When you're looking for a home, it can be exciting to try to find the right one. Not nearly as much fun is getting a mortgage. Here's a quick look at how the mortgage business works.
A Look at How the Mortgage Process Works
You have saved up a good amount of money for a down payment. You have either started looking for a house or found the perfect one. It's time to get a mortgage, which is a big step into the world of money. Before going into the maze, it might help to know how the mortgage process works.
A mortgage is just a debt instrument that lets you borrow money against your home. In exchange for giving you the money, the lender puts a first lien on the home. If you don't pay, the lender can take back the house and sell it to get the money back.
Getting a mortgage is called "originating a loan" in the mortgage business. To get the loan started, you will first need to find a lender you trust. You might already have a good relationship with a bank that will do. Many people will find it best to work with a mortgage broker to find the best loan for their needs. Loans and terms vary from lender to lender.
As part of the process of getting a loan, you will have to fill out a long application. Depending on the type of loan, you may also be asked to show proof of your income and other things you say you do. There are loan applications with no or only some documents, but most people don't qualify for them. After you send in your application, a lender will always ask for more information or proof. The lender may accept or reject your application based on how the review, called "underwriting," goes. Most of the time, the lender will add a condition to the loan that covers things that worry them.
Once you get the loan, you'll be able to close on the house you want. Then, most people are shocked by what happens. Your mortgage lender will sell the loan to someone else at some point. Lenders sell their mortgages on a secondary market to get money to give out more home loans. Your lender may still manage the loan, but most of the time they will just hand the whole thing over to someone else.
At some point, your mortgage will come to an end. Some good reasons include selling the home, refinancing, or just paying off the balance. Some bad reasons are missing payments or going bankrupt. No matter what, the above is an overview of how the mortgage industry works and how your loan moves through it.
