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Home Mortgage Process
Congratulations! You've decided to build your dream home. But now you probably have a lot of questions and concerns about the process. We can help provide the answers and the information you need to make the right decisions.
Step 1: Pre-Qualification
It’s your first step and already we're going to make sure you "proceed with caution." If you have been "pre-qualified", you have only been given a Lender's opinion that based on the information you gave them, you would qualify for a determined loan amount. However, we always recommend you take this to the next step of being "pre-approved." This means your information was validated by the Lender and your credit profile has been assessed. In most scenario's you are not in a position to write a contract without being “pre-approved.”
Step 2: Loan Application
During this phase, the prospective homebuyer will need to provide documentation about current income, assets (bank accounts) and long-term debt (credit cards, auto loans, child support, etc.). With today’s technology, most lenders can take loan applications over the phone or on a secured web site, in as little as thirty minutes. Depending on a borrower's down payment requirement and credit history, some loans can be approved very quickly or as soon as the information is validated. Remember, the more attention we pay to the loan application, the less likely we are to have "unwanted surprises" down the road.
Step 3: Loan Processing
Once an application is complete, the lender begins processing the borrower's information. An appraisal of the home and a credit report are ordered. The borrower's employment and assets are verified. The lender may then finalize specific loan information and an estimate of closing costs to the homebuyer.
During the approval phase, the mortgage lender evaluates the application, including its supporting documentation, and approves, suspends or denies the loan. Changes in the mortgage industry that began in the summer of 2007 have resulted in some additional challenges in the mortgage process today. However, the most experienced and informed lenders have been able to adapt to the changes in the market and successfully process loans to a close.
Step 4: Underwriting
After a loan is processed it goes to underwriting for final approval. If all is well, the loan will be approved as submitted and be set up for closing. However, the loan may be "suspended or conditioned" for additional supportive documentation. In the worst case scenario, the loan may be declined, however in most cases an experienced loan officer can give you a feel for the likelihood of a loan approval.
Step 5: Secure Interest Rate
Often in new construction financing you will be obtaining a construction to permanent loan. In some cases the interest rate for the construction period may differ from the permanent rate or the modification rate upon completion of the home. When securing a rate for construction of a new home your lender must assess whether or not you will be best suited for a "construction only to permanent loan," two time close or a "construction permanent," one time close. The best advice we can give you is to have your lender the program that best fits your needs and then try to estimate your time of completion to help determine the best lock time period.
Step 6: Closing
After a loan is approved and the title search completed, the homebuyer meets with the seller and real estate agent when applicable, and closing agent will finalize the transaction and sign all necessary paperwork. This is commonly known as the closing. The lender then disburses the funds to the settlement or closing agent and the title is transferred to the buyer. If the buyer already owns the land, the title company simply establishes the necessary escrows for the funds to build and develop the property held by the bank or lender. Finally, appropriate documents are recorded at the county recorder's office.
Congratulations on being a new NDI Homes of Maryland home owner!