Key takeaways:

  • The general mortgage timeline includes pre-approval, loan application, processing, and clear to close.
  • Different homebuying scenarios require different types of mortgages, including conventional, FHA, VA, USDA, and jumbo loans.
  • Even the savviest homebuyers have misconceptions about the mortgage industry. As a real estate agent, knowing these misconceptions can help you best educate your clients.
  • Connecting homebuyers to other industry professionals is an integral part of your role as their real estate agent. Having a trusted network of mortgage professionals may help your clients have a smooth homebuying experience.

As a real estate agent, having a complete understanding of the mortgage process can help your clients navigate any nuanced mortgage scenarios. Having this understanding can also guide you on when to bring in a mortgage loan officer to help qualify buyers for the best loan for their home buying scenario. Whether you're a veteran or new to the industry, having an innate understanding of mortgage basics may prevent client frustrations.

Being a trusted advisor to your clients means confidently guiding your buyers. Understanding the many moving parts of the mortgage process can help you be a more credible, helpful, and ultimately profitable agent. Here are several key things every real estate agent should know about mortgages. 

Typical Mortgage Process, Timelines, and Pitfalls

The mortgage process has many moving parts, paperwork, and documentation. While there are many stages and steps, the process follows a general timeline. As a real estate agent, it's helpful to understand the process, which can take 30 to 60 days.

Here's a general overview of what your clients can expect:

Pre-approval

Before house hunting, buyers should meet with a lender and get pre-approved. Instead of simply asking your buyers if they are pre-approved, take it a step further and inquire:

  • What lender are you working with?
  • Have they pulled your credit?
  • Do you have a pre-approval letter? Some lenders also offer a pre-qualification or preliminary pre-approval that can be used to give a general estimate of what your client may qualify for.

Loan Application

Once buyers are under contract on a home, they submit the entire loan application and any supporting documents. These may include tax returns, W-2s, pay stubs, bank statements, and other necessary financial information. This checklist includes most documents you'll need.

Processing and Underwriting

The lender will verify the buyers' employment, review the appraisal, review the credit report, and ensure the buyers meet the loan guidelines. If the buyers miss deadlines or experience financial issues, the mortgage process may become delayed.

Clear to Close

Once the underwriting is complete, the loan is cleared to close. The documents are sent to the title company, and the closing date is scheduled.

Common Mortgage Pitfalls

As a real estate agent, you help your clients navigate the homebuying process from the first showing to the closing table. Part of this process includes educating them on what they should and shouldn't do once the client has submitted the mortgage application? Your clients should avoid any of the following, which could impact the financing process:

  • Opening new credit cards during escrow
  • Making large purchases such as cars, or furniture
  • Depositing large, unexplained amounts of cash
  • Failing to respond to lender requests promptly

Types of Loans and Use Cases

Knowing the basic types of loans gives you credibility and may help you guide your clients toward the right loan for their circumstances. Here's a breakdown of the most common mortgage types and when they're appropriate:

Conventional Loans

  • The most common loan for buyers with good credit and stable income
  • Typically requires 3–20% down for home financing options up to $806,500
  • Ideal for: Move-up buyers, strong first-time buyers, or investors

FHA Loans

  •  Government-insured, designed for buyers with lower credit or limited down payments
  • Allows higher debt-to-income ratios
  • May be more lenient, but comes with mortgage insurance premium (MIP) that is paid up front and monthly [1]
  • Requires as low as 3.5% down
  • Ideal for: First-time homebuyers with limited savings

VA Loans

  • For eligible military/veteran buyers
  • No mortgage insurance
  • Lower closing costs
  • Requires as little as 0% down
  • Ideal for: Military families relocating or buying first homes

USDA Loans

  • Income limits apply
  • Property must be in a USDA-eligible area
  • Requires 0% down, government-backed for rural properties
  • Ideal for: Buyers in rural or small-town areas

Jumbo Loans

  • Used when the loan amount exceeds conforming loan limits for home financing options
  • above $806,500 (varies by location)
  • Stricter requirements
  • A larger down payment and higher credit score are required
  • Ideal for: Luxury or high-cost markets

Mortgage Grant Programs

  • Come in the form of down payment or closing cost assistance, or reduced rates
  • Government-backed, lender-offered, state and local, nonprofit programs
  • Can be limited to specific locations
  •  Often requires a minimum credit score and a homebuyer education course
  • Ideal for: First-time buyers or those with specific income needs

If your client has unique circumstances, like inconsistent income, self-employment, or a large inheritance, it's wise to involve a mortgage loan officer early to find the best loan product for your buyer's individual scenario.

Common Buyer Misconceptions

Even educated buyers can misunderstand the mortgage process. Knowing these misconceptions beforehand lets you showcase your professionalism and expertise to guide and reframe conversations with your clients. Here are some of the most common homebuyer mortgage misunderstandings.

I was pre-approved, so I'm guaranteed a loan.

Pre-approval is conditional. The final underwriting process may uncover red flags, especially if there are any financial changes during the escrow period. Final loan approval and amount are subject to verification of loan data, property appraisal and underwriting conditions.

I need 20% down, or I can't buy a home.

Plenty of loan products offer low down payments with manageable terms. Your clients' most important considerations should be affordability and long-term sustainability.

I can shop for a home before getting pre-approved.

This approach often results in disappointment. When buyers begin looking for a home without fully understanding their buying power, they may fall in love with a house they can't afford. Or, another approved buyer will win the bid because they won't face financing delays.

I shouldn't talk to multiple lenders.

Many buyers avoid talking to multiple lenders for fear having their credit checked, but shopping around is the best way to get better terms. Encourage your clients to shop mortgages within a short timeframe, usually 45 days, so the credit bureaus will count their various credit checks as one inquiry. 

Lenders vs. Brokers and Other Important Details

As an agent, your role isn't just connecting people to properties. It's also essential to connect them to the right people. That includes reputable lenders or brokers who can help your clients smoothly navigate the finance process. 

Lenders vs. Brokers: What's the Difference?

Although the terms lenders and mortgage brokers are often used interchangeably, they play two different roles in the mortgage industry. While some buyers prefer the a mortgage broker, other buyers prefer a bank or local lender. 

Mortgage Lender 

  • Can be a bank lender or direct lender
  • Works for one institution and offers that institution's loan products
  • Has more control over underwriting timelines
  • Best fit for conventional or straightforward buyers

Mortgage Broker

  • Works with multiple lenders and shops for different rates/products offered across institutions.
  • Often more flexible, but may add a layer of complexity
  • Best fit for buyers with unique profiles or specific loan needs

What Is the NMLS License?

Whether a homebuyer enlists a mortgage lender or a mortgage broker, all mortgage originators must be licensed with the Nationwide Multistate Licensing System (NMLS). This ensures they've met training, testing, and background standards. If someone offering loans doesn't have an NMLS number, guide your clients in another direction. It's like working with an unlicensed contractor. [2]

Build a Trusted Lender Network

You don't need an extensive set of lending partners, but having a small, vetted network can make or break your transactions. Here are a few ideas that may help in building your network

Here are a few methods to build your network:

  • Interview lenders just like you would interview a team member.
  • Ask about communication style, turnaround times, and loan types offered.
  • Get feedback from other agents or clients and read online review.

Empower Yourself to Empower Your Clients

While you don't need to become a mortgage expert to be an exceptional real estate agent, you do need to understand the mortgage process enough to guide, support, and protect your clients from avoidable mistakes. When you can clearly educate your clients on pre-approvals, loan types, timelines, and lending partners, you will become an invaluable partner during an often overwhelming process.

For more information on the mortgage loan process, access our free resources and connect with a PNC mortgage loan officer.