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Coordinating a Mortgage Loan With Your Home Purchase Timeline

Tap each step to see it in order.

  1. Check your loan-to-value and debt-to-income limits before signing

    How much you can actually borrow depends on loan-to-value limits in your area and your personal debt-to-income ratio. Talk to a lender to get a rough sense of your borrowing limit before you put down any earnest money.

  2. Get pre-approved to compare offers

    Get a preliminary borrowing estimate from a few different lenders and compare interest rates, repayment structures, and any prepayment penalty terms before choosing one.

  3. Add a financing contingency to the contract

    In case the loan doesn't come through as planned, write a financing contingency into the special terms -- for example, that your earnest money will be refunded if financing falls through -- to reduce your risk.

  4. Submit a formal loan application

    Submit the signed sale contract, your ID, and proof of income to formally apply for the mortgage, then go through underwriting.

  5. Coordinate loan disbursement with your closing date

    Loan disbursement is usually timed to match your final payment date, so coordinate the schedule in advance among your lender, closing agent, and the seller so nothing is delayed.

  6. Understand that the loan usually pays the seller directly

    In most cases, the disbursed loan funds go straight from the lender to the seller rather than passing through the buyer's own account, and a lien is placed on the property at the same time.

Check your borrowing limit before you commit

Without a rough sense of your borrowing limit ahead of time, you risk being approved for less than expected right around closing and finding yourself short. Lending rules and limits change fairly often depending on policy and region, so this is general information -- confirm your actual borrowing capacity through a lender.

The vocabulary is worth knowing too

If terms like loan-to-value and debt-to-income are still unfamiliar, our real estate terms glossary is a quick way to get up to speed on the basics.

Frequently Asked Questions

If my loan comes in lower than expected, can I cancel the contract?

If you wrote a financing contingency into your special terms ahead of time -- covering what happens if financing falls short -- you have grounds to negotiate a refund. Without one, canceling can be difficult, which is exactly why checking your borrowing limit before signing matters.

Does the loan money go into my account first?

Typically not. Disbursed loan funds usually go directly from the lender to the seller's account without passing through the buyer, and a lien is recorded against the property at the same time.