The 5 Steps to Getting a Mortgage
If you are unfamiliar with
the mortgage process - maybe you are a first time home buyer or have
not purchased a home in a long time - below is a quick summary of the
five steps in the mortgage process.
Prequalification
Before
you actually go through the paperwork of a loan application you will be
asked to "pre-qualify". Your realtor may refer you to a lender to get
you prequalified so that when you look at houses, the sellers know that
you are a serious buyer with the money to back up any offers you make. In
prequalification, the lender gather information from you about your
income and debts, and makes a financial determination, subject to later
verification during the underwriting process, about how much home you
may be able to afford.It's good to know how expensive a home you can
afford before you go shopping for one.
Application
The
"application" is actually the beginning of the loan process, and occurs
after you have found a property that you want to buy. You complete a
mortgage application with the loan officer and supply all of the
required documentation for processing.(tax returns, pay stubs, etc.)
The type of mortgage best for you and the various fees and down payment
options are discussed at this time. you will receive a "Good Faith
Estimate" that itemizes the rates, payments, and all the costs involved
in your new loan. At this time you may "lock-in" the interest rate of
the mortgage at todays going rate.
Processing of Your Estimated Loan
The
lender enters your information into the underwriting system which
provides the lender with a list of the documentation needed to achieve
loan approval. The "processor" reviews your credit reports and
documentation to verify your employment, debts, and payment history. If
there are late payments, collections, etc. the processor will request a
written explanation from you. The processor also reviews the property
appraisal and checks for issues that may effect the final loan
approval. The processors job is to put together the entire package for
the underwriter.
Underwriting Your Loan
The
"underwriter" is responsible for determining whether the package
prepared by the processor meets all the lenders criteria. If the lender
needs more information, the loan will be held up until the lender
contacts you and you provide the additional information or documents.If
the application package meets all the lenders criteria, then the lender
will offer a full loan approval. This often depends on the resolution
of challenging credit, income or property issues that arise during the
underwriting process.
If the underwriter gives full loan approval
then the lender issues a commitment letter to lend, orders the title
insurance, clears all contingencies, and then schedules a closing time.
Closing
The
"closing" will occur after the lender gives a full loan approval and
clears any closing conditions. At closing, the lender "funds" the loan
with a cashiers check, draft or wire to the closing agent who disburses
funds in exchange for the title to the property. This is the poinit at
which you finish the loan process and actually buy the house, subject
to the lenders loan. Closings occur at different places depending on
the State in which the sale takes place. In some states, a title
company or escow company is used, while other states require that the
closing takes place in an attorney's office.
Summary
By
helping you understand the five steps to getting a mortgage, we hope to
make the process easier and less stressful than it otherwise might be.
If you have any questions about the process or are ready to get
pre-qualified, call us today and let us help you with your next Woodland
area home purchase