How to Get a Mortgage Home Loan

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    18-Nov-2014

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Mortgage FAQs and the home loan process.

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  • 1. How to Get a Mortgage at loanDepot Chapter 1 - The Home Buying Mortgage Process Chapter 2 - Frequently Asked Questions about Buying a Home Chapter 3 - The Mortgage Refinance Process Chapter 4 - Frequently Asked Questions about a Refinance Chapter 5 - Reasons for Refinancing a Mortgage Chapter 6 - Common Types of Home Loans Chapter 7 - Questions to Ask a Mortgage Lender Written by Rick Smith Visitrick@gmail.com
  • 2. Chapter 1 - The Home Buying Mortgage Process Do you know that real estate agents and home sellers consider a lender pre-approved buyer more attractive than a buyer who has not been pre-approved for a mortgage? Step 1: Get pre-approved for a mortgage A mortgage pre-approval is beneficial in many ways. First, it gives you an idea of what loan amount and purchase price you can afford. Second, it strengthens your offer to the seller and the seller's real estate agent. Third, by getting pre-approved, you're getting a jump start on the mortgage approval process. Once you find your home and open escrow, you're already a few steps ahead. Step 2: Determine which home loan best suits your needs There are many home loan options available from first-time buyer programs to traditional conventional, jumbo, and FHA loans. There are 30 year and 15 year fixed loans as well as adjustable and hybrid loans such as a 5/1 ARM or 3/1 ARM. Step 3: Contact a real estate agent and start shopping Once you've been pre-approved for a mortgage and have an idea of what price range you qualify for, you can work with a real estate agent to view homes for sale in the areas you'd like to live. Once you find a home you like, you can work with the real estate agent to draw up an offer and complete a purchase agreement. The seller has the option to submit a counter-offer and you may go through several rounds of counters. Once you and the seller agree to the price and terms, escrow will be opened. Typical escrow periods are 30 days but 45 and 60 day escrows are not uncommon. Step 4: Review your home loan application and update your file Depending on how much time has passed since your mortgage pre-approval, the lender may need to collect some updated information and updated documents from you. The 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. Once the mortgage lender has updated your file, your home buying specialist will go over the details of your home loan program, confirm the rate that you want, and go over your closing fees. The lender should make sure that you understand every detail of your mortgage program and answer any questions you have before moving forward. Step 5: Lock your mortgage rate At this point, if you'd like to secure your mortgage rate, your lender will send you a lock agreement to confirm the terms of the loan and rate. Once you review and approve the lock agreement, your home buying specialist will collect a lock deposit fee to lock in your rate. The lock deposit will be credited towards your closing fees at the end of the transaction. Once the lender receive the signed lock
  • 3. 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. Step 6: Home inspection and appraisal Shortly 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 flags such as structural damages or appliances that may not be working properly and other items that may need to be fixed. It is a small investment for some peace of mind. Any major issues would need to be addressed before the close of escrow date. While your loan is being reviewed and processed, the lender will schedule an appraisal appointment with the seller's agent to confirm the value of the home. Unlike a home inspection, that appraisal is a requirement to determine that the home is worth what you are paying for it. Step 7: Home loan approval , signing and closing When the mortgage lender has everything needed, your account manager will submit your complete file to the underwriting department for approval. Once approved, the lender will prepare loan documents for you to sign. Generally, you will sign your loan documents at the escrow or title office and it will generally take between an hour and an hour and a half. After the lender receives the signed loan documents back, the lender will review your file one more time to make sure everything is complete. If everything looks good, your home loan should fund 3 days after signing. More about purchase home loans at loanDepot
  • 4. Chapter 2 - Frequently Asked Questions about Buying a Home Question: How do I know how much I can afford? There are several factors that determine the loan amount and purchase price that you can afford. For qualification 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. There are many different loan programs that offer different terms and rates, and some require lower down payments than others and offer more flexibility in credit and income. The best thing to do is get pre-approved so that you know what loan programs you qualify for, the price range you can afford, and what your monthly payments will be. Lenders will often provide a pre-approval at no cost. You can also use an affordability calculator to find out what your payments would be and determine what purchase price and loan amount is comfortable for you. Question: How much money do I need to buy a home? Traditional conventional financing requires a down payment of 10 to 20% of the purchase price of the home; however, there are other programs available such as an FHA loan that allows you to buy a home with as little as 3.5% down. In 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. Question: What's the difference between a pre-qualification and a pre-approval? A pre-qualification is an informal cursory review of your income, assets, and credit, usually conducted over the phone. Once the necessary information is gathered, the lender issues an estimate of loan amount and purchase price for which you qualify. A pre-qualification still gives a potential buyer a good idea of affordability 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 verified. A pre-approval is a conditional approval that holds more weight with a seller and the seller's real estate agent than a pre-qualification, especially if you are competing with another offer. Question: Do I need a home inspection? Although a home inspection is not required, it is a good idea to obtain the services of a professional qualified inspector to help you determine the condition of the home you are looking to purchase. A 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. In addition to a structural review, an inspector will also check faucets, toilets, appliances, and other items in the home to make sure everything is in working order. If something needs to be addressed, you can discuss items prior to closing. Question: What type of documentation do I need for a purchase loan? Standard documentation collected for a purchase transaction includes information regarding your income such as paystubs covering the most recent 30 days and W-2s for the last two years, asset
  • 5. information such as bank or mutual fund stock statements covering the last 60 days showing source of funds for your down payment, closing fees, points and pre-paid items needed to close your loan. Question: How long is the purchase process? A typical escrow period is 30, 45, or 60 days. The escrow period, defined on the purchase contract and agreed upon by both buyer and seller, is usually what dictates when your loan closes. If you have already entered escrow and are closing in less than 30 days, the lender can still close your loan on time if the lender is brought into the loop as soon as possible. Question: What happens at the loan closing? Typically, you will sign your loan documents at a designated settlement office such as an escrow office or attorney's office. In the presence of the signing authority, you will review and sign all your loan documents and then present a certified or cashier's check to pay the remaining down payment, closing fees and other applicable closing funds. You may also wire your funds directly into escrow. Your loan processor will guide you through the process and will advise you on what needs to be done when.
  • 6. Chapter 3 - The Mortgage Refinance Process Before you refinance your home, it's important to know how refinancing works, what questions to ask, research what options are available, and determine whether or not refinancing will benefit you. Step 1: Define your goals One of the most important steps before deciding whether or not mortgage refinancing can benefit you is to determine what your objectives are. Is your goal to reduce your monthly payment or pull cash out of your equity for home improvements or debt consolidation? Are you looking to fix your adjustable rate? Once 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. Step 2: Inquire online or call a lender Once you've defined your goals and researched all the loan options available, you can submit your information online or pick up the phone. Your Mortgage Banker can answer any questions you have about how to refinance, the loan program you're considering or can make a recommendation for you given your individual goals. The lender should make sure that you understand every detail of your loan program and answer any questions you have before moving forward Step 3: Select your loan program If you decide you'd like to move forward with the refinance, your Mortgage Banker will confirm your loan program, rate, and payment. At this point, you can lock in your interest rate to protect you against any fluctuations in the market. Once your rate is locked, you should receive a lock agreement confirming the terms of your loan and your banker may collect a lock deposit fee to finalize the lock. The lock deposit should be credited towards your closing fees at the end of the transaction. Step 4: Submit your documents After 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 quickly. Click here for the refinance document checklist. The lender will also 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 rate and loan. In a few days, the lender will contact you to schedule the appraisal inspection. It is important to schedule the appraisal appointment as quickly as possible to prevent any delays in your closing. Step 5: The lender handles it from here After the lender receives all your documents, your assigned Account Manager 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 quickly. Once
  • 7. the lender has everything needed, your loan file will be submitted to the underwriter for review and formal approval. Step 6: Close your home loan Upon approval, the lender should contact you to schedule a loan document signing appointment. This appointment will generally take 30 minutes to an hour and can be done at the convenience of your home or at an approved settlement location. After the lender receives the signed loan documents, your loan should close approximately 3 days later. More about a refinance mortgage at loanDepot
  • 8. Chapter 4 - Frequently Asked Questions about a Mortgage Refinance Question: Should you refinance? To determine whether or not it is a good idea for you to refinance, you should look at your specific situation and your motivation for refinancing. The most common reasons to refinance are to reduce your rate and/or payment, convert from an adjustable to a fixed rate, or pull cash out of your equity to consolidate debt or improve your home. If your objective is to reduce your rate and payment, you should review your current interest rate and see how much you can save with a 0 point loan and then determine if it makes sense to pay points to reduce your rate further. If you are converting your adjustable rate into a fixed rate, you may actually see an increase in your rate and payment but youll get peace of mind knowing your rate will never increase again. If you are using the equity 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 off. Your mortgage banker can run some numbers for you and help you determine whether or not refinancing makes sense for you. Question: How much can you save? Every situation is different. It depends on what your current interest is and what your motivation is for refinancing. If your current rate is higher than what is available in the market, it probably makes sense to refinance. To get an idea of what you could save by refinancing, check out a payment savings calculator and input numbers specific to your situation. Question: What if you have a second mortgage? Typically, any second mortgages are paid off through the refinance. The lender will consolidate both loans into one new first mortgage and you will only have one payment each month. If youd prefer to keep your...

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