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)
Keywords: luxury real estate, waterview homes, luxury homes, mansions If you are interested in purchasing luxury real estate, you likely have a great many questions about what options are available to you.
When Buying New Tampa Real Estate - You Need A Well-Imformed Realtor! (2)
These agents will save you plenty of time and time because of their vast experience and knowledge of the market. Lance Mohr is your Tampa real estate expert, with over ten years of experience in real estate sales and 18 years of investing.
COBRA Problems Can Hurt Texas Residents (3)
What about an employee whose company is not subject to COBRA? Some states have adopted their own version of the idea behind COBRA; in some cases, those plans are even more flexible in determining who is eligible for continuing health insurance coverage.
Texas Residents Finding Options For Health Insurance (4)
Nationwide, so-called "legacy" health care costs have forced employers such as General Motors and other domestic automakers which negotiated benefits packages with workers and unions to look for ways to trim those costs.
Credit Market: Credit Repair Whiz (5)
As if that's not enough...when your auto and / or home insurance become due...that could cost more too. All Insurance companies base your insurance premiums on your credit score.
Affordable Health Insurance - Where To Get Great Value For Money (6)
Also, checking with local city and state resources can turn up several leads to reputable companies. Some states have state-wide benefits in place for people who meet certain income requirements.
Dental Insurance - Look Upon It As An Investment (7)
Staying away from sugary foods and drinks (like soda) and foods that have a high acidity (certain fruits) is also important. Following a few simple dietary rules and daily routines will ensure that the need for dental insurance is minimal.
If Real Estate Licenses Came With Marketing Degrees (8)
I consider myself to be an average consumer. And as such, for me to pick up the phone and call the phone number off of any advertising, I need to see the benefit to me.
Commodity Trading - Commodities In Your Portfolio (9)
However, some commodities are a good bet and will continue to be. For example, wheat, oil, coffee and other consumable commodities will continue to be in demand, because the world simply needs them.
Investment Strategies For The Risk Averse (10)
As a result, in periods of market declines, the investor contributes more money, while in periods of market climbs, the investor contributes less. Here is an example of DVA: I want to invest in Yahoo using DVA.
What You Might Not Know About Bonds (11)
If you are able to hold your bond until maturity, then interest rate movements do not really matter, because you will redeem the principal upon redemption. But often, investors have to cash out their bonds well before the maturity date.
Why Should You Use The PEG Ratio? (12)
I hope this information has helped you form an understanding of how to evaluate stock prices. Try to set aside some money for investing, and begin to analyze stocks and buy the ones that have a low PEG.
Managing Your Portfolio Yourself (13)
This ratio helps you to ascertain whether the company is growing its earnings enough each year to justify the current price of the stock. If a company is not growing its earnings at all, then the stock will not go up.
Strategies For Combatting Market Timing (14)
If I use DVA, I invest $1,000 to start. If, at the end of the first quarter, the share price has risen to $15 per share, that means that the value of my investment is now $1,500, which means I will only have to invest $500 at the start of the second quarter in order to bring the total amount of my investment for the first and second quarter to $2,000.
Bonds Are Equally Risky As Stocks (15)
Most bonds pay an interest rate semiannually or annually. The maturity date is the date that the bond will be redeemed by the issuer; simply put, the maturity date is when the company must pay back to you the principal you loaned to them.
Is The PEG Ratio Better Than The P/E (16)
You can find net income by looking at a current income statement, which almost all corporations now make available on their company website. The lower the P/E, the cheaper the stock is.
Internet Investment Scams (17)
This is when a small group of investors who hold a large number of shares in a penny stock hype the stock to the general public. The resulting frenzy drives up the price of the stock, at which point the pumpers dump their shares at a high price before the rest of the investors realize that the company is worthless.
Can You Lose Money Investing In Bonds? (18)
Finally, you should also understand that if economic conditions become more favorable after you a buy a bond, and interest rates start to go down again, the issuer will likely issue a lot more bonds to take advantage of the low interest rates, and will use the proceeds to try to buy back any callable bonds it issued previously.
Mutual Funds Make It Easy To Diversify (19)
Carefully examine the fee structure and investment strategy before investing and you should do fine. Jim Pretin is the owner of www.forms4free.com, a service that helps programmers make an HTML form
What You Need To Know About Day Trading (20)
If a company has just put out a favorable press release, the price of the stock will likely go up in the short-term, so it is smart to buy some stock as soon as the story is released, and then sell it when the buying frenzy starts to lose its momentum.
Newer Articles Highlighter:
Unsecured Credit Card For Bad Credit Challenges (1)
When faced with bad credit, you have on your hands a situation that you need to turn around, and the faster, the better! It's never too late to take steps to get rid of a bad credit rating, however, and being approved for a credit card is a great way for the discerning credit card hunter..
How To Get Cheap Car Insurance Quotes (2)
Every auto insurance company has low cost deductions; make sure you ask what they are. If you haven't had any accidents that were your fault and you are a good driver, then be sure to consider getting a higher deductible so you would pay out a larger amount of money in the event you do have an accident that is your fault but will still save on your insurance premium.
The Ins And Outs Of 0 Balance Transfer Credit Card Deals (3)
There might be some withdrawal fees or there might be a termination of service fee that needs to be paid. Your best weapon when you are considering 0 balance transfer deals is the knowledge of your account.
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)
1. "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)
When choosing an independent insurance company to provide car insurance for an antique car, be sure that the company is a reputable one. You do not want to find that after months of paying the insurance premiums that the company will not or is unable to pay your insurance claim.
Business Credit Card Is The Foundation Of Success (7)
These cards are helping both the management and employees in keeping track of either their professional or personal expenses. The separation of personal and business expenses are important because the company's operating expenses are evaluated and monitored properly besides helping the management in assessing tax standings.
Short Sales The Equity Creator (8)
there out there making the big bucks even in this down market. Doing a short sale is totally different that doing a subject to that most investors are quite familiar with.
Why Buying Auto Insurance On The Internet Is The Way To Go Today (9)
If you are willing to do a little leg work and research yourself you can find some great deals on the internet and save yourself some time as well. In this article we will look at why that is true.
Planning Before Moving Is The Secret (10)
Luckily, the Internet has helped a lot of people over the years when it comes relocating. The Internet can help you with home buying, get a general idea of what the area is like, provide contact information for schools, realtors, leasing offices, and other professionals, allow you to rent moving trucks, and research basic information about electric companies, cable companies, DMV, vehicle registration requirements, tax information, and restrictions.
How You Can Choose A Great Realtor (11)
While, this might work out in the end, it is very important that you know you can trust them with the details of your home. The realtor will be the guide of your home buying or selling process and you want to make sure that they will get the the best deal possible.
Debt Consolidation Loans-Getting Off The Credit Card Treadmill (12)
At the same time that consolidating your debt offers a great solution and can be very helpful, your research needs to be done properly as any sort of financial strain can add additional stress to our already stressful lives.
Erasing The Burden Of Debt (13)
Thus, in so many ways, you will have a lighter burden to bear. Finding easy to repay loans are no longer the aspiration of tomorrow. Are you looking for secured personal loans?
The Need For Speed And Car Loans (14)
The twenty-first century is the age of speed. The need for speed makes it crucial for everyone to have a vehicle, or at least aspire towards one. Moreover, these days most of us can manage to buy a car.
Mortgage At Garage Sale Prices (15)
Instead, you should keep on searching for the cheapest mortgages available. Only after you compare these mortgages will you end up with the mortgages that best suit your needs.
Flexible Mortgages For Self Employed Folks (16)
A flexible mortgage does not require the borrower to repay a specific amount each month. The borrower is allowed to pay as much or as little as he likes depending on his monetary situation that month.
Shifting To A Cheaper Insurance (17)
There is great competition in the insurance markets. Thus, if you were about to make that necessary shift to a cheaper insurance, you would be the one to gain.
Home Equity Loans For House Owners (18)
What does a borrower do if (s)he needs money even before the mortgage has been repaid? One popular mode of personal finance among homeowners who have not yet paid up their mortgage is the home equity loan.
Platinum Benefits Grow (19)
This can save a person a lot of money if he or she is carrying a credit card with a high interest rate. Once the introductory rate has expired, Chase will continue to offer its customers with low interest rates.
Whats The Deal With Platinum Plastic (20)
These benefits give the cardholder piece of mind as he or she uses the card, or doesn't. The first benefit of using a Chase Platinum Card is the knowledge that if your card is ever lost or stolen, you will never be held responsible for any unauthorized purchases.