An essential guide to understand the mortgage loan process
When market forces spur capital flow in the mortgage ecosystem, the odds can really favor you with financial perks in your mortgage buying journey. However, securing the preferred loan type and desired level of credit with an optimal payment horizon is nothing short of a milestone achieved! As a first-time mortgage borrower or someone considering a refinancing package or any other loan segment, the potential of a streamlined mortgage loan process coupled with personalized customer experience can hardly be overstated. In this blog, we round up every piece of vital information that will make your profile the most appealing one.
Calibrating your requirements and expectations
Yet again, transparency, speed in terms of digital processing and doing things right the very first time are the hallmarks of a superlative experience. As a prospect you are likely to go intuitively with a mortgage provider that can walk you through each detail and set your expectations regarding pricing and fees, credit eligibility, interest rate, purchase cycle time and application status updation at each stage of the process. Getting early access to handy documentation guidelines and credit assessment tools can give a realistic picture of what to expect, allowing you to be on the same page as your lender. The mortgage loan process lifecycle comprises pre-approval, home/property recce, mortgage application, loan processing, underwriting and closing.
Be organized with paperwork
By prioritizing documentation and being in touch with your lender, you can avoid communication gaps and spare yourself the stress of eleventh-hour requests for documents at any stage of the process. Also, a pre-qualification letter is a preliminary step to determine your affordability wherein the lender gets a bird’s eye view of your credit history to ascertain your ability to repay a mortgage. A debt to income ratio that shows reasonable fiscal prudence is the promising start you need. So, it makes sense to do the groundwork and on your toes for the next round!
A pre-approval will allow you to transition into the buying process past other buyers while unequivocally communicating to the seller your intention to buy the property. At the very least, a pre-approval gives you latitude in a highly competitive market. This stage determines the (ballpark) loan amount you are eligible for based on your credit score and payment patterns. It is possible to get pre-approval in the shortest turnaround time of 24 hours.
With this in place, you are all set for viewing the choicest homes in your price bracket. For shortlisting homes from the latest inventory, you can count on a real estate agent’s fine sense of local market conditions, negotiation acumen and experience with reviewing documents and providing well-researched data on the property and neighborhood.
Completing your mortgage application
As an official commencement, this sets the mortgage loan process rolling. You will be required to fill out your personal, financial data and furnish information/documents primarily under the following categories.
Income and employment (W-2s, pay stubs, bank statements)
Federal tax returns
Assets and long-term debts (car loan etc.)
Legal and financial declarations
Social security number
For refinancing, you may be required to supply additional information such as title, deed, and homeowner’s insurance. If applying for a VA loan, you may be required to provide proof of military service.
Your lender will conduct a verification of the information provided and calculate a loan estimate (LE). The document gives a clear picture of the loan breakdown with components such as loan amount, interest rate, monthly payment (drilled down to principal, interest, taxes and insurance), service-related cost such as origination fee, discount points, processing cost and closing costs.
Upon receipt of your loan estimate, you are entitled for loan processing which can be completed in a flexible time-frame of 45 to 90 days. Loan processors are obliged to set in motion the following:
Verifying employment (VOE) and bank deposits (VOD)
Scheduling Home Appraisal/Title search
Order Property inspection (if required)
While a home appraisal helps to know if the home’s true value and purchase price are in alignment for it to be a sound investment, a title search checks for any outstanding liens on the property. Home inspection is conducted to check the sound working of plumbing, electrical, HVAC etc. and any anomaly or contingency can be addressed or be factored into the contract. For those looking to refinance or to purchase a new one by selling off an existing property, their loan payoff information can be used to arrive at the final loan amount. To align with compliance and regulatory mandates, the processor will review all documents in your loan file before passing it on to underwriting.
The underwriter evaluates all the documentation and the merits of the information provided on eligibility parameters of the mortgage product applied for as well as credit history and capacity to repay the loan. This thorough cross-checking can also reveal red flags. An underwriter retains the right to approve a loan subject to conditions such as a written explanation for late payments.
Locking interest rate is a major move in order to seal the deal post approval and usually a 30, 45, or 60-day window is a reasonable timeline for the commitment.
Having a title insurance in place ensures a smooth closing and if all contingencies are satisfied, you are headed for a closing meeting. A Closing Disclosure (CD) precedes the closing meeting. Your lender will share this document and you must peruse the terms of the agreement and final costs during a three-day review period. Gain clarity from your lender if in doubt. You are now expected to arrange for your down payment and closing costs.
The closing meeting is the most awaited moment but be sure to carry ID proof and checkbook to to go through key documents (Deed of Trust, Promissory Note, Certificate of Occupancy etc.) and if required, to pay any differential amount and finally sign on the dotted line to make a grand entry into your new home!
As special as a home buying decision can be, a long-winded process can take away the zest in the long haul. At Simple Lending, we believe that the odds for a purchase or a refinancing decision are as strong as the choice of your lender. Our endeavor is to provide the best experience along the mortgage buying lifecycle, right from finding the right product fit for your needs to comparing rates and loan options to advising on payment terms to closing. We value our relationship with funding banks and financial institutions that adhere to strict federal underwriting standards and regulatory practices. Ultimately, we protect your interest with the most updated knowledge, technology upgradation and mortgage servicing rules.