Loan Process
Pre-Qualification In attempting to approve home buyers for the type and amount of mortgage, we look the borrower's ability to repay the loan . The ability to repay the mortgage is verified by your current employment and total income. Generally speaking, we prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years. The ability to repay also takes into account how you have fulfilled previous financial commitments, thus the emphasis on the Credit Report and/or your rental payment history will be used. It is important for you to remember that there are no rules carved in stone. Each applicant is handled on a case-by-case basis. So even if you come up a little short in one area, your stronger point could make up for the weak one.
Mortgage Programs and Rates To properly analyze a mortgage program, the borrower needs to think about how long you plan to keep the property. If you plan to sell the house in a few years, an adjustable loan may make more sense. If you plan to keep the house for a longer period of time, a fixed loan may be more suitable. With so many programs from which to choose, each with different rates and/or fees, shopping for a loan can be time consuming and frustrating. We can evaluate a your personal situation and recommend the most suitable mortgage program for you, thus allowing you to make the best informed decision that fits your needs. The Application The application is the true start of the loan process and is usually completed during the pre-approval or pre-qualification process. We complete your application over the phone with you in just a few short minutes, and then have you send us all of the Required Documentation. Once you have an offer accepted to purchase a property and are in contract, or you agree to move forward with your refinance, and your application is completed and we have have all of your Required Documentation, we will email you your loan disclosures, including your Good Faith Estimate (GFE) and a Truth-In-Lending Statement (TIL). The processing of your loan begins once you sign and return these disclosures Processing Once we receive your signed disclosures, the processing of your mortgage begins, and your file is handed over to the loan processor. The processor orders your appraisal and requests title information from the title and/or escorw company. The information on the application, such as bank deposits and payment histories, are also verified at this time. Any credit derogatories, such as late payments, collections and/or judgments will require a written explanation. When received, the processor examines the appraisal and title report, checking for any issues that may require further investigation. After the appraisal report and title report are received in our office along with any other documentation that is needed, your mortgage package is then sent to the underwriter for final review. Required Documentation If you are planning on purchasing a property or you are planning on refinancing one, you should be aware of the paperwork which you will need to send to us at your earliest convenience to start the application process.
Different programs require varying amounts of documentation. The loan program you select may require more or less documentation. Please contact us for a free, no-obligation consultation. Credit Reports Most people applying for a home mortgage need not worry about the effects of their credit history during the mortgage process. However, you can be better prepared if you get a copy of your Credit Report before you apply for your mortgage. That way, you can take steps to correct any negatives before making your application. A Credit Profile refers to a consumer credit file, which is made up of various consumer credit reporting agencies. It is a picture of how you paid back the companies you have borrowed money from, or how you have met other financial obligations. There are five categories of information on a credit profile:
NOT included on your credit profile is race, religion, health, driving record, criminal record, political preference, or income. If you have had credit problems, be prepared to discuss them us honestly as we will assist you in writing your "Letter of Explanation." Knowledgeable mortgage professionals know there can be legitimate reasons for credit problems, such as unemployment, illness, or other financial difficulties. If you had problems that have been corrected (reestablishment of credit), and your payments have been on time for a year or more, your credit may be considered satisfactory. The mortgage industry tends to create its own language, and credit rating is no different. "B-C" mortgage lending gets its name from the grading of one's credit based on such things as payment history, amount of debt payments, bankruptcies, equity position, credit scores, etc. Credit scoring is a statistical method of assessing the credit risk of a mortgage application. The score looks at the following items: past delinquencies, derogatory payment behavior, current debt levels, length of credit history, types of credit and number of inquires. By now, most people have heard of credit scoring. The most common score (now the most common terminology for credit scoring) is called the FICO score. This score was developed by Fair, Isaac & Company, Inc. for the three main credit Bureaus; Equifax (Beacon), Experian (formerly TRW), and Empirica (TransUnion). FICO scores are simply repository scores meaning they ONLY consider the information contained in a person's credit file. They DO NOT consider a person's income, savings or down payment amount. Credit scores are based on five factors: 35% of the score is based on payment history, 30% on the amount owed, 15% on how long you have had credit, 10% percent on new credit being sought, and 10% on the types of credit you have. The scores are useful in directing applications to specific loan programs and to set levels of underwriting such as Streamline, Traditional or Second Review. However, they are not the final word regarding the type of program you will qualify for or your interest rate. Many people in the mortgage business are skeptical about the accuracy of FICO scores. Scoring has only been an integral part of the mortgage process for the past few years (since 1999); however, the FICO scores have been used since the late 1950's by retail merchants, credit card companies, insurance companies and banks for consumer lending. The data from large scoring projects, such as large mortgage portfolios, demonstrate their predictive quality and that the scores do work. The following items are some of the ways that you can improve your credit score:
A borrower with a score of 680 and above is considered an average borrower. A loan with this score or higher will be put through an "automated basic computerized underwriting" system and be completed within minutes. Borrowers in this category qualify for competitive interest rates, but might have a higher rate than a borrower with a 700, 720, or even a 740 credit score. A score below 680 but above 640 may indicate underwriters will take a closer look in determining potential risk. Supplemental documentation may be required before final approval. Borrowers with this credit score may still obtain reasonable pricing, but the loan could take several days longer to close. Borrowers with credit scores below 640 are not normally locked into the best rate and terms offered. This loan type usually goes to "sub-prime" lenders. The loan terms and conditions are less attractive with these loan types and more time is needed to find the borrower the best rates. All things being equal, when you have derogatory credit, all of the other aspects of the loan need to be in order. Equity, stability, income, documentation, assets, etc. play a larger role in the approval decision. Various combinations are allowed when determining your grade, but the worst-case scenario will push your grade to a lower credit grade. Late mortgage payments and Bankruptcies/Foreclosures are the most important. Credit patterns, such as a high number of recent inquiries or more than a few outstanding loans, may signal a problem. Since an indication of a "willingness to pay" is important, several late payments in the same time period is better than random lates. Appraisal Basics An appraisal in real estate is an opinion of the value of a property. The appraiser does not create a value but instead interprets the market to arrive at a value . As the appraiser compiles data pertinent to a report, consideration must be given to the site and amenities as well as the physical condition of the property. Considerable research and collection of data must be completed prior to the appraiser arriving at a final opinion of value. Using three different types of appraisals which help to determine the opinion, or estimate, of value. The first approach to value is the COST APPROACH. This method derives what it would cost to replace the existing improvements as of the date of the appraisal, less any physical deterioration, functional obsolescence, and economic obsolescence. The second method is the COMPARISON APPROACH, which uses other "bench mark" properties (comps) of similar size, quality and location that have recently sold to determine value. The INCOME APPROACH is used in the appraisal of rental properties and has little use in the valuation of single family dwellings. This approach provides an objective estimate of what a prudent investor would pay based on the net income the property produces. Underwriting Once the entire loan file is complete, i is sent to the underwriter. The underwriter is responsible for determining whether the loan is deemed acceptable or not. If more information is needed, then the borrower is contacted to provide the additional information and/or documentation. If the loan is acceptable as submitted, the loan is put into an "approved" status. Closing Once all of the conditions of the loan approval have been me, then the loan is issued a final approval and the file is transferred to the closing/funding department. The funding department notifies the closing agent of the final approval, verifies the closing fees, and gives the closing agent an estimate of when the loan documents will be in escrow. The closing agent then schedules a time for the borrower to sign the loan documents. At the closing the borrower should:
After the documents are signed, the closing agent returns the loan documents. The loan documents are then examined to ensure everything is in order, and the funding of the loan is arranged. Once the loan has funded, the closing agent arranges for the deed of trust or mortgage to be recorded at the county recorders office. Once the mortgage has been recorded, the closing agent then prints the final settlement costs on the HUD-1 Settlement Form, final disbursements are then made, and a copy of the final closing statement or HUD-1 is mailed to the borrower. Summation Under normal conditions, a average mortgage transaction takes approximately 30-35 days to close. Contact one of our experienced Mortgage Specialist today to discuss your particular mortgage needs or Apply Online and we will promptly get back to you.
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