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The Loan Process

Pre-Qualification – Call 1-800-383-7956

The first step to getting a Mortgage Loan is to get a “Pre-Approval” from a Lender.

You can apply online using one of our convenient loan applications under the “Apply Now” button located on the home page.
Or you can can give us a call toll free 1-800-383-7956 and speak to a Licensed Mortgage Professional.
We are here to assist you and answer any of your questions.

This phone call will initiate a brief interview process to determine the best loan for your situation.
Once our Licensed Mortgage Professional has gathered all of the necessary information about a borrower’s situation. We can then make several proposals regarding interest rate, term, loan amount etc… From the interview process a determination can be made as to how much money you can borrow and at what interest rate.
Some of the things that determine the interest rate on a loan include a Borrower’s Credit Score, The Loan Amount, Income Verification, the Loan Program or Term and the Loan to Value of the home. A borrower should get “Pre-Approved” for each loan type the borrower may want.
Please give us a call or simply apply online to start the Mortgage” Pre-Approval” process.

Pre-qualification starts the loan process. Once a lender has gathered information about a borrower’s income and debts, a determination can be made as to how much the borrower can pay for a house. Since different loan programs can cause different valuations a borrower should get pre-qualified for each loan type the borrower may qualify for.

In attempting to approve homebuyers for the type and amount of mortgage they want, mortgage companies look at two key factors: first, the borrower’s ability to repay the loan; and second, the borrower’s willingness to repay the loan.

Ability to repay the mortgage is verified by your current employment and total income. Generally speaking, mortgage companies 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 borrower’s willingness to repay is determined by examining how the property will be used. For instance, will you be living there or just renting it out? Willingness is also closely related to how you have fulfilled previous financial commitments, hence the emphasis on the Credit Report and/or your rental payment history.

It is important 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 companies couldn’t stay in business if they didn’t generate loan business, so it’s in everyone’s best interest to see that you qualify.

 

Mortgage Programs and Rates

To properly analyze a Mortgage Program, the borrower needs to think about how long they plan to keep the loan. If you plan to sell the house in a few years, an adjustable rate loan may make more sense. If you plan to keep the house for a longer period, a fixed loan may be more suitable. i.e 30 year fixed rate loan or 15 year fixed rate loan.

Shopping for a loan is very time consuming and frustrating. With so many programs to choose from, each with different rates, points and fees, an experienced mortgage professional can evaluate a borrower’s situation and recommend the most suitable Mortgage Program, thus allowing the borrower to make an informed decision.

 

The Application

The application is the true start of the loan process and usually occurs between days one and five of the start of the loan process. With the aid of a mortgage professional, the borrower completes an application and provides all required documentation.

The various fees and closing cost estimates will have been discussed while examining the many mortgage programs and these costs will be verified by a Good Faith Estimate (GFE) and a Truth-In-Lending Statement (TIL) which the borrower will receive within three days of the submission of the application to the lender.

 

Processing

Once the application has been submitted, the processing of the mortgage begins. The Processor orders the Credit Report, Appraisal and Title Report. The information on the application, such as bank deposits and payment histories, are then verified. Any derogatory credit items, such as late payments, collections and/or judgments require a written explanation. The processor examines the Appraisal and Title Report checking for property issues that may require further investigation. The entire mortgage package is then put together for submission to the lender.

 

Required Documents

If you are purchasing or refinancing your home, and you are salaried you will need to provide the past two-years W-2s and one month of pay-stubs: OR, if you are self-employed you will need to provide the past two-years tax returns. If you own rental property you will need to provide Rental Agreements and the past two-years tax returns. If you wish to speed up the approval process, you should also provide the past three-months bank, stock and mutual fund account statements. Provide the most recent copies of any stock brokerage or IRA/401k accounts that you might have.

If you are requesting cash-out you will need a “Use of Proceeds” letter of explanation. Provide a copy of any divorce decree if applicable. If you are not a US citizen, provide a copy of your green card (front and back), or if you are NOT a permanent resident provide your H-1 or L-1 visa.

If you are applying for a Home Equity Loan you will need to, in addition to the above documents, provide a copy of your first mortgage note and deed of trust. These items will normally be found in your mortgage closing documents.

 

Supporting Documents for Refinance

1. 2010 & 2011 Tax Returns & W2s – Both Borrowers

2. 1 full-month most recent Pay Stubs – Both Borrowers

3. 1 month most recent Bank Statement that shows income deposits

4. If self-employed, please send 3 months of most recent bank statements, copy of business licenses, copy of business telephone bills that shows that phone is used for business.

5. Most recent Mortgage Statement

6. Most recent Home Owner Insurance Statement (Declaration Page)

7. Copy of Driver License & Social Security Cards

 

Supporting Documents for Purchase

1. 2010 & 2011 tax returns & W2s (each borrower)

2. 1 full-month most recent paystubs (each borrower)

3. 2 months most recent bank statement that shows income coming in, proof of down payment, & proof of closing cost fund (for W2 borrowers)

4. If self-employed, please send 3 months of most recent bank statements, copy of business licenses, copy of business telephone bills that shows that phone is used for business.

5. Fully-executable purchase contract

6. Copy of deposit check already cashed out by escrow

7. Copy of driver license & social security cards

 

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:

  • Identifying Information
  • Employment Information
  • Credit Information
  • Public Record Information
  • Inquiries

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 honestly with a mortgage professional who 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.  A paper 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 persons 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’ve 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, but 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:

  • Pay your bills on time.
  • Keep balances low on credit cards.
  • Limit your credit accounts to what you really need. Accounts that are no longer needed should be formally cancelled since zero balance accounts can still count against you.
  • Check that your credit report information is accurate.
  • Be conservative in applying for credit and make sure that your credit is only checked when necessary.

A borrower with a score of 680 and above is considered an A+ borrower. A loan with this score will be put through an “automated basic computerized underwriting” system and be completed within minutes. Borrowers in this category qualify for the lowest interest rates and their loan can close in a couple of days.

A score below 680 but above 620 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 “A” pricing, but the loan may take several days longer to close.

Borrowers with credit scores below 620 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 of real estate is the valuation of the rights of ownership. The appraiser must define the rights to be appraised. The appraiser does not create value. The appraiser interprets the market to arrive at a value estimate. 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 common approaches, which are all derived from the market, derives 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 processor has put together a complete package with all verifications and documentation, the file is sent to the lender. The underwriter is responsible for determining whether the package is deemed an acceptable loan. If more information is needed the loan is put into “suspense” and the borrower is contacted to supply more information and/or documentation. If the loan is acceptable as submitted, the loan is put into an “approved” status.

 

Closing

Once the loan is approved, the file is transferred to the closing and funding department. The funding department notifies the broker and closing attorney of the approval and verifies broker and closing fees. The closing attorney then schedules a time for the borrower to sign the loan documentation.

At the closing the borrower should:

  • Bring a cashiers check for your down payment and closing costs if required. Personal checks are normally not accepted and if they are they will delay the closing until the check clears your bank.
  • Review the final loan documents. Make sure that the interest rate and loan terms are what you agreed upon. Also, verify that the names and address on the loan documents are accurate.
  • Sign the loan documents.
  • Bring identification and proof of insurance.

After the documents are signed, the closing attorney returns the documents to the lender who examines them and, if everything is in order, arranges for the funding of the loan. Once the loan has funded, the closing attorney arranges for the mortgage note and deed of trust to be recorded at the county recorders office. Once the mortgage has been recorded, the closing attorney then prints the final settlement costs on the HUD-1 Settlement Form. Final disbursements are then made.

 

Summation

A typical “A” mortgage transaction takes between 14-21 business days to complete. With new automated underwriting, this process speeds up greatly. Contact one of our experienced Mortgage Professionals today to discuss your particular mortgage needs or Apply Online and a Loan Officer will promptly get back to you.

1-800-383-7956

Here is an outline of the different steps required to complete a mortgage transaction. In today’s lending environment the loan process can be daunting. Make sure you are working with an experienced, knowledgeable Mortgage Professional.

The Loan Process WHO DAY
Application Loan Originator Day 1
Run Credit Loan Originator Day 1
Lock the Loan Loan Originator Day 1
Create GFE Loan Originator Day 1
Send Disclosures Loan Originator Day 1
Send Need List Loan Originator Day1
Get Disclosures Back From Borrower Loan Originator Day 4
Open Title /  Escrow Processor Day 4
Review Borrower Documents for Income / Asset  Accuracy Processor Day 5
Update 1003 from Documents / Disclosures Processor Day 5
Order Appraisal After 3 days Processor Day 6
Run DU Processor Day 7
Request Additional Documents from Borrower / Updates Processor Day 7
Order Pay Off Demand Processor Day 7
Order 4506T Processor Day 8
Receive Pre-lim – Review Processor Day 9
Order Real Quest Processor Day 9
Give to Underwritng for Review Processor Day 12
Get Conditions list from Underwriting Underwriter Day 14
Request Additional Documents from Borrower / Updates Loan Originator Day 14
Receive Appraisal Processor Day15
Send Appraisal & Receipt to Borrower Processor Day 15
Give Insurance to Escrow Processor Day 15
Check Value Against DU and Loan Program Processor Day 16
Update DU – Value – Etc… Add Appraisal to the File Processor Day 16
Get Receipt for Appraisal Back and Any Missing Documents Loan Originator Day 17
Verify Pay -Off Demand – Update Calyx & DU Processor Day 17
Request Estimated HUD Processor Day 17
Create Final 1003 Processor Day 18
Review HUD w. Borrower – Accept or Change HUD Loan Originator Day 18
Draw Loan Documents Processor Day 18
Send Loan Documents to Escrow Processor Day 18
Documents go out with Notary for Signing from Escrow Escrow Day 18
Borrower signs Docs Borrower Day 19
Documents Back to / From Escrow – Notary Day 20
Get Signed Docs Back from Escrow Processor Day 22
Submit File for Final Underwriting Processor Day 22
Remaining Conditions Underwriter Day 23
Fix Remaining Conditions Processor Day 23
Fund Loan Funder Day 25