Before you go looking for a home with a Realtor, they are going to advise you, that you need to speak to a lender like me. You may hear the Realtor say you need to get 'Prequalified.' What this means, you and I need to have a meeting and we need to fill out a loan application. This will allow me to collect all the necessary information to help determine how much house you can afford. Usually, I recommend going through a full qualification process, which means you need to provide me with a list of information that will allow my mortgage underwriters to make a tentative decision on your mortgage. This will allow your Realtor to make a stronger offer, when it comes time to purchase your home. To start the qualification process, look at the 'apply for your loan' below.
2. Apply For Your Loan.
Applying for a home loan is not as complicated as most people think it is. Simply put, it's about collecting information and putting that information into a presentation and then presenting it to a mortgage underwriter, so they can made a decision. Ideally, we should make an appointment to fill out the application. Don't worry, it's not as intimidating as it sounds. I'll ask you a bunch of questions and fill out your answers. In preparation for this meeting, here is a list of documents that I ideally would like you to have. Please have copies ready or provide me with originals and I'll copy them and return them to you in a few days.
Documents You May Need:
- W2 Forms for the last two years (if you collect a paycheck.)
- If you are Self Employed, Profit and Loss Statements and 1099 and 2 years business and personal tax returns.
- Most recent paystubs.
- A complete list of your debts, including credit cards, student loans, car loans, and child support payments and balances.
- List of assets, including bank statements, mutual fund statements, real estate and automotive titles, brokerage statements, and any other financial records you can think of.
- Copies of cancelled checks for your rent or mortgage statement for last three months if you can get them or print them from the bank.
- Your insurance agent’s name and phone number.
- If you are getting a gift for the downpayment, please bring a gift letter, stating it’s a gift, not a loan.
- Copy of your lease, if you are currently renting.
- If you are going to count child support as income, bring proof of the child’s age.
- Bankruptcy discharge papers if you have filed in the last seven years.
- A copy of Divorce Decree if claiming alimony or child support.
- Name and contact information for your Realtor.
3. You Are Qualified, Find a Home.
Once the underwriter has reviewed your file, they will issue a pre-qualification letter. This is the letter your Realtor is looking for. Once you have this, your Realtor will begin the process of helping you find the perfect home for you.
A Realtor and a Real Estate Agent are not the same. A Realtor is a designation earned by a Real Estate Agent that means they have a higher ethical standard than a Real Estate Agent. Most people use these interchangeably, but they really are different. I recommend a Realtor.
A Realtor can help you find the kind of home you are looking for. It’s your Realtor’s job to show you different homes in different neighborhoods and help you figure out which you like and which you don’t.
It is the Realtor’s responsibility to help you determine information about the community you are considering, including information about schools, property taxes and such. When you find the home you want to bid on, the Realtor will fill out the paperwork for you, and do the negotiation for you.
If you don’t have a Realtor, I would be happy you to refer you to one. I have several that I work with, so let’s talk about what kind of personality you want and I can match you with the perfect Realtor. Also, the Realtor is almost always paid by the person selling the house, so you should not have to pay the Realtor. There are however exceptions to this, so ask your Realtor to check this before bidding on a home.
3. You've Found a Home, Now The Mortgage Processing Begins.
Once you and your Realtor have found you a home and you have written a contract and it's been accepted, the mortgage processing may begin. This could be defined as the verification process. You may be contacted by a Loan Processor. This person is a part of my team, in charge of collecting paperwork and making sure all the ducks are in a row, so we can present your mortgage application to the underwriter for consideration. Think of it this way, they are your advocate. The more complete the Loan Processor can get the file, the easier time the underwriter will have making a decision on your loan application.
4. Appraising Your Home
During the mortgage process, an appraiser will contact your Real Estate Agent, to set a time to appraise your new home. The Real Estate Appraiser is hired by the lending company to determine the value of the home you are purchasing. They do this in a number of ways, including looking at other sales in the area. They are licensed by the state and are experienced in valuing real estate property.
The Mortgage Underwriter is the decision maker. They are the ones that will review your file and ultimately give the authorization for the company to lend you the money you have requested. They will review your mortgage application, credit history, employment history, assets, debts and other factors.
6. Approval and Closing
After the appraisal is in, and everything is approved, you will get the clear to close. The clear to close means the loan is ready to close and fund, and you will be able to move into your new home. Usually the Realtor handles the details. We will send the paperwork to the Title company and a Closing Agent from the Title Company will coordinate everything from the HOA to the Lender, to the Realtors, to ensure a proper closing, funding and ultimately transfer of the property into your home. It sounds complicated, but it isn't.
Glossary of Mortgage Terms:
HUD-1 Uniform Settlement Statement:
A standard form that discloses the fees and services associated with closing your mortgage loan.
Your debts and other financial obligations.
A claim or charge on property for payment of a debt. A mortgage is a lien, meaning the lender has the right to take the title to your property if you don’t make the mortgage payments.
Money you borrow from a bank with a written promise to pay it back later. Banks charge you fees and interest to borrow money.
The person who takes applications for loans offered at the bank. The loan officer can answer your questions, provide written information explaining loan products, and help you fill out a loan application.
Loan Origination Fees:
Fees paid to your mortgage lender for processing the mortgage loan application. These fees are usually in the form of points. One point equals one percent of the mortgage amount. For instance on a $100,000 mortgage, one point is $1,000.
A written agreement from your lender guaranteeing a specific mortgage interest rate for a certain amount of time.
A loan using your home as collateral.
A home finance professional who specializes in bringing together borrowers and lenders to facilitate real estate mortgages.
Insurance that protects mortgage lenders against loss in the event of default by the borrower. If you make a down payment of less than twenty percent, your lender will generally require mortgage insurance.
The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property review, and the mortgage loan application process through closing.
A legal document that provides evidence of your indebtedness and your formal promise to repay the mortgage loan, according to the terms you’ve agreed to. The note also explains the consequences of failing to make your monthly mortgage payments.
The cost or the interest rate you pay to borrow the money to buy your house.
The financial institution or entity that is responsible for collecting your mortgage loan payments.
The amount of money borrowed from the lender to buy your house or the amount of the mortgage loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid.
Real Estate Professional:
An individual who provides services in buying and selling homes. A Realtor® is a real estate professional who is a member of the National Association of Realtors®.
Written evidence of the right to ownership in a property.
Insurance providing protection against loss arising from problems connected to the title to your property.
Truth-in-Lending Disclosure Statement:
A form required by federal law for lenders to provide to you full written disclosure on the mortgage loan amount being financed, fees and charges, the payment schedule, the interest rate, the annual percentage rate, and any other costs associated with the mortgage loan.
Universal Residential Loan Application:
Standard mortgage loan application where you provide the lender with information required to assess your ability to repay the loan amount and to help the lender decide whether to lend you money.
The process that your lender uses to assess your eligibility to receive a mortgage loan. Underwriting involves the evaluation of your ability to repay the mortage loan.