A Guide to Understanding the Home Loan Process

Going through the home loan process is not something that most people do often. Some people may never do it, while others only do it once or twice in their lifetime. The entire process might seem confusing. Getting a home loan can be one of the most gratifying experiences of your life. You can get the house that you've always wanted and enjoy it with your family. Here is what you can expect in getting a home loan.

Loan Application

The first step in the process is the loan application. This step involves a lot of paperwork and verification. You will need to shop around for the best rate and fees. Talk to several different banks and mortgage brokers to find a deal that you like. Once you agree on a loan program, you will need to fill out the loan application. They will verify your income and all the basic information about you.

Credit, Income and Asset Qualification

During the loan application process, the lender will pull a credit report. They will want to make sure that your credit score is good enough to be approved. In addition to that, they will want to verify your income and asset qualifications. Each lender has set guidelines for this, so there is no uniform standard. However, they will want to know that you have sufficient income to repay the loan. They have strict debt-to-income ratios, therefore you have to have a certain amount of income for the size of mortgage that you are requesting. They will also want to know of any other assets that you have that could be used to repay the debt if need be. 


A lender will hire a certified real estate appraiser to go examine the house and make sure that it is worth the amount of money you are asking for. If the house is not worth the amount that you request, you may be required to make up the difference out-of-pocket. Also, the appraiser is reviewing the condition of the property and may ask for minor repairs if the property needs a little bit of work.


Once a lender reviews your loan, according to their guidelines,  they will issue a loan approval. They will give you a timeline and a specific date for closing. At that time, they will go over all of the closing costs and fees that will be needed. They will tell you where to go for closing and what to bring with you.


The last step in the process is the closing. This is the most exciting step in the process as when it is over, you will be the proud owner of a new house. Closings can take place at a number of different places depending on where you live. You might need to go to a title office, the bank, a lawyer's office or another location. You go to the closing, listen to the terms of the loan and sign several documents. In the end, they will give you the keys to your new house.