Helping Clients Understand the Mortgage Process
If you’re working with a first-time home buyer, they will likely have many questions for you about the mortgage process. Though most people have a vague understanding of a mortgage and have hopefully prepared themselves financially before beginning the homebuying process, first-time buyers are often taken aback by the amount of paperwork and time involved. Helping clients understand the mortgage process can be an ideal opportunity for you to earn their trust and further cement your place in their minds as their go-to resource for all their real estate needs.
Step One: Prequalification
In order to be able to place a competitive offer on a home, your client will need to be prequalified for a mortgage. If your client finds this first step daunting, it may be helpful to explain that it’s little more than a soft credit check that allows the financial institution to determine how much money they’re willing to offer on loan.
Let your client know that the financial institution will examine their credit rating, existing debts, assets, and total income. It’s important that your client search for homes that will not create a financial burden, after all, so focus on how this process will serve to help narrow down a suitable price range for the two of you to focus on.
Step Two: Mortgage Origination Processes
Your client will probably not know what mortgage origination is; real estate jargon is tricky for newcomers. Tell your client that this simply means the lender will take their mortgage application and consider it alongside the preapproval.
Once you and your client have found the right home, it’s time to place an offer. Your client will take this signed offer back to the financial institution, thus beginning the official loan process.
Your client can expect that the lender will want to examine the home to make sure it’s worth what’s been offered, and they may also request further documentation from your client regarding their financial situation.
From here, there’s nothing more for you or your client to do actively with regards to the mortgage process. Truthfully, though, some people find this waiting period to be much more difficult than any of the active parts of the process. Keep lines of communication open with your client; reassure them that it’s normal to feel somewhat anxious to hear back, but that it always takes time to process a mortgage request.
Remain positive and calm; your client’s preapproved status means they have good reason to be optimistic!
Step Three: Conditions to Approval
Prepare your client to meet their financial institution’s conditions to approval. This may come in the form of a request to pay off high-interest consumer debt, proof of homeowners’ insurance, or even further proof of income.
If your client understands that the bank will probably return with further expectations, they’re less likely to be throw off-balance or feel discouraged when this moment comes. This is an excellent opportunity to assure your client that many buyers have further hurdles to clear before the bank is prepared to issue a mortgage.
Step Four: Closing Disclosure
Your client will have this five-page summary in hand no less than three days before the mortgage is to be finalized. It should be seen as the mortgage’s fine print, containing all the details of the agreement. Your client may have questions at this stage, so remain available. Make sure they have read and fully understand this disclosure before they proceed to closing.
Step Five: Closing, or Settlement
Once the mortgage has been approved, closing will begin. At the closing appointment, your client should arrive prepared to do the following:
Arrive with a cashier’s check for the total down payment amount plus closing costs
Read through the mortgage documentation to verify that it matches what they intend to agree to, and that all included personal information is correct and complete
Present proof of homeowner’s insurance and state identification
Sign the mortgage agreement
Once the closing attorney has examined the mortgage documentation, they will return them to the lender, who will establish funding for the loan. Once funded, the mortgage and deed will be recorded through the county. At this juncture, the final disbursements will be made.
This is the moment for you to reach out to your client with a congratulatory message! They are likely to be overjoyed to be homeowners and will be experiencing relief that this long process is at last complete.
By remaining helpful and optimistic throughout the mortgage process, you’ll prove yourself to be an excellent resource for your client. Though they may have fewer questions about this process the next time they buy a home, they will not forget the security and information you represented during this exciting and stressful time in their lives.
Word-of-mouth and repeat clients remain the real estate agent’s most reliable source of business. Remember, then, that a positive outcome greatly increases the likelihood that this sale will not be a one-off. Take the time explain the mortgage process, and every complicated facet of the home buying process, to every first-time buyer as clearly as you can, and you can be assured you’ll reap the rewards of your outstanding dedication to your clients.