Home Loan Steps from A to Z

If you are looking to take out a home loan for the first time, then it can look like a complicated and intimidating process. However, if you take it step by step, you can secure home loan approval to buy your dream NYC apartment. Here is NewDevRev’s step by step guide to taking out a home loan.

Get Pre-approved for a Mortgage

Before you actually take out a home loan, you should get pre-approved. This process will help you get a better idea of your budget, which will help in your real estate search. Once you know your budget and get your pre-approval, you and your real estate agent can more effectively search for properties that work for you. Pre-approval also helps to streamline the rest of the home loan approval and closing process.

Make a Budget Estimate

Before applying for pre-approval from your preferred lender, do some math so you can set reasonable expectations early. Look at your finances, your income, and your debt. Then, consider the current mortgage interest rate.

The Fed has set interest rates high right now in an effort to combat inflation. These mortgage rate hikes make it pretty expensive to take out a fixed-rate mortgage at the moment, so take that into consideration as you consider the monthly home loan price you can afford.

Apply for Pre-approval

Once you have an idea of what to expect, you should apply for pre-approval. This short application is typically available online from your preferred lender. You will give them your financial information, including information on your credit, debt, savings, and income. In some cases, to prove the accuracy of this info, you may need to provide documentation like tax returns, pay stubs, and bank statements.

To complete your application, you may be required to pay a fee. Then, you will need to wait anywhere from a few hours to a few business days to receive your approval. It is also important to note that pre-approvals are non-binding. You are not actually taking out a loan, so feel free to apply for pre-approval from multiple lenders before making a decision on where to borrow.

Receive Pre-approval

Once your lender reviews your finances, they will determine the amount you can take out in a home loan and will send you this information in a pre-approval letter. This letter will typically list the interest rate, the type of mortgage (fixed or adjustable rate), your estimated monthly payments, and the total amount you are approved to borrow.

With this letter in hand, you can begin your home search. Without it, most home sellers and real estate brokers will not consider your offers. The preapproval letter proves that you are a serious buyer, capable of financially following through on an offer. That is why it is so important–even necessary–to seek pre-approval early.

Put In an Offer on Your Dream Home

Pre-approval in hand, you are ready to browse real estate listings or contact a real estate agent to aid in your search. Here are our tips on finding an NYC apartment that is right for you, as well as how to begin the purchase process once you do.

Search Online and Do Your Research

Begin your home search online. You can check out NewDevRev’s listing by neighborhood here. You can refine your search by price so that you are looking only within your budget. Be sure to research what neighborhoods, apartment styles, and building types that are available in NYC. There are many factors to consider when looking for a home, so check out all of our resources and learn everything you can before making a big purchase.

Reach Out to a Real Estate Professional

If you aren’t getting what you want from online searches, or if you just want to make sure you have the full picture of what is available to you, then reach out to a real estate professional. NewDevRev’s real estate experts can help you find the right home for you. Just let them know your budget and preferences, and let them handle the rest.

Make an Offer and Put Down Earnest Money

Once you find your dream NYC apartment, it is time to make an offer. Your real estate agent can help you appropriately structure this offer to best protect your interests.

If you are buying a new development property, your real estate attorney should receive an offering plan from the seller or their broker laying out everything you need to know about the building and unit. This is where the asking price, as well as information on the monthly fees, building management structure, and floorplans is found.

Once the offering plan has been reviewed and are sure you understand exactly what you are buying, put in an offer for the property.

In a competitive market like NYC, you will put down “earnest money” at the time on contract signing. The percentage will vary based on the type of building and the building’s financial requirements. This is a show of good faith intention to buy the property. The earnest money will be put in an escrow account that counts towards your down payment.

Take Out a Home Loan

Now that your offer has been accepted, it is time to officially take out a mortgage. Here are the steps you will have to take.

Decide on a Lender

If you were pre-approved by multiple lenders, then this is decision time. You will need to pick one based on what is best for you. It is possible that different lenders will have different rates and fees, so compare before borrowing.

Apply for a Mortgage

Once you have decided on your lender, you will need to complete a full mortgage application. This application builds upon the information you already provided during pre-approval. You will need to present the purchase agreement, as well as any new documentation that impacts your income, credit, debt, or savings.

Wait for Your Home Loan to Process

And now, you wait. In the meantime, your loan officer will go about the process of underwriting your mortgage. Through underwriting, the bank legally takes on the responsibility for the cost of your home in the event you fail to make payments.

During the underwriting process, the loan officer assesses the risk of offering you a mortgage. They will perform credit checks, verify your cash flow, investments, and collateral, and will also take your character under consideration. Once the loan officer is satisfied, the bank will underwrite your mortgage, taking on liability in case you default.

If Needed, Inspect the Property While You Wait for Mortgage Approval

Depending on what type of property you are purchasing, an inspection is occasionally called for in New York City. If you’re uncertain whether or not your purchase fall into this category, consult our guide. If that is the case, the limbo time while you wait for your mortgage approval is the perfect time to have the property inspected before closing.

Have the Property Inspected

An inspector will make sure you are buying into a structurally sound and safe building. In particular, have them inspect things that you might not be able to examine yourself, such as the building’s boiler room and roofing where applicable, as well as certain aspects pertaining to the plumbing and electricity.

If there are any major problems, it is important to find them before closing. Based on this information you can either decide to search for a different property, or you can negotiate down the seller’s asking price. As we lay out in our guide, most of this information is covered by the attorneys during the due diligence process. However, having an inspection done for peace of mind is occasionally warranted. Brownstones, for instance, almost always merit an inspection.

Appraisal

Your lender will schedule an appointment to have the home appraised to independently determine the value of the property they are underwriting. The bank will send out an appraiser to the property to make this determination. Occasionally there can be a divergence between the mortgage amount and the independent appraisal of the property’s value, at which point you might be required to cover the difference to close the deal.

Close on Your New Home

At the end of the underwriting process, you will receive your home loan and the closing documents you need to make it official. You will need to sign a lot of paperwork to officially buy your new home. Be sure that your real estate attorney is there to check that everything is in order and in line with what you expected. Once all of the appropriate documents are signed and you receive your keys, you are a new home owner.

Learn More About Home Loan Approval Today

Learn how to secure your mortgage and close on the perfect new development unit today by reaching out to one of our real estate experts today. NewDevRev is here to help you through the home loan steps so you can get a mortgage that works for you.