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Closing on your loan usually takes place at the bank office. Someone will call you before closing to make sure everything has been properly coordinated between you, your Homeowners Insurance Agent, and Real Estate Agent.

Both the buyer and seller may pay closing fees. As part of your mortgage application you will get a Good Faith Estimate showing your potential closing costs. Some closing costs on a house can be rolled into the mortgage loan. Costs can include:

  • An origination fee
  • Discount point(s)
  • An appraisal fee
  • Credit report
  • Title search
  • Recording fees


Closing costs are typically two to five percent of the purchase price. However, they can vary depending on your bank, location and property. Since your closing costs depend on your purchase price, they're an important consideration when working with your real estate agent to decide how much to offer on a house.

CLOSING

Once you have learned about different loan programs, you then work with your bank to help fill out the rest of the application over the phone, on-line or in-person. You may have to pay an application fee and pre-pay for the home appraisal and other costs. An estimate of costs or fees to be paid at the mortgage closing will also be determined at this stage.

After you complete and file your application, it is then sent for underwriting. The file sent for underwriting includes an appraisal, title commitment, and other verifications. Processing your application is basically verifying your information to make sure you can move forward in the application. Once the application is processed, the underwriting department at the bank will determine if the loan is approved or rejected under the terms for which you applied. An underwriter looks at your other debts and income and basis to make sure you can be approved for your loan amount. If needed, the bank might ask for additional documentation.

APPLICATION AND APPROVAL

Pre-APPROVAL

Mortgage pre-approval involves the same steps as a mortgage application - you'll provide detailed information about your income and assets that will be reviewed by the lender's underwriters. If approved, you'll get a commitment by the lender for a specific loan amount. (When you apply for a mortgage, you're applying for credit to purchase a specific property as well.)

Pre-approval shows you have the resources to make the purchase and it helps you act quickly when you find the perfect home. From the sellers' point of view, a pre-approved buyer is more attractive than someone who says they can buy a house but have nothing but their word to back up their offer. By proving you have your bank's backing, a mortgage pre-approval can help you negotiate on price - and it can be a deciding factor for sellers who receive multiple bids.

One note on timing: Don't apply for a pre-approval until you're fairly certain you'll want to buy a home within the next 90 days. Unlike getting pre-qualified, a pre-approval involves requesting a copy of your credit history and an examination of your application information and the documents you provide. A pre-approval will show as an inquiry on your credit report, and it's only good for a certain amount of time.

If you decide to proceed with the loan, you may also be required to pay an application fee and prepay for the home appraisal and other costs. An estimate of costs or fees to be paid at the mortgage closing will also be determined at this stage.

To get pre-approved, you'll need to provide some personal information and financial documents, including detailed proof of your income for the past two years. You can start your mortgage application by contacting a bank today.

Mortgage pre-qualification is an assessment of your debt-to-income ratio. It also provides an estimate of how much you may be able to borrow - a good first step in your house-hunting journey.

While this number is informative, keep in mind how much you may qualify to borrow is often more than how much you can afford to spend on your new home and still have money left over for the other important things in your life - like furniture for your new home.

Getting pre-qualified doesn't require a commitment from you or the bank. It isn't a true application and your credit history doesn't factor into your pre-qualification. Even so, you should be aware that when you apply for a mortgage, your credit score will affect your ability to qualify. If you have concerns about your credit history, talk to your mortgage loan originator now to find out what options might be available to you.

When you get pre-qualified, you can request a letter stating how much you may be able to borrow, based on the information you provided to the bank. You can give this letter to your real estate agent to show you're a serious home buyer.

You can pre-qualify online or by talking to a mortgage loan originator.

Pre-QUALIFICATION

What does an application process look like?