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Home Loan Process

Do’s and Don’ts Helpful Tips For A Smooth Loan Approval

DO

  • Continue making your mortgage or rent payments
  • Stay current on all existing accounts
  • Continue living in your current residence
  • Be prepared to secure all deposits
  • Ask us before making financial decisions during loan process
  • Alert us if your salary or other compensation changes

DON’T

  • Make any major purchases (i.e. car, major appliances, etc.)
  • Apply for or open a new credit card account
  • Transfer any balances from one account to another
  • Quit your job
  • Close any credit card accounts or change bank accounts
  • Run your credit before asking your loan officer first

Applying for a Loan The Mortgage Loan Process

Step: 1

Loan Application & Pre-Qualification

The first step in the Mortgage Process is to complete a full loan application. Once your application is received, an experienced Mortgage Professional will help explain different financing options that are best suited for your goals. This beginning stages of the process does not guarantee an approval for a mortgage, however it does provide the knowledge required to set realistic expectations in respect to spending limits.

Step: 2

Documentation

Financial documents supporting the mortgage application must be submitted and verified by underwriters. Documentation commonly requested (but not limited to) would include 30 days pay stubs, 2 years complete tax returns, 2 years W2’s and 1099’s, photo ID’s for all applicants, current checking and savings account statements, and recent retirement/investment account statements. If you have experienced a divorce or bankruptcy, supporting documentation will be required.

Step: 3

Begin the Loan Process

When all parties have agreed to the terms of the sales contract, you will meet with your Mortgage Banker to discuss the different financing options you may qualify for. When the type of mortgage, and term, has been determined, you will sign the Loan Application and the Loan Estimate. This document is not 100% accurate in the early stages, however, it does provide you with a realistic picture of your transaction.

Step: 4

Home Shopping

Now that the pre-approval is place, you can begin the process of shopping for your dream home! You might consult with a realtor about your needs and prepare a list of available inventory that suits your search criteria. When the perfect home is located, Eric will present your offer to the seller.

Step: 5

Underwriting

A Mortgage Underwriter’s job is to assess the risk of lending you, the applicant, money to purchase your home. They will consider factors such as credit history, employment history and income, and your ability to repay when determining if they will approve your loan or not.

Step: 6

Inspection & Appraisal

Your Realtor will recommend a capable home inspector to conduct a thorough inspection of the property. The inspector will check for any structural and/or material defects in the property and provide a written report about their findings. If the property contains items that need to be addressed, per the inspection report, the Realtor can submit a building resolution document that request the seller to correct the deficiencies or provide a credit for the repairs at closing. (USA Mortgage does not require a copy of the inspection as this is a voluntary inspection) USA Mortgage will order an appraisal on the property from one of our approved vendors. The appraisal report is required by underwriting as it provides a collateral assessment of the property, assuring the Lender that the property value is commensurate with the purchase price.

Step: 7

Conditional Approval

After the initial documentation has been collected and the appraisal report has been issued, the file is submitted to our Underwriting Team for review. Typically on the first review, the Underwriter will issue an “approval” but with some conditions. These “conditions” are items that the Underwriter needs additional clarity on. Once these conditions are met, the final approval will be issued.

Step: 8

Final Approval

The final approval is issued when all documentation has been signed off on by Underwriting. It is imperative that this final approval date is met prior to your loan commitment date on the sales contract. Since this milestone is time sensitive, staying motived and providing all requested information will allow us to meet the designated date of loan commitment and prevent any delays or extensions.

Step: 9

Closing

The loan closing appointment typically occurs at a Title Company and represents the time when all Buyers sign the final loan, and title, documents. This will include the transfer of title and all recording instruments that show YOU as the new owner!

Mortgage Speak Terms You Will Hear During The Loan Process

Adjustable Rate Mortgage (ARM)
Mortgage in which the rate of interest is adjusted at regular intervals based on a standard rate index. Most ARM’s have a cap on how much the rate may increase.

Amortization
The process through which the mortgage debt is altered, usually declining, as payments are made to the lender. “Negative-amortization” occurs when monthly payments are too small to cover either the principal or interest reductions.

Annual Percentage Rate (APR)
The rate of interest to be paid on a loan projected life; sometimes referred to as the “true” rate of interest.

Appraisal
A professional evaluation of the value of a home or other piece of property. It is often required by the lender.

Balloon Mortgage
A real estate loan in which some portion of the debt will remain unpaid at the end of the term of the loan. A balloon will usually result in a single large payment due when the loan ends.

Cap
A limit on how much a mortgage interest rate may increase or decrease for an adjustable rate mortgage.

Conventional Mortgage
A home loan that follows a fixed rate.

Debt-To-Income Ratio
A ratio used by lending institutions to determine whether a person is qualified for a mortgage. Debt-to-income is the total amount of debt, including credit cards and other loans, divided by the total gross monthly income.

Default
Failure to pay the mortgage payments over a specified period of time.

Discount Points
A percentage of the mortgage paid to the lender to lower the interest rate on a loan. One point equals one percent of the mortgage.

Equity
The difference between the market value of a house and the amount still owed on the mortgage.

Escrow
Money and documents deposited in a trust account to be held by one party for another. Often used by brokers to hold deposit money prior to closing. Also used by lenders to hold money for taxes and insurance on a home.

FHA Loan
A loan guaranteed by the Federal Housing Administration. FHA issues specific guidelines for mortgages.

Loan-To-Value Ratio (LTV)
The amount of the loan divided by the purchase price of the house. If a refinance, the loan is divided by appraised value.

Margin
A set number of percentage points a lender adds to the index to determine the interest rate for an ARM.

Mortgage Insurance (MI)
Insurance designed to cover the lender should the borrower default on the loan. Depending on the lender, this may be required by the lender.

PITI
PITI stands for principal, interest, taxes and insurance – the components of the monthly housing expense. Principal – the portion of the monthly payment that is used to reduce the loan balance. Interest is the fee charged for borrowing money. Taxes refer to the property taxes paid by the homeowner. Insurance refers to homeowner’s insurance – insurance purchased by the borrower and required by the lender, to protect the property against loss from fire and other hazards. Taxes and Insurance that are included in the monthly mortgage payment are held in an Escrow account by the lender who then pays the full amount when they come due.

Points
An interest fee charged by the lender. One point is equal to one percent of the mortgage. The use of points allow the borrower to buy up or down his permanent interest rate.

Prepayment Penalty
A fee imposed on a borrower who pays off a mortgage before it is due.

Prequalification
A process by which a potential homebuyer qualifies for a home mortgage before making an offer on a house. A lending institution agrees to make a loan in a specified amount to the person it has pre-qualified.

Principal
The amount of the loan.

Second Mortgage
An additional mortgage on a property. It often carries a shorter term and a higher interest rate than the original mortgage.

Title Company
A company that searches for titles and insurance claims. Your loan will close at a title company.

Truth In Lending Act
A federal law that requires lenders to reveal all the terms of the mortgage.

VA Loan
A loan guaranteed by the Veterans Administration. To obtain a VA loan, the borrower must have served in the Armed Forces.

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