Seven Steps Of The Loan Process
Keywords: loan process, mortgages, picking a lender
The first time you are getting a loan, it can be confusing what all is needed and how to start. This outlines the steps to getting a loan from picking a lender to closing.
1) Picking a Lender.
Comparing lenders can be daunting. All the components of a loan including the interest rate, origination fee, points, and other miscellaneous fees are hard to sort through. Fortunately, you can get the Annual Percentage Rate (APR) from each lender for each of their programs. The APR is basically an interest rate calculated with the base interest rate plus all the closing costs, so basically, if you have zero closing costs, then the interest rate and the APR will be equal.
Zero closing costs would be great, but it is typical to have an origination fee of about 1%, credit application fees, document preparation fees, and the appraisal fee. When comparing rates, the lower the interest rate, the less interest you will pay over the life of the loan. When comparing the APRs, you are comparing the interest rate plus the closing costs. This is helpful because some quoted interest rates may seem low until you realize that the lender is charging you a point (1% of sales price) for that better rate. If you are comparing APRs as well as interest rates, the APR will show as being much higher than anything without points.
There are of course other reasons to weigh in when choosing a lender. Local lenders tend to know the local real estate market better and are familiar with the state laws for lending. Having a responsive and reliable lender is always invaluable because you are going to count on your lender to get you through the underwriting process in a timely manner.
2) Deciding which type of loan is best for you.
To figure out what loan program fits your needs, a lender is a helpful guide. You can speak with one to get a grip on what programs might work and then call around for rates for that program from other lenders. In general, the different type of loans are: 30 year fixed, 15 year fixed, and ARMs (adjustable rate mortgages).
The fixed rate loan programs have the monthly payments fixed. The ARMs are typically fixed for a certain amount of time and then adjusts along with the prime. For example, a 5 year ARM has a fixed interest rate (and hence monthly payments) for 5 years and adjusts for the remainder of the loan life. Most of the ARMs are amortized over 30 years, which means the monthly payments are calculated as if you are paying the loan off in 30 years. So, in the 5-year ARM case, the interest rate will adjust for 25 years. Most people refinance or sell the property before the 5 years are up so that they do not have to deal with the adjusting interest rate.
3) Submitting your mortgage application.
Once you have picked your lender, you will submit your loan application. This is usually personal information including your social security number, salary, recurring debt, and savings. They pull your credit score and figure out your debt-to-income ratio. With these two pieces of information, they can find which loan programs you qaulify for and which might work best for you.
4) Getting a Pre-Approval Letter
Once you have submitted your mortgage application, you can get pre-approved. This will provide you with a letter from your lender that basically says your debt-to-income ratio and credit score qualify you for the loan program. This letter is helpful to have when you put in offers to show that you are a strong, qualified buyer. Many listing agents will advise their sellers to not even accept an offer unless it is accompanied by a letter, especially in good markets, where as a seller, you do not want to tie up a property with an unqualified buyer.
5) Processing Your Application
At this point, the application has been just the buyer’s word, and now the lender will need to proof of all the income and debts you had provided, so they will ask for documentation like bank statements and w2s. These statements are verified.
6) Underwriting the Loan and Final Approval
At this point, you have found a home and want to get the loan. The lender will need to send the house contract and your documentation to underwriting to basically give final approval. As well, the lender will have an appraisal on the property to assess its value. This ensures to them that if for some reason the property goes into foreclosure and they end up owning the property, that the value will still cover the amount owed on the loan. The lender will also need to approve the survey. This is to ensure there are no major encroachments on the property. And in addition, they sometimes require flood certificates or wood-destroying insect certificates, depending on where you are located in the country. These again ensure the property is not a disaster waiting to happen. These are all precautions the lender takes before allowing funding on a property because they want to not get stuck with a worthless asset, but it is also another assurance for the buyer that the property
is decent.
7) Funding and Closing
Once the sellers and buyers have gone to closing and signed all the papers, including the Settlement Statement showing all the fees and loan amounts, this paperwork is submitted back to the lender. The lender will then double check everything was signed and give a final funding number. This number allows the funds from the lender to be released and the property is funded! The process is complete and you can now enjoy your home, just remember to make your monthly mortgage payments.
Ki Gray lives and works in Austin Texas. Working as a realtor in the Austin Texas Real Estate market. Escapeso Austin Texas Real Estate www.escapesomewhere.com is dedicated to providing its clients with honest and experienced advice when they are looking to purchase in the Austin market.
Previous Articles Highlighter:
Luxury Real Estate - Is It Impervious? (1)
Lance Mohr is your Tampa real estate expert, with over ten years of experience in real estate sales. He holds a real estate broker license in Florida, and has been investing in real estate for over 18 yrs.
When Buying New Tampa Real Estate - You Need A Well-Imformed Realtor! (2)
Whether you are a first time home buyer or a person who is interested in moving into a new development, you likely have a number of questions when it comes to the market and what options you do have available to you today.
COBRA Problems Can Hurt Texas Residents (3)
Under COBRA, changes to an employer's health plan mean the former employee will receive the new benefits. Additionally, a change by the employer to an entirely new plan will mean the former employee will take on the change as well.
Texas Residents Finding Options For Health Insurance (4)
Those signing up should ask whether the insurance company's high-deductible plan is "HSA-qualified," since not all high-deductible plans meet the IRS requirements. To qualify as an HSA-eligible policy in 2007, your health insurance plan must have a deductible of at least $1,100 for individual coverage or $2,200 for families.
Credit Market: Credit Repair Whiz (5)
If you can raise the funds to pull this off, you will have saved yourself a lot of money in mortgage interest over time. Credit is not the most exciting topic; however, you must guard it with your life.
Affordable Health Insurance - Where To Get Great Value For Money (6)
Also, Blue Cross Blue Shield helps patients avoid the rigmarole often encountered when trying to get less well respected companies to cover them. Affordable Health Insurance is certainly on the mind of many Americans, and insurance companies (particularly HMOs) have gotten a bad reputation in the last couple of decades.
Dental Insurance - Look Upon It As An Investment (7)
There are several websites available to compare and contrast private dental insurance plans. Simply put in the zip code of residence and the software will present a variety of local providers and their plans to choose from.
If Real Estate Licenses Came With Marketing Degrees (8)
So if image advertising is not the way to go, what is? Direct response advertising. With a direct response ad you give people a reason to pick up the phone and call you.
Commodity Trading - Commodities In Your Portfolio (9)
However, demand continues to rise, especially from China. All of these factors are good news for those who wish to include commodities as part of their portfolios, at least in the form of ETFs; there are also other mutual funds that focus on commodities available.
Investment Strategies For The Risk Averse (10)
An example of DCA would be as follows: If I want to buy 1,200 shares of IBM stock using DCA, then I might decide to purchase 400 shares of IBM per month over the course of the next three months.
What You Might Not Know About Bonds (11)
Next, you should always check the three main features of the bond you are buying; the coupon rate, the maturity date, and the call provisions. The coupon rate is the interest rate.
Why Should You Use The PEG Ratio? (12)
It is used to calculate how expensive or how cheap a stock is relative to its earnings. Using it, an investor can get a sense of whether a stock might be overvalued or undervalued.
Managing Your Portfolio Yourself (13)
The two most important statistics to look at are the P/E ratio and the PEG ratio. Typically, you can find these numbers under the statistics section for the company.
Strategies For Combatting Market Timing (14)
If there is an indication that a certain stock is currently undervalued and might shoot up in price, you would actually make less money using DCA than if you had bought all the shares in the beginning before the price skyrocketed.
Bonds Are Equally Risky As Stocks (15)
The Federal Reserve (also known as the Fed) meets every 6-8 weeks to evaluate the health of the economy. At each meeting, the Fed renders a decision regarding interest rates.
Is The PEG Ratio Better Than The P/E (16)
If it is low, this could be an indication that the earnings of the company are expected to plummet, causing investors to run away from the stock, resulting in a low share price.
Internet Investment Scams (17)
You should not necessarily ignore all of the investment spam in your inbox. You might receive an email containing a stock tip that could turn out to be a lucrative investment in the future.
Can You Lose Money Investing In Bonds? (18)
The Federal Reserve (also known as the Fed) meets every 6-8 weeks to evaluate the health of the economy. At each meeting, the Fed renders a decision regarding interest rates.
Mutual Funds Make It Easy To Diversify (19)
A mutual fund is really an investment company in and of itself, with a manager and other officers who administer it. When you buy shares, you are buying a portion of the holdings of the fund, which contains many different stocks and bonds within the portfolio.
What You Need To Know About Day Trading (20)
Another strategy that day traders often employ is called position trading, where they look for a stock that is likely to experience a significant increase in price over a period of a few days or even a few months.
Newer Articles Highlighter:
Unsecured Credit Card For Bad Credit Challenges (1)
Bad credit is something that many people deal with, and it is also a situation that many people escape from. Find a unsecured credit card for bad credit, that suits you and start repairing your credit today!
How To Get Cheap Car Insurance Quotes (2)
You also should consider the longevity with your current company, especially if you have a good record with them in case the length of your current insurance coverage plays a part in the rates you have now or other variables in your policy that might be different and more valuable to you than with any new company -- even if it's at a lower or cheaper rate.
The Ins And Outs Of 0 Balance Transfer Credit Card Deals (3)
DrS has been in sales 30 years. "you can lead a horse to water, but you can't make him/her drink it. Unless you put salt in the oats." Salt is your why (or if you don't know why, what you don't want out of life) plus education and action, to make it happpen.
Generate More Leads With Real Estate Marketing Articles (4)
Here's a final comment about marketing with articles. If you're not a good writer you might consider using prewritten articles. While you might be limited to using them on your web site, they are still an excellent option for adding content to your web site fast.
The Top 10 Destructive Money Beliefs And How To Overcome Them (5)
"I'm not worthy." Did you realize that fully 90 percent of the population has an issue with low self-esteem? It's the No. 1 thing that holds people back and prevents them from living their dreams.
How To Obtain Car Insurance For An Antique Car (6)
A car insurance representative will take all of your information and discuss different policy options with you to ensure that you are obtaining the coverage that you need. They will also help you decide which types of coverage are within your target budget and which deductible and limit levels you will need.
Business Credit Card Is The Foundation Of Success (7)
Credit cards minimize the danger of carrying larger amounts of cash and it is more convenient when doing purchases during emergency cases. Business establishments are more grateful and appreciate the benefits to the best of their advantage.
Short Sales The Equity Creator (8)
If you in the business of buying and selling pre-foreclosures or any other properties, always be truthful with all parties involved and you will have more referrals coming to you than you could ever handle.
Why Buying Auto Insurance On The Internet Is The Way To Go Today (9)
By buying a policy online you always get a discount if you are willing to shop. It saves the insurance company money by getting rid of the middle man and dealing directly with you.
Planning Before Moving Is The Secret (10)
When asking friends and family for help, you should ask them as soon as possible as well so you can have an estimate of how many people will be helping.
How You Can Choose A Great Realtor (11)
There are many places to find realtors. The problem is finding a good one and one that you trust with the details of your home buying or selling. Good companies like Century 21 or Weichart Realty have many well qualified real estate agents and have a good reputation for having good realtors.
Debt Consolidation Loans-Getting Off The Credit Card Treadmill (12)
At the same time debt consolidation isn't a silver bullet, for many it's a welcome answer to all those bills and collection agencies that are calling you. For those who feel like they've run out of options, debt consolidation may be the answer for you.
Erasing The Burden Of Debt (13)
This also contributes a great deal to limit the monthly installment amounts that the borrower has to pay. Thus, if one is looking to save money, a secured personal loan could be a great deal.
The Need For Speed And Car Loans (14)
As in the case of loans, cheap car insurance is not too tough to locate these days. However, you cannot just sit around and expect cheap insurance (or loans for that matter) to drop in from nowhere.
Mortgage At Garage Sale Prices (15)
After all, property prices will not be falling in the near future and there is little risk involved. If one owns a house, one also has security for the future.
Flexible Mortgages For Self Employed Folks (16)
Again, it is one thing to tell people who are self-employed the need to be able to deal with the insecurities of an irregular income. How about the people who work with them?
Shifting To A Cheaper Insurance (17)
For instance, if you are searching for car insurance, you should keep an eye out for a plan to suit not just your budget but also your vehicle. If you find that you are paying far more than necessary on your car insurance, do not make the mistake of continuing to renew the same policy.
Home Equity Loans For House Owners (18)
There are all kinds of home equity loans that you as a homeowner could avail of. A simple search on the Internet should provide you with a long list of lenders, each of whom offers really cheap rates.
Platinum Benefits Grow (19)
No matter where the cardholder travels, he or she can rest assured they are being protected by their Chase Card. Another advantage of owning a Chase Platinum is free online account access, perfect for those who spend a lot of time using the internet and prefers to view their account online, instead of calling on the phone for account information.
Whats The Deal With Platinum Plastic (20)
This also is a way that Chase gives its cardholders piece of mind. Whether they travel to the next state or around the world, they are protected. New cardholders have one more advantage in applying for and receiving their chase Platinum Credit card.