How to Get a Home Mortgage

8/12/2019 How to Get a Home Mortgage

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How to Get a Mortgage Home

Loan

The Mortgage Loan Process and

FAQs for Home Buying &

Renance Home Loans


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Ta!e of "ontents

"ha#ter $ % The Home Buying Mortgage Process

"ha#ter % Fre'uent!y As(ed Questions aout Buying a

Home

"ha#ter ) % The Mortgage Renance Process

"ha#ter * % Fre'uent!y As(ed Questions aout a Renance

"ha#ter + % Reasons for Renancing a Mortgage

"ha#ter , % "ommon Ty#es of Home Loans

"ha#ter - % Questions to As( a Mortgage Lender


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"ha#ter $ % The Home Buying Mortgage Process

Getting a mortgage to buy a home starts before you even start looking at homes for

sale. For example, did you know that real estate agents and home sellers consider a

pre-approved buyer's oer more attractive than the same oer from a buyer who

has not been pre-approved for a mortgage

!tep "# Get pre-approved

$nce you've decided that you want to buy a home, you should determine what

mortgage payments you can aord. %here are many tools available such as an

aordability mortgage calculator that gives you a general idea of what your

payments would be, but to get a better idea of the price range of homes to view,

you should get pre-approved. & mortgage pre-approval is benecial in many ways.

First, it gives you an idea of what loan amount and purchase price you can aord.

!econd, it strengthens your oer to the seller and the seller's real estate agent.

%hird, by getting pre-approved, you're getting a (ump start on the mortgage

approval process. $nce you nd your home and open escrow, you're already a few

steps ahead.

!tep )# *etermine which home loan best suits your needs

%here are many home loan options available from rst-time buyer programs to

traditional conventional, (umbo, and F+& loans. %here are year and " year xed

loans as well as ad(ustable and hybrid loans such as a /" &01 or /" &01.

!tep # 2ontact a real estate agent and start shopping

$nce you've been pre-approved for a mortgage and have an idea of what pricerange you 3ualify for, you can work with a real estate agent to view homes for sale

in the areas you'd like to live. $nce you nd a home you like, you can work with the

real estate agent to draw up an oer and complete a purchase agreement. %he

seller has the option to submit a counter-oer and you may go through several

rounds of counters. $nce you and the seller agree to the price and terms, escrow

will be opened. %ypical escrow periods are days but 4 and 5 day escrows are

not uncommon.

!tep 4# 0eview your home loan application and update your le

*epending on how much time has passed since your mortgage pre-approval, thelender may need to collect some updated information and updated documents from

you. %he mortgage lender probably has everything needed, but it is a good idea to

go over the home purchase document checklist to ensure everything is complete.

$nce the mortgage lender has updated your le, your home buying specialist will go

over the details of your home loan program, conrm the rate that you want, and go

over your closing fees. %he lender should make sure that you understand every


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detail of your mortgage program and answer any 3uestions you have before moving

forward.

!tep # 6ock your mortgage rate

&t this point, if you'd like to secure your mortgage rate, your lender will send you a

lock agreement to conrm the terms of the loan and rate. $nce you review and

approve the lock agreement, your home buying specialist will collect a lock deposit

fee to lock in your rate. %he lock deposit will be credited towards your closing fees

at the end of the transaction. $nce the lender receive the signed lock agreement

and lock deposit, the lender will send you some preliminary disclosures such as the

good faith estimate and truth-in-lending disclosure to review and sign, which detail

the terms of your loan.

!tep 5# +ome inspection and appraisal

!hortly after escrow is opened, it is advisable to schedule a home inspection with a

professional who will walk you through the property to look for any red 7ags such as

structural damages or appliances that may not be working properly and other items

that may need to be xed. 8t is a small investment for some peace of mind. &ny

ma(or issues would need to be addressed before the close of escrow date. 9hile

your loan is being reviewed and processed, the lender will schedule an appraisal

appointment with the seller's agent to conrm the value of the home. :nlike a home

inspection, that appraisal is a re3uirement to determine that the home is worth

what you are paying for it.

!tep ;# +ome loan approval , signing and closing

9hen the mortgage lender has everything needed, your account manager will

submit your complete le to the underwriting department for approval. $nce

approved, the lender will prepare loan documents for you to sign. Generally, you will

sign your loan documents at the escrow or title o


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"ha#ter % Fre'uent!y As(ed Questions aout Buying a Home

=uestion# +ow do 8 know how much 8 can aord

%here are several factors that determine the loan amount and purchase price that

you can aord. For 3ualication purposes, lenders look at income, debt, assets >how

much money you have for the down payment, closing fees, points, and other funds

necessary to close your loan?, as well as credit. %here are many dierent loan

programs that oer dierent terms and rates, and some re3uire lower down

payments than others and oer more 7exibility in credit and income. %he best thing

to do is get pre-approved so that you know what loan programs you 3ualify for, the

price range you can aord, and what your monthly payments will be. 6enders will

often provide a pre-approval at no cost. @ou can also use an aordability calculator

to nd out what your payments would be and determine what purchase price and

loan amount is comfortable for you.

=uestion# +ow much money do 8 need to buy a home

%raditional conventional nancing re3uires a down payment of " to )A of the

purchase price of the homeB however, there are other programs available such as

an F+& loan that allows you to buy a home with as little as .A down. 8n addition

to the down payment, you should be aware that there are other fees associated

with purchasing a home. For example, there are closing fees, pre-paid interest, and

prorated items such as property taxes and homeowner's insurance.

=uestion# 9hat's the dierence between a pre-3ualication and a pre-approval

& pre-3ualication is an informal cursory review of your income, assets, and credit,

usually conducted over the phone. $nce the necessary information is gathered, the

lender issues an estimate of loan amount and purchase price for which you 3ualify.

& pre-3ualication still gives a potential buyer a good idea of aordability but it is

not as comprehensive as a pre-approval which is a more formal, more intense

process where income, assets, and credit are documented and veried. & pre-

approval is a conditional approval that holds more weight with a seller and the

seller's real estate agent than a pre-3ualication, especially if you are competing

with another oer.

=uestion# *o 8 need a home inspection

&lthough a home inspection is not re3uired, it is a good idea to obtain the servicesof a professional 3ualied inspector to help you determine the condition of the

home you are looking to purchase. & professional inspector will look for any

structural issues as well as mechanical problems that may exist in the home that

could cause problems in the future. 8n addition to a structural review, an inspector

will also check faucets, toilets, appliances, and other items in the home to make


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sure everything is in working order. 8f something needs to be addressed, you can

discuss items prior to closing.

=uestion# 9hat type of documentation do 8 need for a purchase loan

!tandard documentation collected for a purchase transaction includes information

regarding your income such as paystubs covering the most recent days and 9-)s

for the last two years, asset information such as bank or mutual fund stock

statements covering the last 5 days showing source of funds for your down

payment, closing fees, points and pre-paid items needed to close your loan.

=uestion# +ow long is the purchase process

& typical escrow period is , 4, or 5 days. %he escrow period, dened on the

purchase contract and agreed upon by both buyer and seller, is usually what

dictates when your loan closes. 8f you have already entered escrow and are closing

in less than days, the lender can still close your loan on time if the lender is

brought into the loop as soon as possible.

=uestion# 9hat happens at the loan closing

%ypically, you will sign your loan documents at a designated settlement o


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"ha#ter ) % The Mortgage Renance Process

Cefore you renance your home, it's important to know how renancing works, what

3uestions to ask, research what options are available, and determine whether or not

renancing will benet you.

!tep "# *ene your goals

$ne of the most important steps before deciding whether or not mortgage

renancing can benet you is to determine what your ob(ectives are. 8s your goal to

reduce your monthly payment or pull cash out of your e3uity for home

improvements or debt consolidation &re you looking to x your ad(ustable rate

$nce you determine your goals, you can take a look at the various home loan

programs available to decide which loan option helps you achieve those goals.

!tep )# 8n3uire online or call a lender

$nce you've dened your goals and researched all the loan options available, youcan submit your information online or pick up the phone. @our 1ortgage Canker can

answer any 3uestions you have about how to renance, the loan program you're

considering or can make a recommendation for you given your individual goals. %he

lender should make sure that you understand every detail of your loan program and

answer any 3uestions you have before moving forward

!tep # !elect your loan program

8f you decide you'd like to move forward with the renance, your 1ortgage Canker

will conrm your loan program, rate, and payment. &t this point, you can lock in

your interest rate to protect you against any 7uctuations in the market. $nce yourrate is locked, you should receive a lock agreement conrming the terms of your

loan and your banker may collect a lock deposit fee to naliDe the lock. %he lock

deposit should be credited towards your closing fees at the end of the transaction.

!tep 4# !ubmit your documents

&fter the lender receives the signed lock agreement and lock deposit, your banker

will provide you a list of items to fax or e-mail so that the lender can verify all your

information to get your loan approved and closed 3uickly. 2lick here for the

renance document checklist. %he lender will also send you some preliminary

disclosures such as the good faith estimate and truth-in-lending disclosure to reviewand sign which detail the terms of your rate and loan. 8n a few days, the lender will

contact you to schedule the appraisal inspection. 8t is important to schedule the

appraisal appointment as 3uickly as possible to prevent any delays in your closing.

!tep # %he lender handles it from here


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&fter the lender receives all your documents, your assigned &ccount 1anager

should contact you to go over the next steps, which includes opening escrow,

ordering the preliminary title report, and coordinating with all the necessary parties

to ensure your loan progresses smoothly and 3uickly. $nce the lender has

everything needed, your loan le will be submitted to the underwriter for review

and formal approval.

!tep 5# 2lose your home loan

:pon approval, the lender should contact you to schedule a loan document signing

appointment. %his appointment will generally take minutes to an hour and can

be done at the convenience of your home or at an approved settlement location.

&fter the lender receives the signed loan documents, your loan should close

approximately days later.

1ore about a renance mortgage at loan*epot
http://www.loandepot.com/Refinance/RefinanceYourHome.aspxhttp://www.loandepot.com/Refinance/RefinanceYourHome.aspx


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"ha#ter * % Fre'uent!y As(ed Questions aout a Mortgage Renance

=uestion# !hould you renance

%o determine whether or not it is a good idea for you to renance, you should look

at your specic situation and your motivation for renancing. %he most common

reasons to renance are to reduce your rate and/or payment, convert from an

ad(ustable to a xed rate, or pull cash out of your e3uity to consolidate debt or

improve your home. 8f your ob(ective is to reduce your rate and payment, you

should review your current interest rate and see how much you can save with a

point loan and then determine if it makes sense to pay points to reduce your rate

further. 8f you are converting your ad(ustable rate into a xed rate, you may actually

see an increase in your rate and payment but youEll get peace of mind knowing your

rate will never increase again. 8f you are using the e3uity in your home to

consolidate debt, your overall loan balance and payment may go up, but you will

save monthly because you will eliminate the monthly obligations that you are

paying o. @our mortgage banker can run some numbers for you and help youdetermine whether or not renancing makes sense for you.

=uestion# +ow much can you save

very situation is dierent. 8t depends on what your current interest is and what

your motivation is for renancing. 8f your current rate is higher than what is

available in the market, it probably makes sense to renance. %o get an idea of what

you could save by renancing, check out a payment savings calculator and input

numbers specic to your situation.

=uestion# 9hat if you have a second mortgage

%ypically, any second mortgages are paid o through the renance. %he lender will

consolidate both loans into one new rst mortgage and you will only have one

payment each month. 8f youEd prefer to keep your second mortgage intact, the

lender may be able to ask your second mortgage lender to remain in second

position and allow us to renance the rst loan. %his process is called subordination

and there is typically a fee charged by the second mortgage lender.

=uestion# 9hat are the costs associated with renancing

Fees associated with renancing vary from lender to lender but there are standard

fees that are typical across the board. %hese fees include rd party fees such ascredit report, title, escrow, notary, and recording fees. $ther fees include the

appraisal fee and lender fees such as processing and underwriting. 8f you are paying

points to lower the rate, the cost of each point that you pay e3uals "A of your new

loan amount. &side from the closing fees, there will be prorated pre-paid costs for

items such as property taxes, interest, and homeowners insurance >if applicable?. 8f


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you have enough e3uity in your home, you can add all fees and pre-paid items into

your new loan.

=uestion# 9hat type of documentation do you need

!tandard documentation collected for a renance transaction includes information

regarding your income such as paystubs covering the most recent days and 9-)s

for the last two years, asset information such as bank or mutual fund/stock

statements covering the last 5 days and current loan information such as your

most recent mortgage statement and homeowners insurance declarations page.

=uestion# !hould you renance only if the rate at least .A lower

%here is no rule-of-thumb when it comes to renancing because there are dierent

reasons. 8f you are currently in an ad(ustable rate looking to get into a long-term

xed loan, your rate and payment may actually increase, but you will be in a better

long-term situation knowing your rate and payment will not change. 8f you are

looking to consolidate debt, your loan amount and mortgage payments may go up

but your overall monthly out7ow will decrease because you will have eliminated

some or all of your credit card bills and other monthly obligations. %here are also no-

cost and low-cost renance options that can lower your rate and payment with no or

minimal investment. 8t is a good idea to go over your specic situation with a

mortgage expert to determine whether renancing makes sense or not.

=uestion# +ow long is the renance process

1ost renance transactions close within approximately days from application to

closing. &s long as you do your part in delivering the documentation in a timely

manner, the lender should be able to close your loan within to 4 days.

=uestion# 9hat happens at the loan closing

*epending on the state where your property is located, you can either sign in your

home or at a designated settlement location such as an escrow o


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"ha#ter + % Possi!e Reasons to Renance

". 0enance to a lower rate and payment

%his is one of the most common reasons for a home mortgage renance. 8f your

current interest rate is higher than what is currently available in the market, it is

probably a good idea to see how much you could save by renancing. %here are no-

cost and low-cost options that could save you money with little to no investment.

). 0enance to convert an ad(ustable rate into a xed rate

&d(ustable rate mortgage >&01? loans are a great way to ease into your mortgage

payments, especially if you are a rst time buyer or if you need lower payments

initially. ventually, if you decide you will stay in your home longer, you may want to

consider renancing your mortgage into a long term xed rate loan. *oing so will

give you peace of mind, knowing that your rate and payment will not change for a

set period of time.

. 0enance an interest-only loan into a fully-amortiDed loan

6ike &01s, interest-only loans are a great way to minimiDe your mortgage payments

at the beginningB however, because you are not paying any principal, your loan

balance does not decrease. 8f you plan to keep your home long term, renancing

can help start paying o your loan. $ften, you can renance your interest-only loan

to a year xed rate loan while keeping your payments about the same.

4. 2onvert a year loan to a shorter-term loan

!ometimes plans change and the home >and loan? that you thought you were goingto have for a while turns from a permanent situation into a temporary one. 8f you

are planning to sell your home sooner than you thought and no longer need a long-

term rate, then you may consider converting your year xed to either an &01 or

a /", /", or ;/" loan program, which often have lower rates and payments.

. %ake cash out to consolidate debt

6everaging the e3uity in your home is one of the smartest ways you can make your

money can work for you. :se the cash from your home to pay o higher interest,

credit cards, student loans, or medical bills. Cy consolidating your debts, you can

en(oy the benet of having only one payment each month, and in most cases your

overall monthly out7ow decreases.

5. %ake cash out for home improvements

9hat better way to use your hard earned e3uity than to invest it back into your

home with repairs or home improvements 9hether you would like to x your leaky

roof or update your kitchen, you can tap into your home's e3uity and have a

possible tax deductible way to tackle your pro(ects. consult with your tax advisor


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;. %ake cash out to buy investment property

9ith home prices and interest rates at the lowest they've been in years, if you've

been thinking about buying a vacation home or an investment property, now may

be a great time to take action. %ap into your home's e3uity and use the cash for

your down payment, home improvements, or for any reason.

H. 0emove mortgage insurance

8f you purchased your home with less than )A down, chances are you're paying

private mortgage insurance >pmi?. 0enancing will help you eliminate the extra

expense if you've paid down your loan balance and/or have seen an increase in your

home's value to a point where you have at least )A e3uity in your home, or a

loan-to-value >6%I? of HA or less.


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"ha#ter , % "ommon Ty#es of Home Loans

Fi.ed Rate Mortgages

Fixed rate mortgage loans come in various types, and are generally the most

popular loans for those looking to buy or renance their homes.

%his is due to the security that xed mortgage rates provide, ensuring consistent

monthly payments, without worry or hassle about changing interest rates.

8f you are planning to own your home for several years or more, a xed rate home

loan may be your best option.

%he most popular loan program is the @ear Fixed 0ate +ome 6oan, but ) year,

" year, and " year xed rate loans are also popular.

1ore about xed rate home loans at loan*epot
http://www.loandepot.com/LoanOptions/FixedRate.aspxhttp://www.loandepot.com/LoanOptions/FixedRate.aspx


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Ad/usta!e Rate Mortgage 0ARM1

2onsidering an ad(ustable rate mortgage

&n &01 loan may be a good option if you anticipate a signicant increase in your

income or property value in the next several years.

&lso, if you plan on staying in your home short-term, or would like to signicantly

lower your payment, an &01 home loan might be right for you.

&s the name implies, &d(ustable 0ate 1ortgages >&01 loans? have interest rates

that change at a pre-determined fre3uency.

Federally insured F+& &01 rates to renance or buy a home are also available.

1ore about &01 home loans at loan*epot
http://www.loandepot.com/LoanOptions/ARM.aspxhttp://www.loandepot.com/LoanOptions/ARM.aspx


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2umo Mortgage Loans

Jumbo mortgages are home loans that exceed the conforming funding limits set by

government-sponsored enterprises >G!? Fannie 1ae and Freddie 1ac.

2onforming loans are home loans that meet Fannie and Freddie guidelines and

typically, have a set maximum loan amount.

%he conforming loan limits set by Fannie 1ae and Freddie 1ac vary by countyB some

states and counties have a higher conforming limit than others due to the cost of

housing. 8n most housing markets, the conforming limit is K4";,

Jumbo loans are considered to be higher risk than a traditional mortgage because

you are borrowing a larger-than-average amount of money.

%his is one reason interest rates for (umbo loans are usually higher than conforming

loans. &lso, the approval process for a (umbo loan is generally more rigorous and

there are more stringent credit, income and reserves re3uirements.

1ore about (umbo home loans at loan*epot
http://www.loandepot.com/LoanOptions/Jumbo.aspxhttp://www.loandepot.com/LoanOptions/Jumbo.aspx


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FHA Home Loans

8nsured by the Federal +ousing &dministration >F+&?, F+& home loans are

government-assisted alternatives to conventional nancing.

F+& loans were originally oered by lenders to rst-time home buyers with

imperfect credit. Low, F+& loans are open to a wider audience, and are even

popular options for homeowners looking to renance.

$verall, F+& mortgage loans provide more 7exibility in credit, income, and

e3uity/down payment re3uirements, and are great alternatives to conventional

loans.

%hey do include a 1ortgage 8nsurance Mremium >18M?, as well as monthly mortgage

insurance, but a xed rate F+& loan enables many homeowners who wouldnEt

3ualify for conventional nancing to purchase or renance a home.

1ore about F+& home loans at loan*epot
http://www.loandepot.com/LoanOptions/FHA.aspxhttp://www.loandepot.com/LoanOptions/FHA.aspx


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3A Home Loans

%he I& loan program is available to individuals who have served or are presently

serving in the :.!. military for renancing or buying a primary residence.

%he *epartment of Ieterans &airs >I&? does not lend money for I& loans, but it

backs loans made by private lenders >banks, savings and loans, or mortgage

companies?.

%his essentially means that the Ieterans &dministration stands as the insurer for all

their loan programs and packagesB they guarantee a portion of the loan to the

lender if anything goes awry >missed payments, defaults, etc.?. %his gives lenders a

sense of security during the approval process.

%hose who are eligible for a I& loan include# Ieterans, &ctive-duty personnel,

Lational Guard/0eserve members and some surviving spouses.

%hough I& loans do not re3uire any pre-existing e3uity or income documentation,you must have an ade3uate credit rating, su


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Mortgage Loan "a!cu!ators

@ou can crunch your own numbers with online mortgage calculators and run as

many dierent scenarios as you'd like for home purchase, renance, mortgage

3ualifying, rent vs. buy, &01 vs. xed rate.

$nline mortgage calculators at loan*epot

Mortgage 4nterest Rates

1ost of the popular home loan rates are available online for you to compare. @ou

can also personaliDe your mortgage rate search by adding specic parameters.

2urrent mortgage rates at loan*epot
http://www.loandepot.com/MortgageCalculators.aspxhttp://www.loandepot.com/RateViewer.aspxhttp://www.loandepot.com/MortgageCalculators.aspxhttp://www.loandepot.com/RateViewer.aspx


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"ha#ter - % Questions to As( a Mortgage Lender

@ou may have heard the old saying N@ou wonEt know if you donEt askO. %his is

especially true when shopping for a mortgage to nance what may be the home of

your dreams. $btaining a mortgage is one of the single most important and largest

nancial decisions you may make in your life. Cefore choosing a mortgage lender orbroker and determining which loan works best for you, be certain you have the

information you need to make an informed decision.

Cefore applying for your home loan, ask a lender or mortgage broker these key

3uestions that will help you select the lender thatEs right for you and help you

gather the information you need to know before starting the mortgage application

process.

". +ow long does the loan process take

%he average loan process for a home purchase depends on the loan and lender. %he

process from application to funding generally takes between and 4 days.

). +ow much will obtaining a loan cost me &re those Nout-of-pocketO costs or can 8

nance them into the loan amount

1ortgages come with fees to cover a range of services related to the process of

funding your mortgage. Fees vary from lender to lender so be sure to ask up front

which fees to expect, and which fees can be negotiated. 6enders are re3uired to

provide a written good-faith estimate of closing costs within three days of receiving

a loan application.

. +ow do 8 3ualify for a loan 9hen will 8 know if 8 3ualify

%he determining factors in the 3ualication process are typically your credit score

and history, your property value, and your debt-to-income ratio. $ther factors may

be included in the consideration process, but these three are the primary factors

lenders consider when evaluating a potential borrowerEs credit worthiness.

8n general, these factors determine the perceived level of risk associated with your

ability to responsibly manage a loan, and determine your loan decision as well as

your interest rate, in some cases. very lender is dierent, so make sure you ask

these important 3uestions.

4. 9hat kind of documentation must 8 provide to get approved for a mortgage loan

1ost lenders will re3uire proof of income and assets before approving your loan.

6enders will be able to provide you with their specic re3uirements.

. *o 8 need an appraisal on the property 8 am hoping to buy or renance 9hat

happens if the appraised value isnEt what 8 think it is


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!ometimes lenders do not need to obtain an appraisal, other times they re3uire a

full appraisal, and there are levels in between the two. &ppraisal needs are

generally determined based on specic loan programs versus being credit/income

driven. %his determination is typically made after reviewing your application and the

selection of a loan program that best meets your needs.

5. 2an 8 renance my mortgage if 8 donEt have e3uity in my home

1ost lenders re3uire a homeowner to have at least ) percent e3uity in a home

before theyEll approve a renance. +owever, it is possible to renance your

mortgage if you donEt have e3uity in your home, or even have negative e3uity. %he

federal government has implemented the +ome &ordable 0enance Mrogram

>+&0M? to assist homeowners who may not have su


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Documents

How to Get a Home Mortgage