Yes, an experienced Realtor has seen many mortgage processes, and they know what to expect. While they do not sell a mortgage, the understanding of the process will make things easier and less stressful. Many terms will be thrown at you during the process, and having someone to explain everything in plain language can be very helpful. For example, the difference between “Pre-approved”, “Approved” and ”Clear to Close” are such terms that not everyone understands.
As the Buyer, being pre-approved is the beginning of the process. It does two things for you. First, it gives you peace of mind that you can get the mortgage and second, it makes your offer stronger. The bank checks your credit and reviews your pay stubs to make sure you can afford the payments and how you use credit; this will help the bank understand its risk. One thing to remember is that the less risk the bank has, the better the terms you will get. From the Seller’s perspective, the offer is strengthened with a pre-approval because there is higher confidence that you can pay for the house.
After the offer has been accepted by both sides, the process moves to approval. This is a more formal process; the loan application is completed and all documents that the underwriter needs to make their decision are given to the banker. They recheck your credit and look at your debt-to-income ratios. The bank also orders an appraisal of the home you want to buy to ensure its value. Every approval will be conditional. They will send you a list of items that must be completed before they will fund the loan. Most items are simple; for example, the bank wants to make sure that you are still employed at the time of closing, and that you did not make a large purchase (such as a new car or expensive appliances) on credit that would affect your debt-to-income ratios. Buying, let’s say a car, could move you from an acceptable ratio to unacceptable. In this case the unacceptable ratio would mean that the bank will not lend the money.
The final step is clear to close. The underwriter will make sure that every item on the exception list has been resolved. They will also do what is called balancing the closing documents. This will ensure that all money is accounted for and all rules of the closing have been followed. This might mean that the bank will need to credit you for any over limit escrows, the law only provides so much of a percent of the money the bank will hold. Once all this is done, final closing documents have been sent and you have indicated to the bank that you agree, within 3 business days before closing the bank will state that you are clear to close. This just means that the bank will fund the loan and you can go to the closing. In other words, you can buy the house.
