LOAN PROCESS
A loan process can be broken into steps: Loan Pre-approval, House Buying, Loan Application, Loan Processing, Underwriting, and Closing.
A Borrower (you) wants to get pre-approval for a loan so you know what you can afford before you look for a property. A loan process can take up to 45 days.
1. Loan Pre-Approval
It's good to work out what kind of loan is best for a borrower (you), how much you can afford to pay, and to obtain a loan pre-approval.
A/ Familiarize yourself with the different types of loans, find the one that is right for you. You need to have an accurate idea of your monthly costs. This will include the *principal, the *interest, *property tax, and *insurance. If you can’t make a 20% down payment on a loan, you’ll also need to pay for *mortgage insurance (MI).
2. House Buying
With your Loan Pre-approval, you’re ready to shop & make an offer for a house with your real estate agent.
At this stage, you’ll normally put down *earnest money, 1% to 3% of the sale price, this indicates you are interested in a property. If you close on a property, this money is put towards the down payment. Normally, your offer will also contain contingencies like: *Appraisals, *Home inspections, *Final Loan approval.
You are now ready to apply for a real loan. Your lender will need your information. They should tell you what information they need, likely:
Employment
Income
• Two years of W-2s, 1099, Fed Income Tax Returns • Profit and loss statement if self-employed • Pensions, Social Security • Public assistance • Child support • Alimony
Assets
• Bank accounts (savings, checking, brokerage accounts) • Investments (stocks, bonds, retirement accounts) • Real properties • Proceeds from the sale of your current home • Gifted funds from relatives.
Debts
• Current mortgage • Liens • Alimony • Child support • Car loans • Credit cards • Real properties
Property information
• Street address • Expected sales price • Type of home (single-family residence, condo, etc.) • Size of property • Real estate taxes (annual) • Homeowner’s association dues (HOA) • Estimated closing date
Credit history
• Bankruptcies • Collections • Foreclosures • Delinquencies
Your credit history - is one of the *most important elements in getting your loan approved. Prepare to explain any missteps in your financial background. It’s good to have dates, amounts, and causes for any of these parts of your credit history.
Your lender pulls all information you provided into a Loan Estimate (LE). A loan estimate is a 3-page form that presents home loan information.
You’ll get a LE within 3 business days of applying for a loan unless you don’t meet the lender’s basic qualifications and your application is rejected. If that happens, the lender must give you a written notice within 30 days stating why your application was rejected.
When you receive a LE, it’s valid for 10 business days. If you accept a LE, your loan will start to be processed. At this stage, your lender will go through and verify the information you’ve provided to them. This includes:
* Ordering a credit report (if not already done) * Verifying employment (VOE) * Verifying bank deposits (VOD) * Order a property inspection * Order appraisal * Order a title search
5. Underwriting
Loan underwriters give final approval for your loan or not.
Underwriters check every aspect of your loan application and carry out a number of other steps. For instance, borrowers are required to have an *appraisal conducted on any property they take out a mortgage against.
6. Closing
If your loan is approved, your lender gives you a Closing Disclosure (CD).