For the First-time Homebuyer – A Mortgage Step-by-Step Process

Did you know? That studies on first-time homebuyers from the US show that the median age for people buying their first home has increased from 28 – 29 years in 1981, to 33 years in the current times.

While factors like inflation and increased market competition do play a role, the most frequently occurring reason behind this upward trend was the lack of clarity among first-time homebuyers in how to go about the process of getting a mortgage. This process has rarely been laid out simply for potential homebuyers until now, making this seemingly discouraging process more accessible than ever before.

Today, we want to run you through the steps of getting a home loan and how this process can be made easier for first-time homebuyers. We are going to be breaking down the process of getting a mortgage into 6 clear-cut steps that are very easy to follow, taking you further in your journey of finding your dream home. Our first-time homebuyer programs are also designed to guide you once you get a better idea of what needs to be done. Hopefully, by the end of this article you will have a good understanding of how to go about acquiring your new home!

For the First-time Homebuyer  - A Mortgage Step-by-Step Process Unlimited Mortgage Lending

STEP 1: Organizing your Documents

The smartest way to prepare for managing your home loan is by setting realistic goals for yourself and by planning for each step as you go through them. Starting with a general idea of your budget is important so that you will be relatively more prepared to undertake the steps in the remainder of the loan process. Why is a budget so important?

It is a common fact that human beings think in pictures and not words, so

  1. You physically write down your present expenses and income.
  2. You see if you are spending too much in the wrong areas.
  3. You see how much money is actually leftover (savings) after you pay your expenses.

Now, you get to see what your present financial picture really is.

Your present budget will help you realign your expenses so that you will be able to set a maximum proposed housing expense and budget that you can handle. The importance of doing this is that you will not be financially overextending yourself to where you do not have ample income to cover your expenses and be forced into not meeting your financial commitments.

After you have a better idea of your budget, it is time to begin organizing the basic documents that you will need for your pre-qualification process. Documents involving your monthly income, credit profile, assets and debts, and employment will be required for the following steps. Given below are some documents that you will need to get ready before you move on to the next steps:

  • Federal tax returns for the last two consecutive years.
  • Recent pay stubs.
  • Proof of income, including investments, tops, and social security payments.
  • Bank statements.
  • W2 or 1088

For the First-time Homebuyer  - A Mortgage Step-by-Step Process Unlimited Mortgage Lending

STEP 2: Get Pre-Qualified.

Getting “Pre-Qualified” can be broken down into 3 variations (see Proactive TBD Underwriter Approval for a detailed breakdown).

“Pre-qualified” is when your mortgage loan officer pulls your credit report (includes 3 credit bureaus: Equifax, Experian, and Transunion. Each bureau will have a representative credit score that reflects your credit history. The mortgage lender will use the middle of the 3 or lowest of the 2 if a third is not provided) and will review your credit and information that you verbally provided such as income, bank balances, retirement amounts, residential history, etc. They are not using any supporting documents since you did not provide any. Pre-qualified is basically the mortgage loan officer estimating the loan amount that you should qualify for. This is just an estimate, NOT a guarantee.

To know which documents to gather, please review the following types of loans for their respective list of documents needed to qualify for: Conventional loans, FHA loans, VA loans, and JUMBO loans.

A pre-qualification reflects your financial situation up to a specific point in time. It gives you a general idea of what your total housing expense “could” be and a reference to either increasing or decreasing your purchase price range to fit within your proposed budget. A realtor “prefers” to work with buyers that have already been pre-approved. It shows the realtor that you are serious about purchasing a house, that you have been proactive by gathering your documents and discussing your situation with a loan officer, and having an estimated price range to shop when scouting for homes.

Pre-Qualify yourself with our Exclusive Prequalifying Mortgage calculator


For the First-time Homebuyer  - A Mortgage Step-by-Step Process Unlimited Mortgage Lending

STEP 3: Book a Loan Consultation

Your first contact with your mortgage loan officer would be when you book a Loan Consultation at the beginning of this process after you have your budget and documents gathered. In this first consultation, you will explain what your present situation and goal is in purchasing a home. The loan officer in turn will ask questions to fill in areas that need expanding and layout the process of what you will be facing as a first-time homebuyer.

Your Loan Officer is going to be your teacher, mentor, best friend, and confidant throughout this complete procedure. The experienced loan officer is the person that will listen to you, ask you questions do discover your present financial scenario, and then formulate the best path for you to take to receive a mortgage loan approval. The mortgage loan officer works on your behalf with your best interests at heart.

For the First-time Homebuyer  - A Mortgage Step-by-Step Process Unlimited Mortgage Lending

STEP 4: Apply for a Loan

Applying for a mortgage loan can start via 3 circumstances:

  1. Simply doing an application to be Pre-Qualified without supporting documents
  2. Being Proactive by completing an application to have a TBD Underwriter Approval with supporting documents verified.
  3. You have signed a Purchase Contract to buy a home you found, and you need to get a mortgage to finance the purchase.

How you got to this point through the above 3 circumstances will dictate your chances of having a smooth process as well as the duration of it. To give you examples of the above, let’s start with:

  1. Being Pre-qualified does not determine your exact purchasing capabilities. This path only gives you an idea of your purchasing range. You would still have to provide supporting documentation and all still have to be verified. There is a good chance of this process taking anywhere from 30-45 days to complete. A very high chance of something going wrong with unsupported details.
  2. TBD Underwriter Approval is the most solid path to take when you are in the home buying process. You have completed an application, you have provided the documentation, and your documentation has been verified. At this stage, you know how much you can purchase subject to the amounts for insurances, taxes, and association dues (these all vary). This can take 21 days or less because all that is left is the appraisal on the property and getting the other expenses just mentioned. A very high chance of closing without any problems.
  3. Signing a Purchase Contract (without being pre-approved) is the most stressful path to take. You have legally bound yourself to make the largest purchase in your life without knowing if you qualify to complete the deal. You have to complete a mortgage application, provide the supporting documents, deal with any areas that need additional documentation or explaining while being under the pressure to meet the closing deadline. This is the path that you hear people complain about and hate about the mortgage industry. This is legally set to close on or before a certain date (usually 30 days) but there is generally a good chance that it will not. A very high chance of something going wrong with unsupported details.


For the First-time Homebuyer  - A Mortgage Step-by-Step Process Unlimited Mortgage Lending

STEP 5: Processing and Obtaining Loan Approval

As previously mentioned, you complete a mortgage application and provide supporting documentation. Here is where you enter the processing stage. A processor will literally match up your mortgage application with the supporting documentation you provided and go through each document to make sure that it meets the standard that is required by an underwriter. If the processor cannot understand or find something specifically, they will reach out to you for an explanation verbally or in writing. The processor is painting a fiscal picture at this moment in time. Simply stated, the processor is showing what you have done (credit report and employment history), your stability (income and payment of bills), and the purpose of your mortgage application (purchase the new home) for the underwriter. The processor does work with the underwriter to make sure that your actual mortgage package does meet all of the requirements for the specific loan that you are applying for.

The underwriter is the “God” in this industry. It is their responsibility and livelihood to make sure that your mortgage package does meet the loan requirements. Once they have signed off of all of the documents and conditions, your file will then be marked “Clear to Close”.

For the First-time Homebuyer  - A Mortgage Step-by-Step Process Unlimited Mortgage Lending

STEP 6: Closing the Loan

The final and perhaps, the most exciting step of this process is the closing of the loan after its formal approval. Your file has now been transferred from underwriting to the closing department. The closing department will coordinate with the mortgage loan officer and the title (escrow) company that is handling the actual closing of your purchase. The closer at the lender will be verifying insurances and real estate taxes that are due. The coordinated efforts of the above parties will be finalizing the Closing Disclosure. The Closing Disclosure is the statement that lists all the fees and payments and third parties involved with your transaction. In simple terms, it is an invoice summary for all the fees (closing costs) and the disbursement of monies to and from the buyer and seller.

At the closing table, both sides (buyer and seller) review the Closing Settlement Statement, and then the seller will sign their documents which transfers the property to you. You in turn sign your mortgage (ownership and IOU) documents for the monies that in turn are given to the seller minus all third-party fees to both sides. At this point, you become a homeowner, receive the keys, and the deal is closed.

For the First-time Homebuyer  - A Mortgage Step-by-Step Process Unlimited Mortgage Lending

In Summary

The steps towards getting your first mortgage are fairly straightforward. You begin by going through your finances to come up with a realistic budget for yourself. Once this has been done, begin organizing all the necessary documents and book a loan consultation to know what type of loan you qualify for. This gives you all the basic preparation required to move on with the following steps.

The choices you make for getting Pre-Qualified/Approved will dictate the transition time and probability of problems to occur0 during the process. Your mortgage application and supporting documentation are all verified and packaged for the underwriter by the processor. The underwriter (God) will sign off on the package for the official approval. After obtaining your loan approval, all respective parties will coordinate and bring your file to a close. Closing on your new home will be exhilarating and unbelievable. You might be taken aback by the fact that you have just closed on your very own home. Enjoy it, it happens.


In Conclusion

Here at Unlimited Mortgage Lending, we enjoy educating first-time home buyers and walking them through the mortgage process from start to close. Our loan programs cover all types of situations to help you through this process at your own pace. Our team is always ready to guide you through every step to ensure that you not only experience a hassle-free loan process but also learn to navigate through this financial endeavor safely.

To start you on the right path, please review the home loan tool kit guide, and visit our exclusive pre-qualifying calculator.

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