In our previous post, we took a general look at the mortgage industry and discussed how its various components can affect the home buying journey.
In this post, we dive into the specifics of the mortgage process. What does each step entail, and how can you best progress towards owning the home of your dreams?
The Steps of the Mortgage Process
Applying for a mortgage is often an intimidating prospect. That’s why Divvy has broken down the process into a few easy steps.
- Loan Officer: When ready to begin the application process, Divvy can help connect you with a mortgage provider familiar with our program, or you’re more than welcome to speak with a lender of your choice. A loan officer’s job will then be to pre-approve your application, which means assessing if you qualify for a mortgage at their institution. Preparing the following will greatly expedite the application process:
- Your driver’s license
- Pay stubs for the last 30 days
- 2 years of tax returns and W-2 documents
- Up to 2 years of bank statements
- Underwriting: The loan officer sends your paperwork to an underwriter, who conducts a more thorough review of your files. Your application will either be Approved, Approved with Conditions, Suspended, or Denied. If Suspended, it simply means that the underwriter requires more documentation before moving forward.
- Approved: If your application is approved, the next step is deciding what mortgage rate is right for your circumstances. Some mortgages have fixed rates, other have adjustable rates. Fixed rate mortgages offer a single rate that will stay consistent over the life of the loan, whereas adjustable rate mortgages allow the lender to adjust the rate under regulated circumstances. See our first blog post for more detail on mortgage options.
- Review: Finally, check the conditions the underwriter has attached to the mortgage offer and ensure that you are fully prepared to close the deal. Example conditions range from proof of homeowner’s insurance to a termite inspection, so be sure to review each of these requirements for your mortgage.
Divvy will guide you through this process and facilitate each step both through our Mortgage Readiness Improvement program. As part of that program, we work with clients to not only improve their credit credentials but also work with partners who are familiar with helping customers get that final mortgage offer in hand.
Closing Costs per State
Buying or selling a home usually involves closing costs, i.e. fees for an attorney, a title search, title insurance, taxes, lender costs and homeowners insurance. When applying for a mortgage, it is critical to understand that your location can impact your home’s closing costs.
Here is an overview of three Divvy states, so you can see how the landscape differs between regions:
Ohio: In Ohio, there is no mortgage tax or leasehold tax. The Owner’s Policy Premium and closing fees are negotiable and is usually divided between the buyer and the seller. The buyer must cover the loan policy premium and survey charges whereas the seller will cover the title search and exam and deed transfer tax.
Georgia: Georgia does hold a deed transfer tax and mortgage tax, but there is no leasehold tax. The buyer customarily pays the owner’s policy premium and always pays the loan policy premium. The seller often pays the deed transfer tax. Title search and exam, survey charges, and closing fees are all negotiable.
Tennessee: Tennessee does have a deed transfer tax and mortgage tax but does not have a leasehold tax. The owner’s policy premium coverage varies case by case. The buyer covers the loan policy premium and the deed transfer tax. Closing fees are divided equally and survey charges and title search and exam are negotiable/vary case by case.
As you can see, each state has a different way of assessing these costs, so it is critical that you know the requirements for your exact location.
Please consult this chart for a comprehensive overview of state-by-state regulations. Remember, Divvy follows state ordinances and regulations. Knowing the costs you are expected to cover will help you to better understand the financials of a home purchase.
Because mortgage applications are handled on a case-by-case basis, and because that process is influenced by a wide array of factors, processing times can vary significantly. The process can take anywhere from 30 days to 4 months, but a safe rule of thumb is at least 2 months to complete the process and address any lender concerns in due time.
Tools for Mortgage Application Success
Your aim is to secure a mortgage for the desired amount at the lowest possible interest rate. Here are a few steps you can take to increase your chances of success:
- Increase your credit score: Conventional mortgages from Fannie Mae and Freddie Mac require a minimum credit score of 620. Remember that overlays can still be applied, making it important to continually improve your credit score to increase eligibility.
- Address federal loans in poor standing: Any federal debt in bad standing can significantly jeopardize your chances for government-backed mortgages like an FHA loan. This is because taxes and other federal loans such as student loans are government-related as well, meaning you must be in good standing with the government to become eligible for a government-backed loan.
- Participate in Divvy’s free credit counseling program: At Divvy, we understand the credit system can seem complicated and that even if you’re ready to improve your credit, you’re not sure how. That’s why we launched a partnership with established credit counseling agencies to create our Mortgage Readiness Improvement (MRI) program. This program will help assess your credit situation and will show you simple, easy tactics to ensure you are ready to apply for your loan. 
Buying my Home
As a Divvy customer, you already have a leg up on the competition. By dedicating yourself to saving up and finding the home of your dreams, you are closer than most on the journey to becoming mortgage ready. And as you continue on your path towards buying back your home, Divvy will be there with you every step of the way.
So if you’re ready to buy, go ahead and let us know and we will help take it from there. If you need a little more time and you are interested in becoming a part of our Mortgage Readiness Program, send an email to firstname.lastname@example.org with the subject credit counseling to learn more.
We hope this guide helped you get one step closer to buying back your dream home. With Divvy, we know you are ready to make the leap from renter to buyer. Trust us; it’s easier than you could have ever imagined.