Organize your documents
Whether you are buying or refinancing a home, there are many important
documents that will be needed to process your home loan. To make the
process go quickly and smoothly gather the following documents ahead
of time: two years W-2 and one month of pay stubs, or if you are self-employed,
two years tax returns, three months bank statements, copies of any stock
brokerage or IRA/401K accounts, and if you own rental property, please
provide rental agreements and two years tax returns. There may be some
other documents required, but your loan officer will let you know.
Shop loan programs and rates
To find the right loan for you, you need to consider how long you plan
to keep the loan. If you plan to sell the house in a few years you may
want to consider an adjustable or balloon loan. On the other hand, if
you plan to keep the house for a longer time, you may want to look at
fixed loans. Compare different programs. Understand the relationship
between rates and points. Points are considered to be prepaid interest
and are tax deductible. The more points you pay, the lower the rate
you will get. Shopping for a loan can be difficult, so an experienced loan
officer can help you make a decision that's best for you.
Get Pre-Qualified
Pre-qualification occurs before the loan process actually begins, and
is usually the first step after initial contact is made. The lender
gathers information about the income and debts of the borrower and makes
a financial determination about how much house the borrower may be able
to afford. By getting pre-qualified or pre-approved, you don't waste
time looking for properties you can not afford. It also puts you in
a stronger position when you are negotiating with the seller, because
the seller knows that your loan is already approved. This step helps
you close quickly, since your loan is already approved.
Apply for the Loan
The buyer, now referred to as a "borrower", completes a mortgage
application with the loan officer and supplies all of the required documentation
for processing. Various fees and down payments are discussed at this
time and the borrower will receive a Good Faith Estimate (GFE) and a
Truth-In-Lending statement (TIL) within three days that itemizes the
rates and associated costs for obtaining the loan. The specific loan
program and rates will be determined at this time.
Obtain Loan Approval
Once your loan application has been received we will start the loan
approval process immediately. This involves verifying your credit history,
employment history, assets including your bank accounts, stocks, mutual
fund and retirement accounts, and property value. To improve your chances
of getting a loan approval, make sure you have filled out the loan application
completely and honestly. Do not make any major purchases such as a car,
furniture, or another house, until the loan is closed. Finally, be sure
you can provide a written explanation for any unacceptable late payments
or collections for judgment, etc.
Close the Loan
Closing usually occurs between days 25 and 45 of the loan process. At
the closing, the lender "funds" the loan with a cashier's
check, draft or wire to the selling party in exchange for the title
to the property. This is the point at which the borrower finishes the
loan process and actually buys the house. You will be required to sign
the final loan documents in front of a notary public. Make sure that
the interest rate and loan terms are what you were promised as well
as the name and address on the loan documents are accurate. Bring a
cashier's check for your down payment and closing costs if required.
Personal checks are normally not accepted.
