Yale Roth M.A., M.Ed

A lot of first time home buyers have little idea on what’s involved in getting a mortgage to buy a new home.

I’m going to outline in step by step fashion, how to apply for a mortgage and what to expect once you’ve applied.

So, the first thing you want to do, first time home buyers, is apply for a mortgage.

You need to do this prior to making an offer on a new home or even looking for a new home.  It’s kind of like going to the super market to buy food and not bringing your wallet.  You need to apply for the mortgage first.

Step 1.  Talk to a mortgage broker or loan officer and figure out what loan type is right for you.  Learn the differences between a 30 year fixed mortgage and a 15 year fixed mortgage and an adjustable rate mortgage.

It’s not rocket science.  If you’re working with a good loan officer or mortgage broker, they should be able to define the pros and cons of the different mortgage types.

Once you’ve determined which mortgage type is best for you and what your proposed mortgage principal, interest, taxes and insurance payment will be, you’ll submit a mortgage application.

You’ll either complete the mortgage application over the phone, online or in person with thte loan officer or mortgage broker.

Step 2.  After you complete the mortgage application, you give the loan officer or mortgage broker copies of your last 30 days paystubs, copies of your last two years W2s and copies of your last two months bank statements.  If you’re self employed, you’ll also submit copies of your last two years tax returns, all pages and all schedules.

Step 3. Wait for your mortgage underwriting decision,  This usually takes between 24 and 48 hours.

Step 4.  Once you’ve received you’re mortgage pre approval, you’ll get a mortgage pre approval letter or mortgage commitment letter from your  mortgage company.

Now, it’s time to go home shopping!  (This is usually a conditional mortgage approval.  The mortgage underwriter will in all likelihood request additional paperwork from you before clearing the mortgage to close.)

Step 5.  You’ve found a home and you make an offer to buy.  Your realtor will help you determine a good offer price and also help you write up an offer to purchase the home.  Your realtor submits the offer with your mortgage pre approval letter to the seller’s realtor.

Step 6. It usually takes the seller about 24 to 48 hours for the seller to review your offer.  They will either accept it, counter it, or reject it.

Step 7. Your offer has been accepted!  Now what?

Step 8. Your lender will order a home appraisal.  You will have to pay for the upfront.  This upfront fee generally ranges from $350- $400, depending on your market and the size of the new home.

Step 9. You will need to get a dwelling insurance policy on the home.  So, this means you have to contact an insurance company and get a quote for a dwelling or hazard policy.  You will have to pay the insurance premium for 1 full year upfront.  This is your second out of pocket upfront expense.  The first was for the home appraisal.

Step 10. You are notified by the title company how much money you’ll need to bring to the closing table.  You will get this information a couple of days prior to your settlement date.  You’ll need a cashier’s check made out to the title company or closing attorney as they will be disbursing the funds.

Step 11. You go to closing.  The closing will take place either at a title company office, attorney office or even the realtor’s office.

Here’s who will be at the closing.  It’ll be you, your realtor, the title agent or closing attorney, the home seller, and their realtor.

The closing usually takes about 45 minutes to 1 hour to complete, depending on whether everything goes smoothly.  Be ready, first time home buyer, because you’re going to have to sign a lot of papers!

In addition, the closing usually place within 30 days of the time your offer to buy the home is agreed upon.

Not a big deal.

Some closings are more stressful than others.  Ideally, you want to be able to review the closing costs a couple of days prior to youre closing date.

Sometimes this does’t always happen.  It just depends on the mortgage company and how quickly the mortgage is cleared to close by underwriting.

Expect some “bumps” along the mortgage process.  Like I wrote previously, the mortgage underwriter may request additional documentation from you.  Some first time home buyers become frustrated by this.

Remember, there are a number of parties that are involved in completing the home buying and mortgage closing transaction, including yourself as a first time home buyer.

If all the parties communicate effectively together, then the mortgage and closing process will go smoothly.

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• What Happens At A Mortgage Refinance Closing?
• 4 Important Things To Consider Before Taking Out Home Mortgage Loan
• 2 Reasons Why You Don’t Have To Drop Your Mortgage Rate by 2% To Justify A Mortgage Refinance