Six Stages of a Home Loan
(1) Pre Approval
Many lenders use the terms Pre-Qualified and Pre-Approval interchangeably, however the two terms mean different things fundamentally. A Pre-Qualification generally means that the lender collects some basic financial information from the borrower to estimate how much of a house the borrower can afford. The Lender relies upon the information provided by the borrower without pulling a credit report or verifying related financial information for the loan. Therefore a Pre-Qualification is a ballpark estimate. A Pre-Qualification is less reliable than a Pre-Approval which the lender verifies by pulling a credit report, looking at bank statements and other loan related documents. Documents required for Pre-Approval may incude your identficaton, pay-stubs, Tax returns, Social Security card. Talk to us to obtain your Pre-Qualification or Pre-Approval Letter, or just Apply Online. Once you are Pre-Qualified or Pre-Apprroved, its now time to talk to your Real Estate Agent or a Seller to make an offer.
(2) Shopping for the House
Although choosing a home is an entirely personal decision, however most buyers typically consider the following factors when buying a home:
(a) Size of the House (b) An Ideal Yard (c) Exterior of the House including roof, foundation and siding (d) Bedrooms (e) Bathrooms (f) Living Room/s (g) Heating and Cooling System (h) Basement (i) Attic (j) Garage
Other things they typically look for are Neighborhood Safety, Commute, Budget and Local Public Schools.
(3) The Mortgage Application
The Mortgage Application (1003) is submitted to the Lender in order to be approved for the Home Loan. The Application includes Personal information, Assets, Debts, Information of the property being purchased and disclosures. The Application can be submitted Online or we can help you personally in completing the Mortgage Application.
(4) Loan Processing
Loan Processing Includes reviewing the Mortgage Application, making sure that the borrower has provided all the necessary paperwork and reviewing all the information for accuracy. Our Loan Processors assemble and administer your entire loan application before it gets approved. They act as a Liaison between you and the Underwriter and ensure your loan gets to the finish line.
(5) Loan Underwriting
Underwriting is the process by which a lender verifies your income, assets, debt and property details in order to issue a final approval of the loan. The Underwriter looks for the following four C's:
a- Capacity: " What you can afford based upon your Income and Debts"
b- Capital: "To make the required down payment, closing costs. It can include Personal Savings, Gifts from family members, Assistance Programs, Grants etc."
c- Collateral: "To assure the Property being financed can be utilized, appraises to finance the debt"
d- Credit: "Lender would look for a steady payment history and a FICO score as part of underwriting your application"
(6) Closing
Closing is the last step in buying and financing your home. Closing is also called a "Settlement" where you along with all parties to the transaction sign the necessary closing paperwork. During closing, you may expect all or the presence of your Real Estate Agent or Realtor, your Title Insurance Company, An Escrow Company, your Attorney, the Seller's Attorney, and your lender may or may not be present. Documents you will be signing at closing include The Loan Estimate, The Closing Disclosure, The Notice of Right to rescind in case of a Refinance Transaction, The Initial Escrow Statement, A Promissory note, A Mortgage or Security Instrument, State and Local Government mandated documents and certain lender added documents.
Related Topics: What is a Credit Check What is a Credit Score Documents Required for a Home Loan Application Documents to be signed at closing Uniform Residential Loan Application What are the Duties a loan processor may/may not perform? What is a mortgage underwriter and its Job Description? What is a Mortgage Loan Originator (MLO) and its Job decsiption What is a mortgage lender/funder ? Grants & Assistance Programs The Loan Estimate (LE) The Closing Disclsoure (CD) What is “Notice of right to rescind” ? What is "Cash out refinance"? Promissory Note A Mortgage or Security Instrument
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