MORTGAGE APPLICATION PROCESS
The first thing every potential homeowner should know about the mortgage process is yes, there is a lot of paperwork involved to get you to the finish line. The first set of forms a borrower will encounter are the preliminary application documents which ask questions ranging from employment and income, assets, the home you want to purchase or refinance, and your current debts. All of the information you give to the loan officer will be required to be proven by pay stubs, bank statements and a credit report which also documents your credit score and will help determine the likelihood of how you repay your debts. One important form you will go over is the good faith estimate. A good faith estimate (GFE) displays all of the cost involved in obtaining a loan. Although a GFE is an estimate, it is the closest monetary figure we can provide to you at the time of application. If your loan parameters change throughout the application process a revised GFE will be provided to you containing new loan information.
The loan officer will determine based on the information provided, what mortgage amount you could qualify for and then prepare payments and different loan options to fit your needs. A rate will be estimated based on the program you choose and the loan to value. The loan to value is determined by what amount of money you are borrowing based on the sales price/appraised value of the home. For example a $80K loan on a $100k property, has a Loan to value (LTV) of 80%.
Once the loan officer knows where things stand regarding your situation and what mortgage amount you can qualify for, a loan officer will give you a pre-approved letter. A pre-approval lets the Realtor you are working with know your price range. Once you find the perfect home and sign a purchase agreement, the loan officer gets a copy of the purchase agreement, reviews the terms and orders your appraisal. An appraisal of the home you wrote the offer on determines if the amount of money you offered for the home meets the true value of the home. A deal will not work if you offered more then what the home is worth. Also, it is not until a purchase agreement is written that your interest rate can be locked in. when you have your purchase agreement signed, you and your loan officer may discuss current interest rates as well as if you want to lock in your rate and secure it or let it float (not lock) and play the market to see if rates will get better. Please note that if rates get worse, that is a change you take.
An underwriter determines the final approval for the loan and may ask for additional documentation as necessary. An underwriter’s job is to verify the accuracy of the information provided including income, assets, debts, appraisal, etc. once the underwriter has fully approved the loan a closing can be coordinated. Also, before a closing can be scheduled you must provide a home insurance policy for one years coverage in the home. Prior to closing, the loan officer will go over the HUD settlement statement with you. The HUD is a form that displays your purchase price, loan amount, all applicable fees associated with the loan, and displays the amount of money required out of pocket. If money is due out of pocket, a cashiers check made payable to yourself is required and will be signed over at closing. At closing the final mortgage paperwork is signed, along with real estate transfer documents and then the keys are turned over for your new home. Congratulations!!