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If you’re considering buying a house, it can be difficult to know where to start. Do you start house hunting? Or should you get pre-approved first? Do you need to apply for a mortgage? How do you know what steps to take and in what order?

What is the mortgage loan process? The mortgage loan process can be convoluted and confusing, especially if you’re a first-time homebuyer. In this article, we’ll walk you through the mortgage loan process step-by-step and help you navigate how to get the keys to your future home with as few bumps in the road as possible.

1. Determine your budget

One of the first steps in the mortgage loan application process actually begins before you ever submit your application. Because first, you’ll need to figure out your budget – including your down payment amount and how much home you can afford.

Luckily, First Merchants has some great tools to help you calculate how much house you can afford and your monthly mortgage payments, like our mortgage calculator and mortgage payment calculator. Never used a mortgage calculator before? See how they can help you get a sneak peek of your mortgage payments.

2. Get pre-approved

Next, you’ll start the process of getting a mortgage loan by applying for pre-qualification or pre-approval with a mortgage lender of your choice.

Pre-qualification gives you a quick estimate of how much money you can borrow from the lender based on general information about your finances and credit. Pre-approval takes it a step further by verifying your financial information and creditworthiness to give a more accurate estimate.

Getting pre-qualified or pre-approved helps speed up the homebuying journey and signals to a seller that all your ducks are in a row.

Want to know more about the mortgage loan pre-approval process? Check out how you can pre-qualify for a mortgage.

3. Find a home and make an offer

Now that you have your budget and have been pre-qualified by a lender, it’s time to start your house hunt! Prioritize looking for homes that fit your budget, and work with your real estate agent to make an offer once you’ve found one you like!

Once an offer is accepted, you can officially start the mortgage loan approval process and apply for a mortgage.

4. Choose a mortgage

At this point, you will officially apply for a mortgage and select the type of mortgage you’d like. Typically, you’ll choose between a fixed or variable-rate mortgage and decide if you want to pay back your mortgage in 15 years or 30 years.

You’ll likely also choose between a few different types of mortgages, such as:

Conventional loans: A traditional mortgage loan offered through a private lender like a bank or other financial institution.

Government-backed loans: A loan secured by a government agency, including the United States Department of Agriculture (USDA), Federal Housing Authority (FHA), or Veteran’s Affairs (VA) loans. These loans typically have more flexible terms like lower down payment and credit score requirements.

You should also check with your lender to determine if they have special mortgage programs, often called “portfolio programs” – like First Merchant Bank’s Hometown Heroes, Physician Loan, and Next Horizon programs.

Hometown Heroes: Our Hometown Heroes program assists home buyers who are first responders, medical professionals, non-profit employees, and school educators.

Physician Loan: Our Physician Loan program provides special accommodations to assist doctors, dentists, veterinarians, and medical residents with buying a house.

Next Horizon: First Merchants’ Next Horizon Mortgage program is a first-time homebuyer program that offers down payment assistance to first-time buyers – as well as other benefits – to help them get the keys to their dream home. Our Community Home Lenders can help you determine if you’re eligible for our Next Horizon program.

5. Complete your mortgage application

Work with your Mortgage Lending Officer to complete your mortgage application. Typically, your lending officer will request certain documents to prove your income, check your credit score, and ascertain that you have enough funds for a downpayment and closing costs.

6. Mortgage underwriting

This brings us to the next step in the mortgage loan process: Underwriting. Your Mortgage Lending Officer will work with an underwriting department to put together your final mortgage paperwork.

The mortgage loan underwriting process can take anywhere from a few days to weeks, making up the bulk of the mortgage loan process timeline.

During this time, the underwriting department gathers all your paperwork and performs a hard credit check. They then analyze all the financial information you have provided and weigh how much debt you are likely able to take on. If you got pre-qualified or pre-approved, this process will likely be easy.

Be prepared to provide any extra documentation required – including W-2s, bank statements, employment offer letters, tax returns, and more.

7. Home appraisal

During the underwriting process, your lender will arrange an appraisal, which is a third-party service to determine the actual value of your home.

Since the house is collateral for the mortgage loan, the bank orders a home appraisal to confirm how your purchase price compares to the home’s appraised value.

8. Closing

Once you’ve applied for and been approved for a mortgage loan, you’re ready to close.

Closing is the final step in getting a mortgage. In the mortgage loan closing process, you’ll receive a closing disclosure document, which you should carefully read. It includes all the information about your mortgage terms, monthly payments, and the amount you must pay at closing.

At closing, you’ll need to pay your down payment and closing costs by providing a cashier’s check, wire transfer, or other secure payment method.

Closing costs may include mortgage point fees if you choose to purchase any, along with any fees related to the appraisal, underwriting, title services, loan origination, etc.

Mortgage process timeline

How long does it take to process a mortgage loan? To help you visualize the mortgage process – and estimate how long it should ideally take -- we’ve created a helpful mortgage process flowchart below to help you understand the mortgage loan approval process timeline.

  • Pre-approval – 1 – 3 days.
    • Pre-approval can generally be given in just a few days. It should not take more than a week.
  • Finding a home – Varies.
    • Depending on market conditions, finding a home and accepting an offer may take some time. Be prepared for this step to take several months in a competitive market with low inventory.
  • Mortgage Application – 1 – 2 days.
    • Completing your application should not take long, provided all your documents are in order.
  • Mortgage underwriting – 1 – 3 weeks
    • It can take a couple of weeks for underwriting to finish, depending on what documents are still needed.
  • Home appraisal – 1 – 2 weeks.
    • While the actual appraisal can be done in a day, it may take a couple of weeks to schedule an appraiser to come out.
  • Closing – 30 – 45 days from signing the purchase agreement.
    • Once an offer is accepted, you have about 30 – 45 days to complete your home inspection, underwriting to wrap up, and everything to be prepared for signing at closing. The actual closing meeting should only take about an hour.

Start your mortgage loan application

Want to apply for a mortgage? Contact one of our attentive mortgage lenders to get started! Or, submit an inquiry online.