Buying a home and getting a mortgage loan are big decisions. This may be the biggest financial transaction you make. The mortgage process can be easier if you know what to expect.

Even homeowners who have obtained a mortgage loan before may benefit from reviewing the steps in the mortgage process as they prepare to buy a new home or refinance their current mortgage loan.

Pre-approval

Before you start your search for a new home, you may contact your lender to get a pre-approval letter for a mortgage loan. When you work with your lender to get pre-approved, you get an indication of how much money you will be eligible to borrow when you apply for a mortgage loan. This process occurs before you complete the full loan application.

A pre-approval letter is a written statement of a lender's willingness to approve your mortgage request for a loan amount based on a property purchase price and down payment that you specify. You can also obtain a pre-approval letter without a particular property in mind. You can even be pre-approved online.

In order to provide a pre-approval letter, your lender will conduct a preliminary evaluation of your (and any co-borrower's) income, assets, and credit history based on information that you provide, as well as information in your credit report, which the lender may decide to order as part of the pre-approval process.

All information that your lender obtains during the pre-approval stage will be verified when you apply for your mortgage. You also may need to meet other terms and conditions, which your lender will explain during the loan application process.

You will learn how much you can afford to spend on a house once you go through the pre-approval process. Also, having a pre-approval letter will indicate to the seller that you are a serious buyer and that you have made the first step toward securing mortgage financing.

Discussing Your Mortgage Needs

Today, lenders are able to offer a variety of mortgage products to suit the needs of their customers.

Here are a few questions to ask yourself when deciding what type of mortgage product to obtain:

• How long do you plan to stay in your new home?
• Are you interested in stable, predictable payments for the life of the loan or a low initial rate and low monthly payments for the first few years of the loan?
• Do you want a loan that allows you to make a low down payment?
• Do you need a loan with flexible qualifying guidelines because of past credit problems?
• Are you interested in a loan that can help you build equity quickly?
• Do you want to pay your loan off faster (and save significant interest costs) or stretch your payments over a longer term with a lower monthly payment?

It is important to think clearly about your needs and goals, and discuss them with your lender so that you can obtain the type of mortgage product that is right for you.

Completing Your Loan Application

Some lenders prefer that you complete the loan application in a face-to-face interview or by phone. Others offer the convenience of completing the loan application online. And some prefer to receive a written loan application prior to the loan interview so that they can better prepare to assist you. They may ask that you submit the written loan application before your loan interview appointment.

Your lender will need basic information from you (and any co-borrowers) in the loan application. This usually includes your full name, current and past addresses, Social Security number, employment and asset information, any amounts you owe to creditors, and the property address of the home you want to purchase. You also will have to provide a recent pay stub, a recent bank statement, W-2 tax forms for the last two years, and a signed sales contract (purchase agreement) for the property you are buying, as well as additional information that may be requested by your lender. The lender will order a credit report for each borrower on the loan application if one was not already ordered during the pre-approval process.

Reviewing Your Good Faith Estimate and Other Documents

Within three business days of submitting your loan application, your lender is required by law to provide you with a Good Faith Estimate (GFE) of the closing costs you will pay, as well as the government publication A Home Buyer's Guide to Settlement Costs, which explains the costs associated with settlement. It is based on the lender's typical loan origination costs for the area where your home is located. It is important that you understand these documents. If you have questions, ask your lender.

Satisfying Requests for Additional Information

After you complete the loan application, your lender will review it to ensure that you have supplied all the necessary information. The lender also will order an appraisal of the property.

If your lender has questions about information provided in your loan application or needs to obtain verification for some items, the lender will contact you. You also may need to provide proof of a satisfactory home inspection and a satisfactory termite inspection, depending on where the home is located and your lender's requirements.

It is important to respond to these requests in a timely fashion in order to ensure that the processing of your loan progresses on schedule.

Closing

The closing is the point at which ownership of the property is transferred from the seller to the buyer, all documents are signed, and you get the keys to your home. The meeting is typically attended by the buyer(s), the seller(s), the buyer's and seller's attorneys if applicable, all real estate sales professionals involved in the transaction, a representative of the lender, and the closing agent. You will be asked to pay certain closing costs at the closing. These expenses are in addition to the price of the property and are typically incurred when ownership of a property is transferred. Closing costs may include a loan origination fee, an attorney's fee, taxes, and title insurance fees. Closing costs vary according to the area of the country in which the property is located.

You may request a preliminary copy of the HUD-1 Settlement Statement from your lender or closing agent on the business day before the closing. You should review your HUD-1 Settlement Statement before the closing and compare it with your original Good Faith Estimate to understand what charges may have changed between application and closing.

The Settlement Statement will list the actual amount of money you will need to bring to the closing. You will need to pay your closing costs in the form of a certified or cashier's check. Your lender also may ask you to bring certain documents to the closing such as proof that you have acquired a homeowner's hazard insurance policy for the property.

At the conclusion of the closing, you will receive copies of all signed documents related to your mortgage loan and the sale of the property.