Loan Process

The majority of us do not have the ability to pay cash for our homes and require a mortgage which is an instrument that secures a loan against the property.

When you get a loan for the purchase of your home you will sign a promissory note and mortgage or deed of trust at the closing.

Noted below are some helpful ideas to guide you through the home loan process:

1. It will be helpful to the purchase process if you contact a mortgage specialist to get prequalified and/or preapproved prior to looking at homes or at least very early in the search for your home. Preapproval will increase your chances of acceptance of your offer by the seller, because he will feel more confident that you will be able to close on the contract because you have been preapproved for a loan in the appropriate amount.

   What do the terms prequalification and preapproval mean?

   Prequalification: This is a preliminary look at credit scores and other information you furnish to a loan officer about your financial information. Prequalification can usually be done by phone and would include information such as your income, Long-term debts and the amount of down payment you can afford.

   Preapproval -- A preapproval is the lender's commitment to furnish you a loan in a given amount for the purchase of a home. During the preapproval process you furnish the lender all of the necessary financial document and prove of employment so that they can approve you as a qualified purchaser.

2. What do you need to apply for a loan?
   • W-2s or tax returns for the past two years or both
   • Proof of gross monthly income for the past 30 days
   • Proof of investment income such as rental incomes
   • A list of creditors including the account numbers, balances and monthly payments
   • Two months of banking statements

   The lender will also need a copy of the contract for purchase of the property you wish to buy when that has been completed. If you are selling a home that has not yet been closed you will also need to provide a copy of that contract.

   During this process the lender will verify all information provided. Your lender will also check your FICO score which is a system of points that indicates your credit worthiness for the purchase of your home.

   Be careful not to place applications with too many lenders as, excessive numbers of check against your name within a recent time period may cause a red flag and your credit worthiness may actually decrease because of the activity of these credit checks .

3. There are many types of loans. You should consult with your loan officer regarding the best loan vehicle for your needs.

4. Loan Approval consist of approval of the buyer financially and secondly approval of the property. Once the loan has be process with information on both the buyer and the property, the lender will make a decision as to committing to make the loan. The commitment may include certain conditions, such as additional information to be provided, repairs to the property or survey and restriction stipulations. There should be something regarding the lock-in rate for the loan for a certain time period.

   Should the lender decide to reject you application for a loan, you will be sent a rejection letter notifying you of their decision. If you receive such a letter you can present it to the parties to the contract and receive a refund of your earnest money.

5. The Closing -- Once the loan has been approved and a closing date determined you will want to do a final walk through to determine that the property is in the same condition as when the offer was made except for any negotiated repairs. Pay special attention to be sure the required repairs were completed by licensed repairmen.

   Most often the closing will be at a title company but could be at an attorney's office.

   On the day of closing, remember to bring:

   • A certified check for the total amount of your closing cost and downpayment
   • A picture ID, such as a driver's license
   • Your personal checkbook

   Closing cost will include, but may not be limited to:

   • Attorney's fees
   • Property taxes ( to cover the tax period up to that date)
   • Loan origination fees (this covers lenders expenses
   • Recording fees
   • Interest (paid from the date of closing to the 30 days before the first payment)
   • First premium of mortgage insurance
   • Title Insurance
   • Survey fees
   • First payment to escrow account for future taxes and insurance
   • Loan points ( a point is a fee that equals 1% of the loan amount. They enable you to secure a lower interest rate for the mortgage)
   • Home inspection fees
   • Any additional preparation fees

   During the closing the closing officer will explain the documents to you. If all meets with your approval you will sign all the documents and finalize the transaction. Upon funding you will be the proud owner of your new home.