There are various steps involved in getting a mortgage loan.
1. Pre-Qualification
2. Mortgage Programs and Rates
3. The Application
4. Processing
5. Required Documents
6. Credit Reports
7. Appraisal, Title Report and Escrow
8. Underwriting
9. Closing
Pre-qualification starts the loan process. This is an information gathering phase were the lender asseses borrower's income and debts, and determine how much the borrower can pay for a house. The lender is focused on the borrowers ability to repay the loan and borrowers willingness to repay the loan. Ability to repay the mortgage is verified by your current employment and total income. Generally speaking, mortgage companies prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years. In addition to employment the lender is looking for your assets and liability ratios. The borrower's willingness to repay is determined by examining how the property will be used. Is it a primary residence or second home or a investment property. Willingness to repay is also related to how you have been fulfilling prior financial obligations, thus the emphasis is on the Credit Report and/or your rental payment history. Since different loan programs can cause different valuations a borrower should get pre-qualified for each loan type the borrower may qualify for. In attempting to approve homebuyers for the type and amount of mortgage they want. Remeber that there are no set rules and each lender an their own qualification process. Mortgage companies could not stay in business if they did not generate loan business, so it is in everyone's best interest to see that you qualify. At Beacon Lending and Realty we work with the borrower to match their requirment with one of the approved lenders. We run the loan application also know as Form 1003 with Fannie Mae Desktop Underwriter prior to contacting the mortgage company.
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To properly analyze a mortgage program, the borrower needs to think about how long he/she plans to keep the loan. If you plan to sell the house in a few years, an adjustable or balloon loan may make more sense. If you plan to keep the house for a longer period, a fixed loan may be more suitable. With so many programs to choose from, each with different rates, points and fees, shopping for a loan can be time consuming and frustrating. At Beacon Lending & Realty we can evaluate a borrower's situation and recommend the most suitable mortgage program, thus allowing the borrower to make an informed decision.
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The application is the true start of the loan process. With the aid of a Loan Originator or a Loan Processor, the borrower completes the application Form 1003 and provides all required documentation. List of document to support the assets and income. The various fees and closing cost estimates will have been discussed while examining the many mortgage programs and these costs will be verified by the Good Faith Estimate (GFE) and a Truth-In-Lending Statement (TIL) which the borrower will receive within three days of the submission of the application to the lender.
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Once the application has been submitted to the mortgage lender, the processing of the mortgage begins. The Loan Processor orders the Credit Report, Appraisal and Title Report. The information on the application, such as bank deposits and payment histories, are then verified. Any credit derogatories, such as late payments, collections and/or judgments require a written explanation. The processor examines the Appraisal and Title Report checking for property issues that may require further investigation. The entire mortgage package is then put together for submission to the lender.
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Loan Originator will provide you with the list of required documents. In general if you are purchasing or refinancing your home, and you are salaried, you will need to provide the past two-years W-2s and one month of pay-stubs: OR, if you are self-employed you will need to provide the past two-years tax returns. If you own rental property you will need to provide Rental Agreements and the past two-years' tax returns. If you wish to speed up the approval process, you should also provide the past three months' bank, stock and mutual fund account statements. Provide the most recent copies of any stock brokerage or IRA/401k accounts that you might have. If you are requesting cash-out, you will need a 'Use of Proceeds' letter of explanation. Provide a copy of the divorce decree if applicable. If you are not a US citizen, provide a copy of your green card (front and back), or if you are NOT a permanent resident provide your H-1 or L-1 visa. If you are applying for a Home Equity Loan you will need, in addition to the above documents, to provide a copy of your first mortgage note and deed of trust. These items will normally be found in your mortgage closing documents.
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Most people applying for a home mortgage need not worry about the effects of their credit history during the mortgage process. However, you can be better prepared if you get a copy of your Credit Report before you apply for your mortgage. That way, you can take steps to correct any negatives before making your application. A Credit Profile refers to a consumer credit file, which is made up of various consumer credit reporting agencies. It is a picture of how you paid back the companies you have borrowed money from, or how you have met other financial obligations.
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An appraisal of real estate is the valuation of the rights of ownership. Most lenders require the appraisal to be done by appraiser approved by the lenders. In addition to the appraisal the borrower has to purchase the title insurance policy. Your Loan Processor should be able to get appraisal scheduled once the borrower picks a lender and also guide you to get the title insurance and select a closing agent or Escrow company.
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Once the loan processor has put together a complete package with all verifications and documentation, the file is sent to the lender. The underwriter is responsible for determining whether the package is deemed an acceptable loan. The Loan Processor works with Lender and the borrower to provide the necessary documents to lock the loan and meet all the underwriter's conditions.
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Once the loan is approved, the file is transferred to the closing and funding department. The funding department notifies the broker and closing agent (Escrow Agent) of the approval and verifies broker and closing fees. The closing agent then schedules a time for the borrower to sign the loan documentation. At the closing the borrower should: Bring a cashiers check for your down payment and closing costs if required. Personal checks are normally not accepted and if they are they will delay the closing until the check clears your bank. Review the final loan documents. Make sure that the interest rate and loan terms are what you agreed upon. Also, verify that the names and address on the loan documents are accurate. Sign the loan documents. Bring identification and proof of insurance. After the documents are signed, the closing attorney returns the documents to the lender who examines them and, if everything is in order, arranges for the funding of the loan. Once the loan has funded, the closing attorney arranges for the mortgage note and deed of trust to be recorded at the county recorders office. Once the mortgage has been recorded, the closing attorney then prints the final settlement costs on the HUD-1 Settlement Form. Final disbursements are then made.
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A typical mortgage transaction takes between 14-21 business days to complete. With new automated underwriting, this process speeds up greatly. Contact Beacon Lending and Realty and our loan processor can guide you through the whole process and assist you with your mortgage loan.
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