Not everyone has the cash to purchase a home outright. This is why securing a mortgage is a very important step in the home buying process. It's a lot of paperwork and due diligence but it doesn't have to be overwhelming. For all prospective buyers, I HIGHLY recommend you first...
1. Get a pre-qualification letter - I highly suggest speaking to your local bank or mortgage broker to understand how large of a loan you can qualify for. Everyone and their brother is a mortgage broker (and realtor) these days. This isn't the time be shy, ASK QUESTIONS. There is a wide range of loan products depending on your situation. This way, you can narrow down our search requirements in terms of price range. This also shows your seller that you're a REAL buyer and your offer should be taken seriously!
With your pre-qualification letter, you made your offer and the contract was ratified. Depending on what contingencies you put in your offer, buyer now does his due diligence by getting a home inspection report, inspect HOA or condo docs, or order termite inspection. The Bank also does it's due diligence by...
2. Bank Appraisal - Your bank will require an appraisal done on the house. The most STANDARD loan will require you put down 20-25% of the appraised value in down payment (most conservatively speaking).
3. Borrower Due Diligence - The bank will then go into full due diligence mode. This is where they gather all the information they need to approve the loan. This includes:
- Personal Financial Statement
- Tax Returns (2-3 years)
- Recent Pay Stubs and proof of employment
- Proof of Assets (eg: bank statements, stock portfolios, 401k, etc.)
- Credit Reports