Your hard work is finally going to pay off; you are buying a house! And so you begin the exciting process of hunting the perfect house, you scroll online listings, then - boom! - you found it! The perfect home; it's in your dream location, layout, size, finishes, and price.
But most sellers only accept offers from preapproved buyers and you realize that you haven't started looking for loans yet. Bummer!
Unfortunately, a loan application doesn't unfold overnight. There are steps that you need to follow from prequalification to preapproval to the mortgage approval itself.
This is how the application process goes as well as tips on how you can land the smartest loan according to Trulia:
Shopping for loans
Just like when buying a car, furniture, or appliances (which are big investments), you need to some serious research when shopping around.
One way you can begin your process of loan application is of course finding the best loan provider. You can make your research online or by visiting your local bank or credit union. A loan officer should be able to explain to you information such as interest rate estimates, closing costs, and terms you can expect. You can further your research by checking other financial institutions or you can continue online.
Tip: Aside from the interest rate, also find out about the annual percentage rate (APR). It could show you the total borrowing cost, including loan origination fees and other ancillary costs.
Total time: 14 days
Get prequalification letter
You can only really expect sellers to consider your offer if you could hand them a prequalification letter. But don't be taken aback in this step of loan application; it's actually a pretty quick and easy step.
During your mortgage shopping spree, ask a lender to give you a prequalification letter. It is usually a simple document that contains a rough, unverified estimate of the loan size you may be qualified to receive. They will base it on your verbal declaration of income, assets, debts, and down payment size.
Pro tip: You are not required to get a loan from a lender who provided you with a prequalification letter.
Total time: 1-3 days (overlapping with step 1).
Get preapproval
This is the stage of the loan application process when you will be asked to provide support or proof of everything you've told your lender. This includes your proof of income, proof of assets, proof of employment, records of any debt you hold, and identification documents like Social Security card and a credit report that the lender will run.
After which, you will be given a conditional letter which states the exact amount of loan for which you are approved.
Pro tip: For sellers, a preapproval holds more bearing than a prequalification letters.
Total time: 1 week to several months.
Final loan approval
Your offer on your dream home gets accepted - thanks to your preapproval letter! Now, the lender shall conduct an appraisal and you are almost done with your loan application.
An appraisal will help ensure that you are buying the home at a reasonable price. For instance, lending $200,000 on a house that should be valued at $120,000.
It would usually take time to schedule a licensed appraiser to visit the property, but once the appraiser makes the visit, it would only be about 1 to 2 days for the approval (or rejection) to come through.
Total time: 3 days to 2 or more weeks.
When you pass the appraisal process, then you can close on this loan application and finally buy your dream home. Well done!
