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Man Applying For A Mortgage Loan

Solving the Mystery of the Mortgage Loan Process

Metropolitan Mortgage Corporation understands that applying for a home mortgage can be an overwhelming prospect. That’s why our team wants to be your advocate from the time you start thinking about buying a home, all the way to getting your keys in hand. Our mortgage bankers understand the process of loan processing, and are here to walk you through the eight steps involved with getting your loan.

1. Determine your budget

The primary consideration of a mortgage loan is this: how much can you afford? Lenders have a wide range of what they consider “affordable”; your job is to figure out a payment level that’s comfortable for you.

These are the basics for coming up with a housing budget.

  • How much of a down payment can you make?
  • The mortgage payment only includes the principal and interest payments. Estimated real estate taxes and homeowners insurance premiums are in addition to that number. This is where the acronym PITI (Principal, Interest, Taxes, Insurance) comes from.
  • Can you put down enough to avoid paying a mortgage insurance premium?
  • Don’t forget HOA dues and potential assessments
  • Houses are expensive to maintain. Be sure you keep enough in savings for repairs.

Once you have these numbers, you can determine how much house you can really afford. Keep in mind that just because a lender is willing to max out your mortgage loan, that doesn’t mean it’s a good idea.

2. Get pre-approved

Once you’ve determined a realistic budget and searched for homes online, it’s time to get pre-approved for your mortgage. At Metropolitan Mortgage, we will review your overall financial picture and issue you a pre-approval letter you can take to your realtor. This is a more substantial document than a pre-prequalification letter in that we are telling the seller that you meet our standards for a loan, and the only thing left to do is find a suitable house. In today’s competitive Kansas City market, this is a tool that sets you apart from other buyers.

3. Find a home and sign the contract

Now that you and your real estate agent are out touring homes in person, you’re ready to find the right house and make an offer. The amount you’ll offer for the home is just the beginning of the offer process; your agent will structure the offer so that it’s appealing to the seller. They could suggest a larger down payment as a signal you are serious, or present a contract with few contingencies—again, telling the seller that you really want the home and are not going to nitpick the details.

The contract is effectively a road map to closing. As your mortgage loan processes, you can check off the conditions of the approval, each one getting you that much closer to your new house keys.

4. Order a home inspection

A home inspection is typically ordered as soon as the contract is signed by both parties. Your real estate agent can order it on your behalf, or you can do it yourself. This inspection is completely separate from the appraisal, which simply assesses value. The inspector comes with their flashlight and coveralls and goes over every inch of the house, from crawlspace to attic, and may even get up on the roof. They’ll run the dishwasher and the HVAC to ensure they work properly, test the electrical system and validate it’s up to code, check the plumbing and pipes, the foundation, and anything else in the house. This costs about $400 on average, but can be more or less, depending on the age and size of the house. You can ask for repairs or financial concessions based on the results of the inspection.

Home Inspector

5. Finalize the mortgage application

The mortgage loan application isn’t complete until the Offer to Purchase and proof of your earnest money deposit are included in the file. You’ll also need to provide us with updated pay stubs and bank statements if your pre-approval is more than a few weeks old. You’ll receive a Loan Estimate within three days of your completed application, which covers the costs you will incur in receiving the loan. These costs are itemized and include things like filing fees, processing and origination fees, attorney and title search fees,  title insurance premiums, and all the other expenses associated with the loan.

6. Lender orders the appraisal

Lenders require an appraisal to confirm the home’s value is at least equal to the purchase price. The lender orders the appraisal and the appraiser is randomly selected from the lender’s approved vendor pool. This costs in the $495-$550 range, and you’ll pay that up front.

7. Mortgage processing and underwriting

The actual mortgage processing is “hurry up and wait” for buyers. The processor makes sure all the required documents are in the file, orders the title search, confirms your homeowner’s policy, and sends the file to the underwriter. The underwriter reviews the documents in the file and signs off on each condition of the approval, and may request additional explanations of collections or judgments in your credit file. If our mortgage bankers see any kind of “red flag” on your credit report, we’ll go ahead and ask for that explanation so it can go in the file before the underwriter gets it. Once the appraisal is in and the title search is cleared, the file is considered “clear to close” and the loan documents are prepared and sent to the closing agent.

8. Settlement

Your Metropolitan Mortgage banker will provide you with a Closing Document several days prior to settlement. You can either design or wet sign (in ink and in person) this document at least three days prior to settlement. This is the final fee tally, and it should closely reflect the original Loan Estimate. The only things that should be markedly different are real estate taxes or buyer concessions. This document also lets you know how much money you will need at settlement, for both the closing costs and the remainder of the down payment.

Plan to wire the funds to the closing agent’s escrow account rather than bringing a certified check.

The settlement itself involves signing a lot of papers. Typically, the seller will not be there; their only role is signing the deed and they can do that ahead of time. Once the new deed is recorded at the courthouse, the loan is considered “clo,sed” and you are officially a new homeowner.

Obviously, this is a quick rundown of the mortgage loan process. At Metropolitan Mortgage, our expertise is in the Kansas City area, so our team is ready to provide you with the best mortgage experience in the market today. Contact to learn more about our hands-on, local service.

Rick Woodruff
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