|
Obtaining a mortgage can be intimidating, but
don’t despair because you’re not alone! Typically, it takes 2 to 6 weeks to
complete the mortgage loan process from application to closing. Listed below is
some helpful information that will hopefully take some of the mystery out of the
mortgage process:
%20of%20HTML/images/hr01.gif)
Selecting a lender
Selecting a reputable mortgage company can be the
most important part of the entire mortgage process. It pays to do your homework
before selecting a mortgage company. Important considerations should be the
interest rate (annual percentage rate) of the loan, total closing costs, and the
level of customer service offered. References play an important part, and always
check with the Better Business Bureau to determine if there have been any
unresolved complaints against the company.
Now is also a good time to obtain your credit
report. This will allow you to clear up any problems that might delay the loan
approval process.
^
back to top
Interest Rates
Long-term interest rates can be relatively
volatile and can change at anytime without notice. Generally, rates will change
slightly each day, up or down. Most mortgage companies will allow you to lock
the interest rate during the mortgage process. This give you the opportunity to
establish an interest rate guarantee at a certain level if you think the rates
may rise before your loan is closed. The downside is that you may be locked-in
at a higher rate if the rates drop.
^
back to top
Applying For
A Mortgage
Once you have selected a house, been
pre-qualified, and found a suitable lender, the next step is to apply for a
mortgage loan. During the application process you will need to provide detailed
information about your income, assets, liabilities, credit history, amount of
down payment, and the terms of the offer to purchase. Your mortgage
representative will give you a list of additional information needed for loan
processing (check stubs, income tax returns, etc.). You will also be required to
pay an application fee that will cover obtaining a credit report and appraisal.
^
back to top
Credit Report and
Verification of Information
A Mortgage Residential Credit Report is ordered
from one of the three major credit-reporting agencies. This report will contain
a detailed review of your previous credit experience and will often provide
other detailed information about your credit history.
The information included on your loan application
will be verified. This will include income, employment, account balances, etc.
^
back to top
Property Appraisal
Your mortgage company will hire a licensed real
estate appraiser to provide documentation of the house including its value. The
lender will use the appraisal to determine the loan amount based on a
loan-to-value ratio. As an example, a loan-to-value of 90% would allow a loan of
$90,000 on a house valued at $100,000.
^
back to top
Loan Underwriting
Once all the verifications are completed, and the
property appraisal and mortgage credit report have been received, the loan
processor will compile the documents and prepare the loan package for submission
to the underwriter. The underwriter will then compare the applicant's
information to the loan program guidelines, and then make a decision to approve
or deny the loan. The underwriting process typically takes 2 to 3 days.
^
back to top
Loan Approval
If the loan is approved, the borrower will receive
a commitment letter from the lender stating the amount and terms of the loan.
The borrower will have a specified time period to accept the loan offer and
close the loan. The home buyer should read and understand the commitment letter
before signing it.
^
back to top
Closing the Loan
Your closing agent will coordinate a firm date and
time with you and provide you with the amount needed for loan closing.
Generally, the closing will take place at the offices of the title company,
lender or an attorney. Prior to closing, you will need to obtain homeowner’s
insurance from your carrier of choice.
At closing, the closing agent will go over the
settlement charges with you and answer any questions that you may have. Closing
can be broken into 3 segments:
1. Review
and signing of the loan documents provided by the lender.
2. Exchange
of documents between the buyer, seller, and title company.
a. Both
you and the seller will get separate settlement statements that give an exact
accounting of expenses and funds provided or required.
b. These
statements are reviewed, each item is explained, and all copies are signed by
both you and the seller (you and the seller will likely be at different
locations).
c. The
title company will sign certain documents at this time.
3. After
all of the documents have been signed, dated, and notarized, the closing agent
will proceed with the disbursement of funds. The closing agent will request your
certified funds for any outstanding amounts due and provide a copy of all
documents signed for your records.
^
back to top
Mortgage terms
The promissory
note.
This is the agreement to repay the loan. Details of the repayment, such as the
principal balance, interest rate, and term, are included.
Mortgage or deed
of trust.
Depending on the state in which the property is located, a mortgage or deed of
trust will be required to provide collateral for the loan. The property is
essentially pledged to the lender in the event of default (buyer failure to meet
the conditions of the loan, usually in making payments on time).
HUD-1 Settlement
Statement.
This statement is the standard for the residential lending industry and
summarizes all of the proceeds, expenses, and responsible parties associated
with the closing.
The deed.
This transfers the property from the seller to you, the home buyer.
The survey.
This is prepared to verify the property boundaries, confirm the legal
description, and identify encroachments or other peculiarities.
Final
disclosures.
These include the Truth in Lending Statement and the Right of Recision (if any).
^
back to top |
%20of%20HTML/images/bg_right.gif){kind=small}
QUICK LINKS
%20of%20HTML/images/bg_left.gif){kind=small}