From finding the perfect home to signing those papers at closing (congrats!), the process of buying a home can be exciting. Know what to expect with your mortgage by learning the basic steps of the process, and you’ll already be ahead of the game.
Step 1: Getting prequalified
A prequalification letter comes in handy when you’re ready to make an offer on a home. “Visit your bank and go through what is called the prequalification process, where they’ll speak to you about your income and talk about how much you qualify for,” says Jonathan Giles, Head of Consumer Direct Lending at TD. “This helps sellers see you as a serious buyer and puts you in a much better position to make a qualified offer.”
"Prequalification" is commonly confused with "preapproval," which is a bit more involved. As Scott Lindner, National Sales Director for TD Mortgage, explains, “A preapproval is typically a fully underwritten loan, but it’s not offered by every lender.” Keep in mind, if the property is not yet identified, the loan is not fully underwritten.
Step 2: Shopping for a home and making an offer
You did your mortgage shopping (phew!). Now comes the fun part: hunting for a home. At this point, some people hire a real estate agent who can set up viewings, provide helpful information and negotiate prices. “Knowing the area, size and neighborhood are important, but you also need to check that it’s in your budget,” says Giles.
Once you tackle all that and find the right home, it’s time to make an offer. A real estate agent can also help develop a written contract.
The "offer" process includes:
- Purchase offer: the price you’re willing to pay
- Earnest money: money you offer up front to show your commitment
- Negotiation: back-and-forth talks with the seller
- Purchase agreement: signed contract with final price
Keep in mind, this step can take a while—but don’t sweat it. “The contract process sometimes happens relatively quickly,” says Lindner, “but it can often take a long time to get the final agreement.”
Step 3: Loan process
So, your offer's accepted (woohoo!)—now what? Giles recommends you “ask your lender to get the loan process started because it’s good to get everything moving.”
Both Giles and Lindner say to prepare yourself for lots of paperwork and document gathering. Tax returns, check stubs, bank and investment statements—a slew of documents is required in securing a loan. “Getting these documents back quickly is only going to help get through the loan process faster,” Lindner says.
So, where do you start? The first step is submitting your mortgage application. You’ll need a signed purchase and sale agreement for this. Then, you may choose to complete a home inspection (to check the home’s condition).
Once you’ve tackled all of that, the underwriting process begins. Remember all those documents you gathered earlier? Your lender will have a final look at them during this step as well as engage a home appraiser and a title attorney to review key details about the home you are buying. If all is well, then you’ll get final loan approval and funding. Great news, that means the mortgage process is complete.
Step 4: Homeowners insurance and closing
Get excited—that perfect home is almost yours. You’ll just need to insure it first.
Homeowners insurance makes sure you’re covered if your home or property is damaged. “It’s a lender requirement,” says Lindner. You’ll likely need to take care of this before closing and may have to pay for several months up front, so be sure you have the necessary funds set aside for this. A standard package includes coverage of disasters (fire, theft) and legal responsibility (property damages, injuries).
After you’ve completed this step, you’ll be close to the finish line. Your mortgage should be ready to close soon. The whole process usually takes 45-60 days. Then, you’ll sign the necessary documents, pay closing costs and officially own the home. You did it!
Now, do you have any packing tape?