Step 1: Getting Prepared:
You have to get all your documents ready beforehand. You should be ready with those W-2’s and paystubs, the phone numbers for your Human Resources contact and Insurance Agent and dig up a property tax bill for your mortgage professional.
Also, you should have some of the documentation of the assets you own. The latest statements about your stock investments, the values of your car will also help make the balance sheet look like you have more than just a house as an asset. It is much better to be prepared for what you may need. When your mortgage professional has to come back to you for these items, this can cause a delay to the mortgage process.
Documents You will need:
When you are in the process of applying for a mortgage, your mortgage professional will focus on the most important aspect of this transaction, which is getting you the best price as well as the rate on your mortgage. But beforehand, you should make ready for the following list:
- Income two years W-2’s
- Two months current paystubs (tax returns if self-employed)
- Phone number and contact for human resources where you work
- Assets two months bank statements
- Latest 401k or investment statement
- Values of other assets – cars, boats, etc.
- Proof of Homeowner’s Insurance, Insurance Agents name and number
- A legal description of the property – the last property tax bill
It is really important to know the process for a mortgage, which should be start before looking at a home. Also, it will show you how much you can afford for your new home.
Your Credit History – How is your current credit score? You have to know, the better credit score is the better mortgage rate. The Lander’s down payment requirements as well as the rates are very much depending on your credit score.
Why Down Payment? – Your loan type such as adjustable, fixed rate, Conventional, VA or FHA loan is determining the down payment requirements.
Cash for Closing – Lenders are looking for a proof of your money and as well as your money for at least the last 90 days. If the money hasn’t been in the bank, be ready to prove where it came from. This can range from deposit and withdrawal slips when you have transferred money between accounts to obtaining a gift letter from a relative who gave you the money. You should not move any significant funds from your bank accounts during the loan process. Any deposits should have a proof of source.
Choose your Loan – There are many different kinds of loans available today and the most commonly used:
- Fixed loan: This is a long-term option which requires monthly payments. It will remain the same (fixed) throughout the duration of the loan. The loan term may vary from fifteen to thirty years.
- Adjustable rate mortgage (ARM): The loan rate here will be determined by different factors like the capitalization, Federal Funds index rate and readjustment intervals. The initial interest rate would be lower than a comparable fixed rate mortgage. This can make home ownership more affordable. However, you have to first examine the all factors and consider the downside risks before selecting this option.
- Hybrid loan: Also known as an intermediate or convertible ARM, it offers a fixed interest rate for a specified initial period before it ‘switches’ to an ARM and adjusts with the market every six months or every year thereafter.
You should consult with your lender and decide your loan type and program which will be the best for your needs and resources.
Step 2: Application:
This is the meeting with your mortgage professional. This is when you will put your signature on the paperwork and sign the mortgage application verifying the information that will be submitted to the bank. In some cases, it is also possible to have these papers downloaded and printed out or sent to you. The preliminary questions can be answered on the phone and the application filled out in advance.
It is better to take the time on the phone when making the appointment to give all the information necessary to sill out the application and so that the credit report can be retrieved in advance.
When you receive the papers to have the meeting, this is your time. You are paying good money to get this mortgage and should not ever sign anything you do not understand. I encourage my borrowers to ask questions. More problems later on come from not asking questions or making assumptions about how you think it should work.
You have to get a pre-approval for your mortgage. It is an excellent idea to be prepared for your mortgage before you start seriously looking at new homes. This will evidence of your purchasing and negotiation power in the market as well as shows how much home you can afford for. Pre-Qualification is an assessment by the lender which will be based on the certain basic information given by the borrower like income, asset info, credit reports ext. And the lender will get a quick evaluation and make a tentative decide to pre-qualify the borrower for a certain amount. This is goodwill of the lender who is willing to provide a loan for the borrower.
Step 3: Processing:
This is when the mortgage professional reviews your application in order to make sure that it paints an accurate picture of your financial situation and is the internal step of submitting your application to the underwriter of the lender that will approve the mortgage.
You may get a call during this time for more information. This is not a sign that there is any trouble with your application. In fact, this may be a sign that you have a professional who wants everything just right to make the rest of the process go faster. When your mortgage banker tells you there are conditions to clear and asks for something, don’t delay. This stage is where most loans are delayed. Many times, this is due to the companies that the information must be retrieved from. This may involve things like a Verification of Employment from your place of work, a statement from your bank that the funds on your bank statement are still in the bank or proof of where those funds came from. Should any changes be made, ask for a copy of the updated application to be sent along with your Closing Disclosures that will be sent within 3 days of your application as required by law.
Underwriting is where the underwriters who are hiring by lenders examine all the data from a borrower’s property and transaction looks at the detail of the mortgage application and decides whether or not this loan makes sense. The underwriter makes the decision as to whether or not your application is approved. Loan approval committees will use underwriters’ reports during their deliberations to evaluate the property and the applicants’ creditworthiness. Your mortgage Broker will contact you during the course of the loan application process.
Step 4: The Closing:
You got it! Although this is the time that you actually sign those papers committing yourself to up to 30 years of paying the bank just to live in your house, if all the steps above have been followed and you have picked a mortgage professional that does their job, this should be the least stressful time for you.
Wiring Funds: Your down payment is either automatically deducted or wired-in the latter case, the money is electronically transferred between financial companies. Make sure that the wiring instructions as well as all important numbers must be clarified and checked for accuracy by both parties. Your cash to close amount should be wired to the Title Company prior to the Closing.
Closing Table: Review the papers you are asked to sign and bring the Closing Disclosures you received to compare and make sure all the costs that were presented up front are still the same.
Signing: Once your lender has agreed to close or fund your loan, the signing can begin. Before this happens, however, be sure to verify and finalize all the documents, and to supply any additional requirements (such as photo IDs or cashiers’ checks). The final loan documents are usually signed in the presence of a notary at a title company.
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