has been accepted, you can submit the formal application for your mortgage. At this point, your real estate agent will be able to help you with certain aspects of the process as the lender will require a few things to be finalized before closing on the house.

Fulfill all Borrower Conditions

In the process of applying for and finalizing your mortgage, your lender will walk you through a list of conditions that need to be met. These will vary from person to person and lender to lender, but typically borrower conditions include further documentation, verification of certain financial situations, and correcting any inconsistencies on your credit report. It is important to carefully read every document you receive from your lender and follow all requests promptly.

Complete all Inspections

A home inspection will need to be ordered to help you determine if there is anything unexpected with regard to the condition of the home. If repairs need to be made, at this point your agent will help you negotiate with the seller to either complete the repairs or reduce the price of the home, which has a direct impact on your mortgage.

Also during this part of the mortgage process, the lender will request a home appraisal to make sure the purchase price lines up with the value of the home and other similar homes on the market. The title company will perform a title search to ensure there are no outstanding issues with the title of the house.

Lock in Your Interest Rate and Loan Terms

Before closing on your home and finalizing your mortgage paperwork, it is important to work with your lender to lock in the best interest rate possible for your mortgage. Interest rates change daily and are also influenced by the size of your down payment and the length—or term—of your loan. The sooner you lock in these rates, the easier it is to determine your closing costs and fees, which can be anywhere from 2% to 5% of the amount of your loan. This is an often overlooked, but very important part of the mortgage process.

Close on Your Home

With paperwork in order, inspections complete, and your interest rate locked in, you’re ready to finalize your mortgage and close on your home. Your agent, lender, title company, and the seller will all be part of the closing, and it is at this point that you will sign your final mortgage documents and pay the closing costs.

With LemonBrew, paying for closing costs is simplified through our rebate process. When you purchase a home with your LemonBrew agent, you receive money back on your purchase that you can apply toward the closing costs and fees. Making your down payment and finalizing your mortgage process is also made easier through LemonBrew Abstract. Instead of the risk of sending a wire transfer, you can pay your lender via ACH, keeping your money secure while finalizing one of the biggest investments of your life.

Manage Your Payments

Welcome home! Now that you have purchased your home, keeping up with your mortgage payments should be your top priority. Like any other debt—student loans, credit cards, and car loans—your ability to manage your payments, pay on time, and even pay more than the minimum will have an impact on your credit and your ability to invest in other home purchases down the road.

Home Buying Made Easy

LemonBrew takes the guesswork out of the mortgage process and buying home. From finding the perfect local agent to safely and easily transferring your down payment on your home, everything is made simpler with LemonBrew.