Mortgage Process (Continue...)


Applying for a Mortgage

Once you choose a mortgage lender and you decide on a mortgage product, you will need to fill out a mortgage application. If you were pre-approved, you may have already done this.

Mortgage Application Steps

* Complete the "Uniform Residential Loan Application" which requests your income, assets, liabilities and a description of the property.

* Pay the application fee which covers the lender's processing costs. Find out if there is a refund policy.

* Submit the application by mail, e-mail, and fax or online. Online mortgage applications include a review of your credit score. When your credit score is pulled, an "inquiry" will be placed on your credit report. It's important that you understand about inquiries. Every time a lender asks to see your credit history an inquiry is noted on your report. If you have too many inquiries, lenders will be concerned that you are trying to get more credit than you can handle. Don't make too many requests for credit -- it can damage your credit score. All mortgage loan inquiries in a 2-week period are counted as one transaction. To keep inquires on your report to a minimum, apply to different lenders within a 2 or 3 week period.

* Mortgage Decision : You'll need to decide how much money to borrow when you submit your application. The amount of your mortgage will be based on the purchase price of your house and your down payment. It's important to do your homework before the application process; that's why we recommend getting pre-approved.

* Deciding on a Settlement Date : After you apply for a mortgage, work with your lender to determine a settlement date.

Locking in a Rate

Mortgage rates frequently change. With many lenders you can "lock in" a mortgage rate. Locking in a rate allows you to complete the mortgage process knowing the exact interest rate. If you believe rates will increase while your mortgage is being processed, you might lock in the current interest rate through your closing date. If you choose not to lock your rate, you can "float." This means that instead of immediately locking, you have the opportunity to follow the trends in market rates and choose to lock when rates are more favorable. However, you will have to lock your rate at the end of the float period, usually 72 hours before closing. Check with the lender to see if you can lock in a rate when applying for your mortgage or if you need to wait for approval. Ask how long the rate lock remains in effect and if the lender charges fees or points to lock in the rate.

The Qualification Process

A loan underwriter will review and decide whether to approve your loan application. You can help the process by responding quickly to the underwriter's requests. Be honest about any problems you've had with your credit. Check with your lender from time to time to get the status of your application.

If you are turned down for a mortgage, ask why. There could be a number of reasons, like not enough savings in your bank account or needing to improve your credit. By law, you should receive a written disclosure statement from the lender indicating the reasons for declining the loan.
Try qualifying for a smaller mortgage or pay off some debt and try again at a later date. Develop a plan with your lender to better your position to buy a home.

Getting your Mortgage

After you apply for your mortgage, your lender will schedule a loan interview with you and give you a list of the documentation you'll need to bring to the interview. The lender may request additional information from you by mail, rather than scheduling an interview.

Loan Interview Documentation

1. Social Security Number: Both yours and any co-borrowers'
2. Birth Date: Both yours and any CO-borrowers
3. Income: Most recent pay stub showing year-to-date earnings
4. Tax Information: W-2 tax forms and tax returns for the last 2 years are necessary.
5. Employers: Names, addresses and telephone numbers of your employers for the past 2 years
6. Bank Accounts: Account numbers and current balances of checking, savings and any other accounts
7. Assets: Statements of current assets, such as Individual Retirement Accounts (IRAs), certificates of deposit (CDs), stocks and bonds. If you have individual investments, bring a current brokerage statement with the name of the stocks, the amount per share and the number of shares owned
8. Personal Property: The value of your personal property, including employee retirement accounts, furniture, cars, collection, other valuable property and your life insurance
9.Credit Information: Creditor name and address as well as the monthly payment and total amount due for all current loans
10. Current Housing Information:
* If you own your own home, bring the address, current market value, mortgage lender, account number, current monthly payment and outstanding balance due on the mortgage.
* If you rent, bring the address, name and address of your landlord and your current monthly rent.
* If you have lived in your current address for less than 2 years, you'll also need to provide information for your previous addresses.
11. Contract & Deposit: A signed copy of your ratified sales contract, with receipts for the earnest money deposit towards the property
12. Gift Letter: If part of your down payment or closing costs will be from a gift, a signed letter from the donor stating that you don't have to repay the gift money is mandatory.
13. If you are Self-employed: Your profit and loss statement and balance sheet for the past 2 years.
14. If you are Divorced or Separated: A copy of the divorce decree or maintenance agreement, along with any amendments and a 12-month payment history of alimony or child support payments if the payments are needed to qualify for the mortgage.
15. If you are a Student: Your school transcripts or diploma if you do not have 2 years of employment history
16. If You Own Rental Properties: Federal tax returns along with a schedule of all real estate owned and the account number and address of the mortgage company that holds the mortgages. If the property is rented, a copy of the current lease.

The Documents Needed

Your lender is required by law to provide you with several kinds of documents once you apply. They include:

1. Truth-in-Lending Disclosure: Federal law which requires disclosure of a truth in lending statement for consumer loans. The statement includes a summary of the total cost of credit such as the APR and other specifics of the loan.
2. "A Home Buyer's Guide to Settlement Costs": A government publication that describes the closing or "settlement" process and its costs as well as information on your rights.
3. ARMs Disclosure: Information on the important terms and costs of an adjustable-rate mortgage, the past performance of the index to which the interest rate will be tied and a copy of the booklet, "Consumer Handbook on Adjustable-Rate Mortgages.
4. Your Annual Percentage Rate or "APR": This is the cost of credit expressed as a yearly rate. The APR includes the interest, rate, points, broker fee and certain other charges that the borrower is required to pay. 

Private Mortgage Insurance

Generally down payments of less than 20% of the price of the home require Private Mortgage Insurance (PMI or sometimes MI). You may be able to cancel your mortgage insurance under certain circumstances, for example when your loan amortization reaches a certain percentage or your property value increases due to a favorable market value or home improvements. Contact your lender for specific requirement on your private mortgage insurance.

You'll Need Title Insurance

Once your mortgage is approved, your lender will order title insurance. Title insurance protects you and the mortgage lender against legal problems with the title, like a lien on the property with the previous owner. The lender's policy only protects the lender. If you want this type of protection you will need to secure a separate "owner's policy." You may be entitled to a reduced rate if you purchase both policies at the same time.                                                                     

We hope that the information thus provided is useful for you and you got all the answers to your Mortgage related queries.

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