A Guide to home loan Process
The first step in obtaining a loan is to determine how much money you can borrow. In case of buying a home, you should determine how much home you can afford even before you begin looking.
Mortgage Preapproval will show you how much a mortgage lender is willing to lend you for a loan. Mortgage lenders calculate this and your interest rate by assessing your income, credit history, credit report, assets and credit score. Keep in mind that preapproval will make you more attractive to home sellers and real estate agents since you’re already vetted and ready for the mortgage loan process.
Home loans come in many shapes and sizes. Deciding which loan makes the most sense for your financial situation and goals means understanding the benefits of each. Whether you are buying a home or refinancing, there are 2 basic types of home loans. Each has different reasons you'd choose them.
1) Fixed Rate Mortgage
Fixed rate mortgages usually have terms lasting 15 or 30 years. Throughout those years, the interest rate and monthly payments remain the same. You would select this type of loan when you:
- Plan to live in home more than 7 years
- Like the stability of a fixed principal/interest payment
- Don't want to run the risk of future monthly payment increases
- Think your income and spending will stay the same
2) Adjustable Rate Mortgage
Adjustable Rate Mortgages (often called ARMs) typically last for 15 or 30 years, just like fixed rate mortgages. But during those years, the interest rate on the loan may go up or down. Monthly payments increase or decrease. You would select this type of loan when you:
- Plan to stay in your home less than 5 years
- Don't mind having your monthly payment periodically change (up or down)
- Comfortable with the risk of possible payment increases in future
- Think your income will probably increase in the future
By carefully considering the above factors and seeking our professional advice, you should be able to select the one loan that matches your present condition as well as your future financial goals.
Although lenders conform to standards set by government agencies, loan approval guidelines vary depending on the terms of each loan. In general, approval is based on two factors: your ability and willingness to repay the loan and the value of the property.
Once your loan application has been received we will start the loan approval process immediately.
The underwriting process is when your mortgage lender goes through your application and verifies your income, assets, debt and property details. Once verification is complete, you’ll receive final approval on your loan application. For the borrower, this process is more of a waiting period as they are usually not needed unless the lender has any specific questions or needs any additional documents.
In order to improve your chances of getting a loan approval:
- Fill out your loan application completely. You may use our online forms to expedite the process.
- Respond promptly to any requests for additional documentation especially if your rate is locked or if your loan is to close by a certain date.
- Do not move money into or from your bank accounts without a paper trail. If you are receiving money from friends, family or other relatives, please prepare a gift letter and contact us.
- Do not make any major purchases until your loan is closed. Purchases cause your debts to increase and might have an adverse affect on your current application.
Now you’re inching closer to the finish line, this is where down payments and closing costs come into play. You’ll need to provide the down payment for the property, payment for the closing costs agreed upon as well as proof of home owners insurance. This information can be found in the closing disclosure which you will receive after mortgage underwriting has been completed. It’s important for you to understand these closing documents and be financially prepared in order to finish the mortgage loan process.
The final step to complete is to attend your closing day meeting and officially become a homeowner! Yay, you did it. At this closing meetingyou’ll sign all necessary documents, don't worry you will have 72 hours before closing to review all of the Final Numbers. This meeting will be conducted with the closing attorney or a title company usually in person, but e-closings are also available. Once everything is signed and handed over, you’ll receive the keys to your property and you’ll officially be able to move into your new home!