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How does the mortgage loan process work?
With all the work and documentation that is required from
them, many home buyers are bewildered by all the events and planning that have to take place before they can
step into their new home. We’ve put together a schedule of the events
that should take place in their proper order as a road map. The
whole process can take as long as 45 days from start to finish.
Application...Step 1
The most important thing to do, in our opinion, is to ensure
that you have submitted a complete loan application to your lender/broker and supply them with the information
that they need. Although we have stated that it takes 1-4 days with this process,
with the advent of faxes and this handy little manual, you should have everything in place ahead of time and be
able to shorten this time frame to just 2 days.
You will need to have handy your…
- Employers’ names and addresses for the past two years.
- Checking and savings account information, the financial
institutions' names, addresses and account numbers for asset verification.
- Residency addresses for the past two years
with landlord's name and phone number, if applicable.
- An offer to purchase/purchase and sales agreement (unless your getting pre-approved for your mortgage).
- Recent pay stubs covering the last 30 days and your last 2 years of W2’s or Federal Tax Returns.
How does the mortgage loan process work?
With all the work and documentation that is required
from them, many home buyers are bewildered by all the
events and planning that have to take place before they
can step into their new home. We’ve put together a
timetable for the events that should take place in their
proper order as a road map. The whole process can take
as long as 45 days from start to finish.
Opening
the File...Step 2
Once you have supplies the lender/broker with a complete
application and the necessary paperwork (don’t worry
if you have not gotten the purchase and sales agreement
at this point) they will order a credit report, send out
the Verifications of Employment (VOE), Deposit (VOD),
and Rent (VOR)(if you are currently renting a property.
VOE: Employers are asked to verify for each borrower the
last two years of employment history and gross income,
and state the probability of continued employment.
VOD: Financial institutions are asked to verify the
existence of each borrower's funds. If gift funds were
received, the lender must be able to verify the transfer
of money from the giver to receiver beyond doubt.
Your lender will give you the gift letter form, for you
and the donor to complete and return. If you received
the gift ahead of time a copy of the cancelled check and
deposit receipt will be extremely helpful. A copy of
this gift letter must be in the loan file.
Processing the Loan...Step 3
During this
time, the loan processor will review your credit report
and verify your debts and payment history. The
lender/broker may require written explanation, depending
on the loan program, for any late payments, collections,
judgments, and credit inquiries. If you have placed an
offer on a home, at this point you will need to get the
lender/broker a copy of the executed offer or purchase
and sales agreement. If the appraisal has not been
ordered, it will be at this point.
Underwriting...Step 4
The
underwriter reviews the completed loan package and
decides whether to approve or deny the loan. If more
information is required to make a decision, the
underwriter contacts the lender/broker and requests
additional information from you. This is a critical time
and it is important that you respond immediately to
requests for additional information. There are several
reasons why, you may have a rate locked with said
lender/broker and every day that you wait jeopardizes
the interest rate that you were quoted. In addition,
many offers to purchase and purchase and sales
agreements have a “mortgage contingency date.” This
is the due diligence on your part to provide to the
seller and realtor a mortgage commitment letter that
tells them. ”Hey I’ve got the money!” Once your
loan is approved, the lender/broker will notify you and
issue you your mortgage commitment. At this time, we
highly recommend that you start shopping around for your
homeowners (hazard) insurance policy. You will be
required to have this policy and a paid receipt for
closing. We recommend that you do your hunting, find the
best policy for yourself, but do not have the policy
issued until a closing date has been set.
Pre-Closing...Step 5 Once the loan is approved, typically the attorney or settlement agent is notified and the title insurance is ordered
and the closing is scheduled. You will be required at this point to have your hazard/homeowners insurance policy in place.
Closing…The Home Stretch
Prior to the closing you should have an opportunity to get a final walkthrough of your prospective home. This is done to ensure that all the conditions (or addendums)
that had been agreed upon by yourself and the seller, have been met. At closing, your loan proceeds (if any) will be held in escrow by the attorney/settlement
agent and you will need to bring a certified check or a cashiers check to cover your closing costs and the balance of your down payment. At this point the loan closes and
the loan closes and you should be handed the keys to your new home.
Closing costs include the following (place your mouse over each item to
see a definition):
Appraisal fee — shows the lender a reasonable estimate of value for loan purposes. FHA and VA loans set maximum charges;
conventional loan appraisers can set their own charges, usually about $300 in the Washington, DC metro area.
Attorney/settlement fee - this is a charge for all the paperwork and research required by the mortgage company.
Credit report -reports your credit history so your lender can verify your credit worthiness. Reports range from $55 to $70.
Points - equal to 1% of the loan. Points are comprised of the origination point and discount point(s).
Origination fee - a fee collected by the lender for obtaining your loan. On all loans, this cannot exceed 1% of the base loan amount.
Discount point(s) - a one-time charge paid to reduce the interest rate on your loan. The lower you want your interest rate, the higher
the discount points will be. However, depending on market conditions, a loan may or may not have discount points.
They are set by the lender—the higher the interest rate, the fewer points.
Sales Commission - usually paid by the seller, this is the charge from the real estate company or builder's representative who sold the
property to the homebuyer. For the real estate company, the charge is generally a percentage of the sales price; builders may receive a straight fee per house.
Survey - the survey, done by an engineer, shows the lot measurements and all recorded or unrecorded easements or restrictions
against the lot. This ensures that the house and lot being sold are the same as the current deed.
Title Insurance - protects you and your lender from title liens placed upon your new home. Any claims that would cause problems with the
lender's first lien on the property and that was not detectable through the title search would be protected with this insurance.
Recording Fees - cost to record mortgage loan papers and the deed at the county courthouse.
Termite Inspection - checks for wood damage or infestation of any kind from wood destroying insects.
Next: On to Mortgage Loan
Programs
Back: To
Pre-approval/Pre-qualification
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Equal Housing Lender. Advise U Mortgage, LLC. Trademarks are the property of Advise U Mortgage, LLC. Rates and terms subject to change without notice. |
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