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How Does a Mortgage Work?

The iServe Blog

How Does a Mortgage Work?

May 16
Category | The iServe Blog

As millennials enter the home-buying market, there can be a world of forms, terms and knowledge to gather. But many people find the entire process mind-boggling: filling out a residential mortgage application, contacting mortgage loan lenders and working out financing details. Whether you’re working with VA mortgage loans or are just beginning your journey with mortgage loan lenders, this guide may help you understand the process.

How Does a Mortgage Work?

Earnest Money Deposit

Once you’ve found the right home for you, you’ll often make an offer to include a certain amount of what is called “earnest money.” This money is a show of good faith that you are intending to get financing to purchase the home. However, this particular step may happen later in the process if you’ve been pre-qualified for your mortgage.

Completing a Residential Mortgage Application

Whether you’re considering a VA mortgage loan or other residential loan programs, the first step toward a mortgage is completing the residential mortgage application. Though it is a lengthy process, it typically gives the mortgage company much of the information needed to process the mortgage application.

Credit Verification

Once your residential mortgage application has been completed, the mortgage loan lenders may process the information, including verifying your credit and determining whether any additional information is needed to complete the process.

Home Appraisal

Whether you’ve identified a specific home before applying or have been pre-qualified and have finally found the right home, the home that the mortgage will cover will most likely need to be appraised. This appraisal must be carried out by a licensed, professional appraiser with expertise in residential real estate and looks at a wide range of factors that may impact the home’s value.

Loan Approval

Once the above items have been processed, the loan may be approved. At this point, it may be approved unconditionally, approved with specific conditions or denied. If conditions are placed on the loan approval, the loan may be finally approved and processed as soon as those conditions are met and the final loan documents are signed.

The Closing Process

Once you’ve received final approval on your home loan, the closing process can begin. The closing company may need to receive a variety of documents including a title search to ensure the seller has authority to sell the property, proof of insurance if needed for the mortgage, the appraisal, closing disclosures and other assorted paperwork. During closing, you’ll sign a number of documents and pay closing costs.

By understanding how mortgages work, you may be able to take advantage of programs such as VA mortgage loans or other options available through mortgage loan lenders during your residential mortgage application process. Whether you’ve found the perfect home or are just trying to figure out how much home you can afford, the professional mortgage loan lenders at iServe Residential Lending are always ready to help. Please feel free to contact us today to get started on a residential mortgage application or look at VA mortgage loans today.