Loan Process Overview

Loan Process Overview

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Category: General
Published on Tuesday, 14 October 2008 19:04
Written by Administrator

What is the procedure from application through close?

Applying for your loan is the first step in the mortgage financing process. This starts with completing a mortgage loan application. You can provide this information to your Mortgage Consultant in a variety of ways: in person, via fax or apply on-line.

Your Mortgage Consultant will use this information to determine the type, rate, and loan program that meets your needs.

Things to understand when choosing a loan program:

  1. Fixed rate or adjustable/ARM loan? ARM loans offer lower rates but the monthly payments will move with interest rates.
  2. Eligibility for government programs such as FHA or VA? Otherwise you loan is considered to be a conventional loan.
  3. If your loan balance is over $322,400 your loan qualifies as Jumbo.
  4. Down payment on conventional loans, if less than 20% you may need (PMI) private mortgage insurance.
  5. You should consider a budget for you monthly mortgage that is in line with your lifestyle and financial feasable.

Understanding rate and total loan cost. While your rate is determined by your financial situation. Options range from: Discount Points are points or fees paid up front that reduce the interest rate. They are expressed as a percentage of the loan balance. i.e. 1 point on $100,000 loan is $1,000. Depending on the duration of ownership this may prove to be a financialy sound option. This is not advisable for short term ownership.

Keep in mind one of the most beneficial aspects of Mortgage interest that it is tax-deductible. A higher rate is more tax shelter for income.

Processing and Underwriting

You will receive disclosures within 3 business days after we receive your application.

Disclosures you will receive include:

  1. Good Faith Estimate: an estimate of all the fees associated with getting your loan. (California recieves MLDS)
  2. Truth-in-Lending: a detailed description of the loan you have chosen.

Standard applications take 24 - 48 hours for approval. Approvals are "conditional" as support documentation will need to be gathered. i.e. A condition may be VOF "verification of funds" and requires 2 months bank statements to verify your assets in the bank. Processing is verifying the documentation and checking that the numbers support the origional numbers completed on the application.

An underwriter will review the automated underwriting feedback, based on submitted documentation on income (DTI), assets (reserves), credit (FICO), and appraisal (LTV).  A title search to verify all liens is ordered and when these tasks are completed you final decision of approval is released.

Closing your Loan

Closing your loan is the final step in getting your mortgage. Closing procedure vary slightly depending on the state and whether your loan is a refinance or a purchase. In certain states the closing agent is a title company. In other states it may be an attorney.

Purchase Transactions:

  • Your "cash to close" will include your down payment and all other closing costs.
  • Typically escrow distributes funds to the mortgage lender the remaining balance, less fees is paid to the Seller.
  • The Seller and Buyer close at different times.

Refinance Transactions:

  • A "cash-out" refinance is when you recieve money back from the transaction. There is a three-day waiting period, or "right of recession" before your funds are available.
  • Closing is the signing of final loan documents, including the Mortgage Note and Deed of Trust.