Dallas Homebuyer’s Guide
Exploring the Mortgage Loan Application Process
Purchasing a new home is an exciting step in anyone’s life. If you are like most people, you will likely need to take out a mortgage loan before you will be able to purchase the home of your dreams. While the process of taking out a mortgage loan can be quite lengthy and even overwhelming at times, by working with the right mortgage company, you can ensure your experience is positive and stress-free.
Additionally, gaining a better understanding of how the process works beforehand can go a long way toward easing your stress and getting you prepared for the mortgage loan application process.
Signing the Mortgage Loan Application
Whether you are applying for a mortgage loan on your own or you have co-borrowers, the first step in applying for a mortgage loan is to sign the application. After you have signed the application, the lender will pull your credit report and score in order to verify your credit history.
When the mortgage lender pulls your credit reports, four factors will be evaluated to determine your creditworthiness. These include:
- Capacity – your current and future ability to make payments on your mortgage
- Capital – your cash reserves, including the money in your savings account and any investments you have that could be quickly sold for cash
- Collateral – the value of the property that you wish to purchase
- Credit – your history in terms of paying your bills and other debts in a timely manner
After evaluating these four criteria, the lender will provide you with a pre-approval letter.This letter will specify how much you may borrow as well as the specific terms associated with the loan. With a pre-approval letter signed by a mortgage lender, you will have more negotiating power when it comes time to make an offer on a home.
After you find the home you want to buy, you will need to sign a Purchase Agreement for the property. The Purchase Agreement will contain the property’s address and other details the lender will need in order to finalize the mortgage application. Prior to final approval of your loan, the lender will have the property appraised in order to determine its market value. Following the appraisal, the lender will provide you with a Commitment Letter, which will detail the terms of your loan. This letter, which will serve as your final approval, will state the terms of your approval. Once you have accepted these terms, you will have the final piece you need to close on the home and make it yours.