What To Expect When Applying For A Home Loan?

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Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
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San Diego, California
www.loansreduced.com
Buying a new home is one of the biggest decisions you’ll ever make. Whether you’re buying your first time home or a seasoned homebuyer, you’re bound to have some questions and that is where we come in. We aim to provide a step-by-step personalized guidance to ensure that the loan processes is simple, clear and timely.

Step 1: Pre-Qualification
There shouldn’t be a cost to get prequalified, I know a few lenders (we won’t name names) that charge up-front fees that in most cases are non-refundable. You should run the other direction if the lender you’re working with is asking for any type of commitment or up-front fee. The pre-qualification process lets you get any potential credit problems out of the way early if there are any. You’ll learn what size loan you may qualify for, how much home you can afford and most importantly you will be able to make an offer as soon as you’re ready.

Realtors in many cases will not even show you properties until you’re pre-qualified for a home loan. Typically the realtor that you’re working with may also have a contact of a loan officer that they work with directly. The statistics revealed that about 80% of agents will recommend a loan officer to work with and about 65% of those people will decide to work with the person that they recommend. I always mention to my clients, work with the person you feel most comfortable with and also the one that can benefit you the most.

Step 2: Choosing a loan
There are many different loan options in the industry today and depending on your situation, certain loan options will provide you the most benefit. This is where you want to lean on the support of your loan officer to guide you to the best product to suit your needs and goals in the long-term.

We offer not only conventional fixed and adjustable rate, jumbo loans, government backed loans with flexible eligibility requirements, portfolio loans and even self-employed home loans for borrowers that may not fit the typical conventional or government boxes.

Step 3: Finding a home
Congratulations you’ve overcome a big hurdle already and that is qualifying for the home loan. Before you start house hunting, make a list of what you do and don’t want in a house as well as where you want to live. Narrowing the search will save you and your real estate agent a lot of time. Of course being pre-qualified you will also know what price range to stay in.

Step 4: Home appraisal and inspection
An appraisal is required (in most cases) to make sure that your offer matches the fair market value of the home. An inspection is also needed so that both you and the lender know the condition of the home and if any minor or major repairs are required. In most cases inspections are not required to be delivered to the lender if the appraisal comes back “as-is”. If the appraisal comes back subject-to repairs needed at that point you will need to have the seller of the property fix the items and we would send the appraiser back out to confirm they have been complete.

Step 5: Getting insurance
All mortgages that require insurance covering the home and property are required to be in place before the loan closes. Start shopping for insurance as soon as your offer is accepted to interrupt any delays when it comes closer to closing.

Step 6: Loan processing and underwriting
Once your application is complete and all documents have been submitted to your loan officer, the loan officer will in turn submit the loan into processing for review. Processing will double check everything that has been submitted to ensure a complete file prior to going into underwriting. Once the underwriter reviews the file they may also determine additional documentation is necessary to complete the file. It is important to closely communicate with either the loan officer or processor on the file to ensure everything has been received and nothing else is needed at that time. Your loan officer should relay this information to you also.

Step7: Closing and funding
Now it comes time where you can sit back, relax and know that at least 95% of the process is complete. Closing is where you sign a lot of papers, provide your down payment, have bank funds transferred, close the deal and get the keys to your new home!

Documentation Requirements:
ALL BORROWERS:

  • Copies of W-2’s for the last two years;
  • Copies of paycheck stubs for the last 30 days (most current);
  • Copies of checking and saving account statements for last 3 months (all pages);
  • Copies of quarterly or semi-annual statements for checking, savings, IRA’s, CD’s, money market fund, stock, 401k, profit sharing, etc.;
  • Income Tax Forms;
  • Copy of sales contract when ratified;
  • Employment history for the last two years (address any gaps of employment);
  • Residency history over the last two years, with name, phone number, address and account number of Land or Mortgage Company.
  • Rental property copies of leases plus mortgage information.
  • Canceled earnest money check when it clears or corresponding bank statement, if applicable;
  • Commissioned or bonus income — if 25% or more of base, must have 2 year tax returns;
  • Check for the expense of appraisal & credit report;
  • Refinance Copy of Note, Deed of Trust, Settlement Statement, Survey, and Insurance information;
  • Any assets used for down payment, closing cost, and cash reserves must be documented by a paper trail;
  • If paid off mortgage in the last 2 years, need copies of HUD1;
  • Copy of driver’s license for applicant and co-applicant.
SELF-EMPLOYED BORROWERS:
  • Copies of most recent 2 years tax returns (with all schedules including k-I’s, if applicable);
  • Copy of current profit & loss statement and balance sheet;
  • Copy of corporate/partnership tax returns for most recent 2 year period if owning 25% or more of company — copies of W-2’s and/or 1099 forms.
DOCUMENTS WHICH MAY BE REQUIRED:
  • Relocation Agreement if move is financed by employer, i.e. buyout agreement plus documentation outlining company paid closing costs benefits;
  • Previous bankruptcy, need copies of petition for bankruptcy and discharge, including supporting schedules;
  • Divorce Decree if applicable;
  • Documentation supporting moneys received from social security/retirement trust income, i.e. copies of direct deposit bank statements, awards letter, and evidence income will continue for at least 3 years.
DOCUMENTS NEEDED FOR FHA/VA LOANS:
  • FHA: Copy of social security card and driver’s license for each applicant and co-applicants;
  • VA: Original Certificate of Eligibility and copy of DD214 Discharge Paper; Name and address of nearest living relative; and, Child Care information.

FAQs
What is a prequalification letter, and why should I have one?

A prequalification letter comes from the lender. The letter states that the lender agrees to provide a mortgage to you, the homebuyer, under certain conditions. Prequalification letters help you set realistic goals while you’re house hunting. Additionally, they can provide you with the same negotiating ability as a cash buyer and enable you to move quickly once you find the perfect home.

How will I know which loan program is best for me?
Your lifestyle and financial situation are the best guides for deciding on the best loan program for you. Your loan officer can discuss different home loan programs that will suit you financially and help you reach life’s milestones.

What will my monthly payment be?
That depends on several factors, but every mortgage payment is part Principal, Interest, and Taxes and Insurance (or PITI) if you choose to escrow.

Principal is the initial amount you borrow, then the remaining balance throughout the life of the loan.
Interest is the fee you pay to borrow the money.
Taxes and the rate you pay are set by your local government.
Insurance on your home and property is required if you have a mortgage. Rates are set by the insurance provider.

What are closing costs?
Expenses that fall above the price of the property that are incurred by buyers and sellers in the process of transferring ownership of a property. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The cost of closing typically is about 3 percent to 6 percent of the mortgage amount. Closing costs will vary according to the area of the country; your loan officer is able to provide estimates of closing costs for you.

What are “origination points”, “discount points”, and “origination fees” in regard to my mortgage?
Paying origination or discount points allows you to lock in a lower interest rate. Typically, origination points are applied and disclosed at the time of locking in an interest rate. On the other hand, discount points can be added at the time of lock or later in the process if you choose to pay to reduce your interest rate.

Origination fees are the fees required to originate the loan. They can include processing fees, underwriting fees, administrative fees, and several others. Your loan officer can give you a complete breakdown of these fees as they vary from state to state.

Please feel free to apply online on our website here: www.LoansReduced.com or reach out to us directly at 800-779-4547 for an in-depth mortgage analysis and pre-qualification.