Financing 101: How Home Loan Pre-Approval Works
Once you have an idea of the type and size home you want and the area you’d like to look in, you should be pre-qualified by a Lender. By doing this before looking for a home, you’ll save yourself time, energy and frustration because pre-qualification can: Determine How Much Home You Can Afford. Pre-qualification helps you avoid buying less home than you can afford or being disappointed if you don’t qualify for as much as you had hoped. Show What Your Total Investment Will Be. You’ll know approximately how much money you’ll need for down payment and closing costs. Inform you of your monthly payments. You’ll have a close estimate of your monthly principal, interest, taxes and insurance (PIT). Identify the Loan Programs You Can Qualify For. With the wide variety of loan programs available, it is important to know which types you qualify for and which will best suit your needs. Strengthen Your Offer. Sellers are more inclined to accept realistic offers when they know that you have taken the time to be interviewed by a Lender and can probably qualify for the loan. At this point, your Lender can also help you determine alternatives and strategies that could help you buy the home of your dreams. Some examples include:
• Special first – time homebuyer program. • Co-mortgage financing. • Debt consolidation counseling. In order to be pre-qualified, the Lender will need to know the following: • Your employment history and income. • Your monthly debts and obligations. • The amount and source of cash available for down payment and closing costs. When you are pre-qualified by a Mortgage Company, you’ll receive a FREE PreQualification Certificate to give to your Realtor®. The Seller may be more likely to accept your offer because you have been qualified to buy their home.
THE LOAN PROCESS
Step 1 – The Loan Application The key to the loan process going smoothly is the initial interview. A t this time, the Lender obtains all pertinent documentation so unnecessary problems and delays may be avoided. The Realtor® opens escrow with the title company at this time as well.
Step 2 – Ordering Documentation Within 24 hours of application, the Lender requests a credit report, an appraisal on the new property, verifications of employment and funds to close, mortgage or landlord ratings; a preliminary report and any other necessary supporting documentation.
Step 3 – Awaiting Documentation Within 1-to-2 weeks, the Lender begins to receive the supporting documentation. As it comes in, the Lender checks for any problems that might arise and requests any additional items needed.
Step 4 – Loan Submission Once all the necessary documentation is in, the loan processor assembles the loan package and submits it to the underwriter for approval.
Step 5 – Loan Approval Loan approval generally takes 1-to-3 days. All parties are notified of the approval and any loan conditions which must be cleared before the loan can close. The loan approval is the beginning of the closing process.
Step 6 – Documents are Drawn Within 1-to-3 days after loan approval, the loan documents (including the note and deed of trust) are completed and sent to the escrow holder. The escrow officer will make an appointment for the borrowers to sign the final documents. At this time, the borrowers are told how much money they will need to bring in to close the loan. Payment must usually be made by a cashiers check.
Step 7 – Funding Once all parties have signed the loan documents, they are returned to the Lender who reviews the package. If all the forms have been properly executed, a check is issued to fund the loan.
Step 8 – Recordation Upon receipt of the loan funds, the title company will record the legal documents necessary to transfer the property into the Buyer’s name. At the same time, the deed of trust is recorded to show the new loan on the property. Escrow is now officially closed and you now own your home. Please consult your Mortgage Consultant for more detailed information regarding your loan.