Home Loans from Start to Finish
The most important step in obtaining a first time home loan
is to find a mortgage provider who will lend you the money
you need for your dream home and match that with your credit.
We have also listed many other steps that may help you being
a first time homeowner or someone that forgot all the chains
of command to get that loan you want.
One: The Loan Application
Filling out a loan
application is the first step in obtaining a mortgage.
This usually takes place over the phone with the loan officer.
Sometimes you can even aply over the internet. You'll
be asked for information about employment, earnings, savings,
and so forth. You'll be asked to provide documentation,
such as W-2's, recent pay stubs, and perhaps even copies
of your income tax return. The loan officer will also check
your credit report.
It's important to make sure your application is complete
and accurate. Missing or incorrect information can delay the
loan or can even cause you to be turned down for a loan. A
good loan officer will take time with you and not rush through
Two: Loan Processing
Once your loan application has been completed, the loan officer
passes the application to the processor. The processor's
job is to organize the paperwork and make sure all the documentation
is complete. It's her job to make sure that the loan
officer hasn't missed anything. It's common for
the processor to give the borrower a phone call to verify
facts or request additional documentation.
The processor will analyze the numbers. She'll evaluate
your income and how much cash you are bringing to the deal.
She may also update your credit report if there's anything
that needs to be updated in your favor.
When the processor has gotten all the paperwork in order,
she turns the file over to the underwriter. The underwriter's
job is, essentially, to check the work of the processor. The
underwriter will compare the facts in the applicant's
file to the guidelines of the loan type being offered, and
make sure that all the conditions are met favorably. As long
as you can meet all the guidelines of the loan, your loan
will be approved.
Sometimes there's still some missing information at
this point that will delay your loan approval. For instance,
if an appraisal of the property is required, the appraisal
may not have been completed yet. In cases like these, the
underwriter will approve the loan, conditional upon meeting
certain critieria. Then he will send the loan back to the
processor, who will make sure the conditions get met –
such as making sure the appraisal comes in at a high enough
Four: Closing and Funding
Once the loan is approved by the underwriting department,
it goes to closing. Closing is the process where the lender's
office communicates with the title company to get all the
paperwork in order for settlement.
At this stage, the money is made available for the loan. Banks
and many mortgage companies use their own money to fund the
loan, so no wire transfers from other entities are needed.
But in many cases, especially with mortgage brokers, another
entity actually funds the loan. The money is wired electronically
a day or two ahead of time to make sure it's available
the Settlement Table
The paperwork is done. The conditions of the loan have been
met at every stage of the way. The funds are available. Before
you get to the settlement table, however, your lender should
give you a Good Faith Estimate of Settlement Costs. You should
review this document and make sure you understand it before
proceeding to settlement.
It all comes together at the settlement table. At settlement,
several parties are represented. The buyer and the buyer's
real estate agent will be there, as will the seller and his
agent. A settlement attorney, who acts on behalf of both the
buyer and the seller, conducts the final transaction. If every
person has done his job along the way, the settlement will
be smooth, with no last-minute problems.
Buyers and sellers will each be given a settlement sheet and
asked to review the numbers to make sure they are correct.
Since the numbers are often confusing, the agents and attorneys
are available to answer any questions that may arise.
Costs: What to Expect
There are many costs associated
with closing on a mortgage. In addition to your down payment
and the settlement attorney's fees, here's what
else you should expect to pay in closing costs for your first
time home loan.
- Loan origination fee and discount points – Based
on a percentage of the total mortgage cost, this is how lenders
are compensated for their services.
- Appraisal fee - $300 to $400. A professional appraiser
visits the sale property to determine its value and condition.
- Credit report fee - $50, to determine the borrower's
- Title company fee - $250 - $350. This is how the title
company is compensated for their services of researching the
title and preparing the deed.
- Title insurance – Usually 1/2 to 1% of the total
mortgage cost. Title insurance ensures that if there is ever
a problem with clear title to the property, the lender's
money will not be at risk.
- Underwriting fees, document preparation fees, and
processing fees – These are costs incurred during the
loan application process.
- Recording fees and state and transfer taxes –
taxes and fees paid to the locality where the property is
- Private mortgage insurance – often required
by a lender if your down payment is less than 20% of the property’s
- Mortgage interest for the current month
- Homeowner's insurance – you will probably
need to show proof of this at settlement.
- Property taxes
- Homeowner Association Fees After settlement, most
lenders will sell your loan to another company, who will
then take over the servicing of that loan. This is the norm
rather than the exception. You may want to ask at settlement
what you can expect in this regard.
Applying for a loan for the
first time? Check out our first time home buyer
programs including financing in California,
Texas, and nationally.
Search our national lenders looking to bid you the lowest
mortgage rate possible.
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