 |
|
Call Toll Free: 866-287-0791
|
|
Connecticut Local: 203-626-0363
|
|
|
|
|
 |
|
|
|
|
|
|
|
|
|
|
| Click Above for Live Help |
|
|
 |
The Loan Application Process
Introduction
The most exciting, confusing and stressful financial transaction you will ever undertake will be that of buying a home. Even those who
have done it several times still find the process complicated and intimidating, particularly when it comes to getting a
mortgage loan. Loan documents, unfamiliar terminology and uncertainty can affect the home buying experience. Obtaining the financing
for the purchase becomes paramount for all but a very few buyers. We hope, that buy guiding you through the steps of the loan process, we
will help you to eliminate that stressful portion of the mortgage process.
The Loan Application Interview
Once you have selected a lender, the next step will be to meet with that lenders representative who will begin collecting the information
necessary to get your loan approved. He/She will explain the types of loans available to you, the interest rates and fees for each type of loan
and the qualification requirements. During this meeting you will be required to fill out an application.
The cost of a mortgage loan consists of the interest rate on the loan, origination fees, discount points, and miscellaneous other charges. One
point is equal to one percent of the amount of the loan and is usually collected at the loan closing, or settlement. The interest
rate affects the amount of the monthly payment, while points affect the amount of cash you must have at closing.
Lenders offer many interest rate/point combinations to meet the borrower needs. In general, the higher the
interest rate, the lower the points. For example, if the current market provides for an 8.5 percent interest rate with 2 points, a
nine percent rate may be offered at no points. If you are a first-time home buyer, the larger monthly payments on the 9
percent loan may be easier to handle than the 2 points that will require additional cash at settlement. If you are a corporate
transferee, however, your company's relocation policy may pay all or part of origination costs and the lower rate will have
more appeal.
Make sure that you discuss the "rate lock" with the lenders representative. A rate lock protects you from rising interest
rates while the loan is being processed, but it also typically commits you to close the loan at the rate and the fee even if
rates decline prior to closing. Lock periods can run from 10 to 60 days, with longer periods available in some cases at an additional fee.
The lock period must be long enough to get you through the estimated closing date. A 30-day lock affords you no protection if closing is at least 60 days away.
Lenders often will give you the option of "floating" your rate. This means that your rate is subject to the fluctuations of the market.
If you believe rates are declining and are willing to gamble, you may select to do this. If you don't like to gamble, the we would advise against
"floating" your rate. Remember, higher interest rates, mean higher mortgage payments, and if interest rates rise, you could find yourself now
unable to qualify for a mortgage.
Completing The Loan Application Form
The loan application consists of information on the property you are buying, terms of the purchase
contract, as well as the
employment and financial history of all loan applicants, including your spouse and/or other co-borrowers. The lender will
verify all of these items to determine whether or not they will make the loan, so it is very important to make sure that the
application is complete and accurate.
In order to better prepare you for the information that will be necessary for the completion of the loan application, the
following is a summary of the kinds of information required on the loan application, the documents that will be needed and
the questions that will be asked of you.
Details of Purchase Contract and the Property
Personal Information
Employment History and Sources of Income
Personal Assets
Personal Indebtedness
Additional Information
After The Loan Application - What Next?
Once the application is completed the loan is processed and then turned over to an underwriter, who will approve or reject
the loan. Loan processors send out the V.O.E.'s and V.O.D.'s, order the credit report, property appraisal and other documents.
The time it takes to receive these documents affects the length of time required for approval of the loan. The Loan Officer should
be able to give you a general idea of the processing time of your application.
Within three business days after completing the application, the lender must provide you with a Good Faith Estimate of the
closing costs, and a Truth-in-Lending Disclosure. The Good Faith Estimate will show costs associated with the loan
settlement, such as origination fees, mortgage insurance, title insurance, escrow reserves and hazard insurance. The
Truth-in-Lending Disclosure shows, among other things, the estimated monthly payment. The total cost of all finance charges
on your loan is also shown, stated as an Annual Percentage Rate (APR). The APR represents the dollar amount of finance charges
you pay either up front or over the life of the loan, converted to an annual interest rate. Since the APR includes origination fees
and other charges as well as interest on the mortgage loan, the APR is usually higher than the interest rate on the loan.
After the lender has approved the loan, you will usually receive a commitment letter which sets out the terms of the loan and
the length of time for which those terms are offered. The commitment letter is your guarantee of the financing you need to
buy your home. If the loan does not close within the specified commitment period, the
terms are subject to change.
Reducing Your Anxiety
Keep in mind that the lender wants to make the loan. Loan underwriters are looking for ways to approve loans, not reject
them. If you have come to the interview with the loan officer fully prepared and have provided good documentation, you have
done a great deal to assure prompt processing of your application and approval of your loan.
You and the lender need to make sure that lines of communication are kept open. Your contact person may be the loan
officer, but often it might be someone in the lender's loan processing department who can tell you the status of your
application. Remember, however, that it may take several weeks to process the application and frequent inquiries from you
prior to that time will not speed things up.
You should be accessible if the lender needs additional information or documents during processing. If you are from out of
town, use your real estate agent as a contact if necessary. Quick response to lender requests helps keep the process on
schedule. In order to protect both you and the lender, mortgage loans require much more paperwork and legal
documentation than an automobile or other installment loan, and lenders do not ask for more than is absolutely necessary.
Obtaining a mortgage loan need not be an ordeal that dampens the thrill of acquiring a new home. If you understand the
lending process and are prepared to do your part, it simply becomes a key step in owning a home.
|
|
Home
