Check the Complete Process of Mortgage Loan – From Pre-Approval to Closing

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Pledging your property can be a significant financial decision, even when the intention is noble. Knowing the steps involved in the process can help you make informed decisions.  

From the time of mortgage loan application to loan approval, there are five distinct steps. Read this article to know each step in detail.

Step 1 – The Pre-Approval Stage

Getting your mortgage loanpre-approved increases your loan eligibility. Pre-approval is not that difficult if you know the proper way. To guarantee mortgage loan pre-approval, you need to approach the lender and express your desire. The lender will seek your credit report from a credit rating agency like CIBIL. The credit report contains all details of loans that you have applied for and the history of repayment. Once they are satisfied with your credit profile, they will inform you of the loan amount you are eligible for. It is better to keep the documents required for mortgage loan ready before applying for a pre-approval.

Step 2 – House Selection

Now that you know your mortgage loan eligibility, the next step is to browse houses. There are two ways in which you can find houses. 

  • Online – In this mode, you visit a property aggregator’s website and browse houses as per your budget.
  • Alternatively, you may contact individual developers online and enquire about ready-to-move properties or upcoming projects.
  • Offline – In this mode, you contact the local property agents and schedule property visits. You may also contact the developer directly and schedule a site visit.

In both modes, you can ask as many questions as you want before finalising the property.

Step 3 – Applying For the Mortgage Loan

Applying for the mortgage loan is the most crucial step, as you have to be careful while selecting the lender and filing the application. The lender may ask for several documents like photograph, age and residence proof, income proof, bank account details, income tax documents, and property papers. Also, the interest rates will depend on your credit score, disposable income, and property status. Generally, lenders approve a loanamount of up to 90% of the mortgaged property’s market price. Hence, before applying for the mortgage loan, you should enquire about all terms and apply only when you are certain that you are getting the best deal.

Step 4 – Loan Processing and Underwriting

After you submit the mortgage loanapplication form, the loan officer or processor evaluates the documents and arranges them in order. The loan officer may ask for additional information if the application lacks any details. The officer then forwards the application form to the underwriter,  who is the final decision-maker. The underwriter cross-checks the information provided by you with the property and evaluates your repayment capability. The underwriter then decides the interest rates and loan terms. If you agree to the terms, the underwriter sends your file for closing or loan approval.

Step 5 – Closing

This is the final step in your mortgage loan application process. During the closing process, you will encounter four critical documents.

  • Closing Disclosure, which contains every detail about your loan, including loan terms and costs.
  • Promissory Note, which contains the terms governing repayment.
  • Deed of Trust, which gives the promissory note a legal edge.
  • Occupancy Certificate, which gives you the rights to move into the property.

Conclusion

A mortgage loan is a long-term financial commitment. You can get the best terms if your mortgage loan eligibility is high. Read all terms before signing the application form.

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