Tuesday, July 14, 2020 / by Todd Mowry
What happens in the mortgage loan process after you get pre-qualified and have found a house to buy?
Getting a pre-qualification is not exactly what it sounds like. Most people think this is all I need to buy a home. Pre-qualification is just a quick look at your credit and income to see if you can possibly qualify to be approved for a mortgage. You do a quick application..they give you a pre-qualification letter and you go on your way looking for a home thinking you are ready and good to go. While you are good to find a home and turn in an offer you are still a long way off from being ready to buy.
Making an offer:
After you’ve found the property you would like to buy, it’s time to make an offer. Your Realtor will know the ins and outs of how to structure your offer. They will include contingencies of all the following when buying with a mortgage:
· Home must pass appraisal (meaning the home must appraise close to the loan amount) and not be lower.
· The Home inspection must not find any major issues or code violations with the property that could affect value or local housing laws.
· That you the borrower be able to obtain funding (final loan approval)
· Also will include the HUD Mandated clauses that must be met
After your offer has been accepted now the real process of applying for the loan starts. Even though you are pre-qualified be ready to gather and turn in the following items:
· Name of current employer, phone number, address
· Length of time at current employer
· All information proving salary or hourly wages including overtime, bonuses and or commissions
· 2 years of W-2’s
· Profit and loss statement if running your own business
· Pensions, and or social security
· Any public assistance
· Any alimony payments or Child support
· All bank accounts (savings, checking)
· Properties you own
· Investment accounts (brokerage, stocks, bonds, retirement)
· Money gifted from family towards down payment costs related to buying the home
All Debts and expenses
· Any car loans
· Alimony payments
· Liens private or on property
· Credit cards
· Any other property or mortgages
· Child support payments
All negative financial issues affecting credit
· Delinquent payments
· Accounts in or formerly in collection
· Past Bankruptcy
VA Certificate of Eligibility (VA Form 26-1880 COE)
If you happen to be applying for a VA Loan you will need to provide proof of your military service. You will need to fill out the VA Form 26-1880 so they can verify service time. Your lender will be able to provide that for you. You can also get it yourself from here.
After turning all of the information needed by the processor..the wheels of motion will start to turn in the loan processing department. You will get what is called a Loan Statement.
The Loan Statement is a statement that includes all the closing costs, the monthly payments (if applicable and included… principal, interest, taxes and insurance) and the pre-payment penalty information if applicable.
This is just an estimate and you are not fully approved yet. It’s like an estimate for work on your home before it is done. You can get a preview of what they look like if you go here.
The loan processors after you verify the Loan Statement will open a file and start putting together all your information and paperwork into a file or package for the underwriter. After this they will start the following steps:
· Order the credit report (unless already received)
· Order the property inspection
· Will verify employment and bank statements
· Order an appraisal of the property
· Order the title search
During the processing phase the underwriter will closely evaluate all the documentation prepared by the loan processor in the file (loan package). The underwriter is the main decision maker in deciding if the loan will be approved. The underwriter will go back through everything and verify to see if the loan fits the property and the borrower’s debt and income. They will also double check the borrowers credit history and ability to pay back the loan. They will look to sound any alarm bells that may indicate fraud or mistakes in the application.
After everything is reviewed the underwriter will accept or reject the loan approval. There are times that a loan will approve a loan with special conditions. For example, they might ask for a written explanation of past credit problems, late payments, and or collection notices.
Documents are drawn, meaning they are typed up or printed out and sent to the title company or lawyer’s office depending on the state you live in. You will meet with the title representative and your Realtor may or may not be there. Do expect to be signing a lot of papers.
Make sure you pay special attention to the Closing Disclosure. If you would like to see a sample closing statement go here. It should look the same as the Loan Estimate and the numbers should be somewhat close to each other. They are not allowed to differ too much from each other due to laws preventing them from doing so.
You have the right to review the closing disclosure 3 days prior to the closing meeting. In fact you are supposed to receive a copy of them in that time. This gives you a chance to review and verify all information and terms of the loan. If the numbers are different or not what was agreed upon now is the time to speak up and ask questions.
After you agree to everything and sign all the papers and funds are verified. Then you are ready to move in to your new home.
Hope you found his helpful if you need help or just want to search homes. Go here.