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It’s your money, you deserve to know how it’s being spent! No question is insignificant.
Pre-Qualification (LO means Loan Officer)
The Pre-Qualification process sets the stage for the entire home buying process. Get the conversation started! Be prepared with the following information:
Contact information including email, home address, phone numbers, etc.
Your monthly gross income.
Your employer name, address and phone number.
Assets: Checking and savings accounts, 401k, stocks, et. al and approximate balances.
Do you own other properties? What are their addresses? If you rent them, what is the rental amount?
You can use 75% of the rental amount toward your income.
With your written permission, the LO will ask to run your Credit Report. Your liabilities will automatically download with the FICO Score.
We calculate home affordability and sustainability then write the pre-qualification letter for you to give to your Real Estate Agent.
Be honest! No one is perfect. Not disclosing the financial imperfections to the LO could limit the ability to close the loan. The LO knows how to present your best financial side to the lender. And the lender has and uses resources to sniff out those imperfections. Dealing with the issue upfront and getting the right loan program to smooth the path to closing is always the best way to go.
Happy house hunting!
While you’re house hunting, the LO will be checking lender programs and rates and looking for the right fit for your financial position so that you are prepared to hit the ground running when the purchase contract is received. A discussion will take place regarding all the loan programs and benefits that fit your situation. All options are presented and the client decides how they want to proceed.
So you found the home of your dreams, now we start the loan process. In the pre-qualification phase, the loan application was started and now it needs to be completed. The LO will go over all the information gathered so far to confirm there have been no changes. A secure copy of the application will be sent to you for signature.
You’ll need to send the PURCHASE CONTRACT to the LO. The purchase contract sets the timeline for everything that needs to happen and we need to stay in compliance with your contract. The contract also tells us who the Title Company is and the LO can then gather closing cost information to prepare for the Loan Estimate.
The LO will package all the requested information in a way that will most benefit you, the buyer, and upload the information to the chosen lender. The lender will then send a Loan Estimate along with many other documents to the buyer by secure email for signature.
It’s important to note that the Loan Estimate is just that, an estimate. It should be slightly higher than what you can expect to see at closing. This is done so that we minimize any surprises at closing. THE LOAN ESTIMATE IS THE MAXIMUM COST THAT CAN BE CHARGED AT CLOSING. Prices cannot increase.
Pricing and Locking
Interest rates change daily. Pricing refers to the price of the interest rate. When we see a good price, we lock the interest rate which means the rate will no longer fluctuate for your loan. This is a larger discussion than there is room for here. The LO will be happy to teach how the rates work.
So the lender has sent out the loan documents for signature and everything has been e-signed and sent back to the lender. Processing actually started with the Loan Estimate. But at this point, a review of the documents received thus far is in order to see that everything is in order and we can move confidently to the next step.
Your loan application and support documentation has been structured to present you to the lender in the best possible light. We submit your information to the lender for the initial approval process. The lender’s underwriter will determine if your loan meets Fannie Mae / Freddie Mac, FHA, USDA or VA guidelines and the lender’s in-house guidelines for the type of loan you are seeking. This process typically takes two to four days to complete at which time we are given their findings. The underwriter is responsible for determining whether the combined package passed over by the processor is deemed an acceptable loan. If more information is needed, the loan is put into “suspense” and the borrower is contacted to supply more documentation. If your loan is approved, we will be given a list of conditions that must be addressed with additional documentation and explanations.
Your LO will be working with you to complete requirements that the lender request for them to approve your loan and provide a Clear-To-Close (CTC). These might include payment of homeowner’s insurance, completing repairs on the subject property, providing tax returns, pay stubs or other documentation, and signing additional lender required documents or forms. Please understand that the recent changes in the Mortgage Market have forced all lenders to be very strict and restrictive regarding their lending policies. If this isn’t your first home loan then you might be surprised by the amount of documentation that you will be required to provide. It’s not you, it’s a sign of the times.
Final Loan Approval
You are almost done. The Final Loan Approval stage of the process is typified by the race to complete the lender’s requirements before the expiration of your contract or the scheduled date of closing. Once the lender’s requirements have been satisfied, we will receive a Clear-To-Close (CTC) for your loan. With that we will receive the Closing Disclosure (formerly called HUD-1) that details the amount of money that you are required to bring to closing on a purchase. For refinances, the Closing Disclosure could detail the amount of money that you are either required to bring or the amount that you will receive from the bank. The Closing Disclosure statement details all closing costs, the loan’s interest rate, payment amount, and any disbursements. However, this Closing Disclosure is sent out to start the 3-day waiting period or cooling off period. Over the 3-day waiting period, the Title Closing Agent, LO and Lender’s Closing Agent scrub the numbers to make sure they are correct so the Final Closing Disclosure may change.
Congratulations, you are about to cross the finish line! If you are purchasing a home, you will need to arrange to a wire transfer for the amount of money that was detailed on the Final Closing Disclosure that you received prior to closing. Typically the Seller, Buyer, Listing Agent and Selling Agent will attend the closing. At the closing, our lender “funds” the loan, with a wire transfer to the closing attorney that is paid to the selling party in exchange for the title to the property. This is the point at which you complete the loan process and actually buy your house. Closing typically takes 45 to 60 minutes to complete depending upon the type of transaction. If you wish to read the closing documents in detail, then we strongly suggest that you request a copy of the closing documents before the closing date. The closing attorney will be happy to provide you an initial package for you to review. Please keep in mind that you will be signing standardized template documents that you are required to sign in order to complete the loan process. The loan documents should definitely be reviewed, but as a courtesy to everyone at the table, we recommend that borrowers be prepared.
If you are refinancing your loan the closing will be slightly different. The only people that should be attending will be yourself, your spouse and the closing attorney. Keep in mind that you will have a three day right of rescission on this loan, and the loan will not be considered final and closed until the passage of 72 hours of time. The closing attorney will provide you with the process and requirements for rescission.