Understanding the loan process is the first step in preparing for your mortgage. The mortgage loan process takes time, but by being organized, prepared, and patient, the process can be quicker and less stressful. Here are a few key parts in the loan process that will allow you to better understand the components of a mortgage and the steps you need to take.
Before you start the home loan process, you have to get pre-qualified for the loan. Pre-qualification means that a lender has determined that you, based on the information you have provided, are likely to be approved based on your financial situation, credit criteria, and other factors determining what you can afford.
After pre-qualification, you will have to choose a loan program that fits your criteria. An experienced, licensed mortgage professional will help you find one that best meets your needs.
The first step in this process is to formally apply for the loan. To ensure that there are no unnecessary delays in the processing of the loan, make sure you provide all the required documents requested by your mortgage professional as quickly as possible. If you have previously met with a lending representative to attain pre-qualification, you may have already provided some of those documents.
Apart from providing basic information such as your name and income, you will also have to give your permission to the lender to check your credit by providing your social security number and include information on the property you are planning to buy. This information may include the address and a property evaluation, which will take into account not only the condition of the property itself but the value of the home and others in the neighboring area. The lender will use these documents to process the loan application.
Once the lender completes the loan application, you will be provided with a loan estimate that provides information on the costs of the loan, the mortgage payment, and other fees. This includes the approximate interest rate and monthly payments and the terms of your loan. You will also receive a breakdown of all the fees you may need to pay, such as recording fees and mortgage insurance if necessary, as well as special loan features like penalties for early repayment or increases to the balance if you are unable to make payments promptly. Receiving this document is not an indication that your loan has been approved, but is intended to inform you about the loan terms you can expect if you decide to accept a loan from that particular lender.
The lender then forwards the application and all relevant documents to an underwriter. The underwriter has the responsibility to ensure that all the requirements related to the loan are met before approving the loan.
When the application process is finalized, you will be provided with documentation that includes the final details of your mortgage. You are required to be given this document at least three days before the scheduled closing of the loan. This gives you time to read over the document and compare it with the Loan Estimate and ask the lender any questions.
Before closing you will also have to order title insurance. This insurance protects against liability in case there are any defects in the title that can cause the loss of ownership rights over the property. Title insurance is usually intended to protect the lender although the borrower will have to bear the premiums. In addition, you will also have to meet any approval contingencies required by your lender.
Proof of homeowners insurance will also be required at this time. This type of coverage protects against losses arising from natural disasters, fire, vandalism, and theft. Lenders require this type of coverage to protect their interest in the property, which acts as collateral for the loan.
During the closing procedures, the borrower signs the final loan documents. At this point, you’ll need to bring a cashier’s check, or pay via electronic methods, for the down payment and other required costs, such as the settlement and appraisal fees and the title exam.
Before signing, the borrower should review the loan documents carefully to ensure the loan terms agreed upon match those in the document. Additionally, be sure that all of your information is accurate to keep the process as quick and efficient as possible.
After the loan document signing, the mortgage is funded by the lender. Funding is typically not given until three days following the closing. This 72-hour period provides borrowers with a final opportunity to cancel the loan in case they change their minds. Once a borrower accepts the loan proceeds, the title is transferred through a deed of trust that is filed at the county recorder’s office.
The mortgage loan process may seem daunting at first, but with the right tools and preparation it can be a simple process for union members. With the proper knowledge and guidance from a qualified lender, you will be in your new home before you know it.