Understanding the Mortgage Process: Tips from Pre-Approval to Closing

Understanding the Mortgage Process: Tips from Pre-Approval to Closing

  • 06/4/24

Question: Can you provide an outline of the mortgage process for homebuying?


Navigating the mortgage process can feel daunting, especially if you are a first-time homebuyer or if it's been a while since your last purchase. Understanding each step can help ensure a smooth journey from pre-approval to closing. This week I enlisted Jake Ryon of First Home Mortgage ([email protected]) to help me outline the mortgage process from start to finish. I have worked with Jake for many years and highly recommend him. 


Step 1: Pre-Approval

Before beginning your search for a new home, you’ll want to get pre-approved for a mortgage. Pre-approval provides you with a clear understanding of your budget, identifies any issues or surprises in your financials, and demonstrates to sellers that you are a serious buyer. Here’s what goes into a pre-approval:

  • Credit Check: Your credit score significantly influences your loan terms. This is classified as a “hard” credit check, but you can have multiple lenders run your credit within 14 days and it’ll count as just one hit on your credit score.
  • Documentation: Be prepared to provide proof of income (such as pay stubs and tax returns), employment history, and assets (such as bank statements).
  • Debt-to-Income Ratio: Lenders want to ensure you can manage your mortgage payments alongside your other debts. Strive to keep your debt-to-income ratio below 43%.


Step 2: Making an Offer

Once you have found a suitable property, it's time to make an offer. You will submit your pre-approval letter along with your offer so that the seller knows you can afford to make the purchase you’re offering to make. Having a thorough pre-approval and a lender who is available to speak with the seller’s agent about your qualifications makes a big difference in how your offer is considered by the seller.


Step 3: Loan Application

After your offer is accepted, you will officially apply for your mortgage. Here’s some of what to expect:

  • Complete the Application: Despite being pre-approved, you will need to provide updated documentation and complete a full loan application.
  • Home Appraisal: The lender will order an appraisal to verify that the property is worth what you’ve offered to pay. If the home appraises for less than the purchase price, you may have to increase your downpayment if you do not have the protection of an appraisal contingency.
  • Title Search: A title company will conduct a title search to ensure there are no issues with the property’s title, confirming it can legally be transferred to you.
  • Homeowners Insurance: You are required to obtain a minimum level of homeowners insurance to qualify for your loan.
  • Condo/HOA Approval: If you are purchasing in an condo or homeowners association, the lender will request specific information from the association to ensure it is warrantable.


Step 4: Underwriting

During underwriting, the lender's team reviews your entire file. They will verify your income, assets, debts, and credit history. Additional documents may be requested during this stage, and it is important to respond promptly to avoid delays.


Step 5: Closing Disclosure

Three days before closing, you will receive a Closing Disclosure (CD). This document outlines the final terms of your loan, including your interest rate, monthly payments, and closing costs. Carefully review the CD and compare it to your original Loan Estimate to ensure accuracy.


Step 6: Closing

Closing day is when the transaction is completed. Here’s what to expect:

  • Sign Documents: You will sign numerous documents, including the mortgage agreement and deed of trust.
  • Pay Closing Costs and Downpayment: Be prepared to pay your downpayment and closing costs, which typically range from 2-3% of the purchase price in Northern VA. These costs include title fees, loan origination fees, transfer taxes, and tax escrows.
  • Deed Recording: Once all documents are signed by both parties and the funds are received, the title company will record the deed at the local courthouse and the transaction will be official.


Tips for a Smooth Process

  1. Stay Organized: Keep all your documents in one place and respond promptly to any requests from your lender.
  2. Maintain Your Credit: Avoid making large purchases or opening new credit accounts during the mortgage process.
  3. Communicate: Maintain open communication with your lender and real estate agent. If you have any questions, do not hesitate to ask.

If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.


Video summaries of some articles can be found on YouTube on the Eli Residential channel.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.


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