Pulling Back the Curtains on the Loan Process


Pulling Back the Curtains on the Loan Process

 

Buying a new home can be an exciting experience, but it can also be one of the most challenging, especially if you are unfamiliar with the mortgage process and its many requirements. Much of this stress can be avoided, however, if you understand the steps involved with purchasing a home.

 

Are you wondering what happens during the loan application, approval and closing process? We’ve laid it all out for you in five steps, along with more details on exactly what happens at closing. Below is a step-by-step explanation of the home mortgage process.

 

Loan Officer

Loan Officers are subject matter experts who stay up to date with the mortgage industry so they can informatively answer questions homebuyers may have about various loan types. They are also licensed to discuss current rates and get a homebuyer locked in at the best available rate a loan type offers.

 

Chris Crenshaw, a loan officer with Home Team Mortgage, says, “It is so important to dive deep into the financial situation of each client to present to them the best options available. Then you can discuss the pros and cons of each loan type, so they can make a well-informed decision.”

 

Loan Officers are on standby for their clients, and they keep everyone updated on the loan status. Dan Hansen, a loan officer with Home Team Mortgage, says, “On average, I would say that I speak with a single client at least three or four times a week. I always try to speak with the borrower before the weekend to update them on the status of their loan and explain the next steps of the process to them beforehand. If they are new home buyers, I try to reach out more often to go over more – in case they don’t know what questions they should be asking.”

 

Processing

In some cases, processing is the most important step in the mortgage loan approval process since it is decided early on whether a potential homebuyer will be approved for the loan. Processors come in after the loan officer enters a homebuyer’s data into the system and uploads required documentation such as paystubs, bank statements and the loan application. They have a variety of responsibilities, from reviewing bank statements for any large deposits that need to be sourced to verifying employment to calculating income based off W2s, tax documents, and paystubs.

 

Underwriting

A more in-depth analysis follows once underwriters ensure the loan application is completed with all supporting documentation required for the loan. Underwriters consider the loan-to-value (the amount one puts down on their home compared to what is owed) and debt-to-income ratio (total funds left after debt including the potential mortgage payment) to factor a borrower’s ability to pay. They also cite other compensating factors beyond numbers and calculations, such as stable employment history and high liquid assets with a low loan to value. Once the review is completed an underwriter creates specific loan conditions for the loan closer to clear so the file can be completed per state and federal regulations. The loan is then in the final approve stage.

 

Closing/Funding

Mortgage loan closers pick up the file once it is final approved. This department works with title companies to finalize all fees and the escrow account (taxes plus insurance), if applicable, to create a final Closing Disclosure. A closer also creates and prepares documents for borrowers to sign, such as the Note and Deed of Trust. Before documents are created and a Closing Disclosure is finalized, the file and system are reviewed for any discrepancies and any required underwriting conditions are cleared, or pushed to be cleared at funding. Funding takes place after the borrowers and seller’s signed closing documents are reviewed and remaining conditions are cleared.

 

Post Closing

Many borrowers are unaware of the loan progression after closing on their home. Typically, a mortgage company will sell the loan for profit. This requires reviewing, organizing, and auditing the loan file to deliver to the selected investor (usually completed electronically). The investor will then purchase the loan or send notice for conditions they require prior to purchasing. Each loan contains a Mortgage Identification Number and is registered through the Mortgage Electronic Registration System (MERS). Once the loan is purchased, it is transferred to the investor via MERS. Upon completion of the transfer, the new investor provides borrowers with a welcome package identifying contact information, monthly payment required, and information on how and where to send mortgage payments.  The former lender will also provide borrowers with a “goodbye” letter confirming to whom their loan has been sold and the date future payments should be made to the new investor. The homeowner’s insurance company will also receive notification of the sold mortgage along with a request to update the mortgage holder on the borrower’s policy. Additionally, government loans require the lender to insure the loan by completing an application and occasionally sending in an audit binder (an organized binder with supporting documentation a lender has on file) prior to insurance approval. The “insuring” process can take anywhere from 5 minutes to two or three weeks, depending on any conditions requested of the lender.

 

Are you or someone you know interested in buying a home? You are invited to listen to local experts discuss the home-buying process in today’s market.

 

Questions that will be addressed:

*  Is now the right time to purchase a home?

*  Rent vs. Buy: What are the benefits of each?

*  How does the interest rate affect a house payment or size of home for the buyer?

*  What is the process of purchasing a home?

*  What are the qualifications for purchasing a home?

Join us for a free seminar on Thursday, April 27, 6-8 p.m. or Saturday, April 29, 10-noon at the Irving Convention Center, 500 W. Las Colinas Blvd. in Irving.

 

Seating is limited. Please reserve your seat by texting/calling Renee Michon at 248-707-0260. Please provide your name, number of attendees and which date you would like to attend.

 

 

Loan Lingo Made Easy


 mortgage-cloud

 

Buying a home can be overwhelming, especially when you add in the loan lingo used by lenders and real estate agents, according to Alex Parker, sales manager at Home Team Mortgage – Ebby’s affiliated mortgage source. To help alleviate some of the confusion, below are some common terms frequently used in the mortgage process:

 

FHA Mortgage

FHA is a type of mortgage that offers lower down payments, lower credit and less income to qualify. These mortgages are government backed by the Federal Housing Administration.

 

VA Mortgage

VA mortgages are loans catered to qualified veterans, active-duty military personnel and reservists. These loans require no down payment and are guaranteed by the Department of Veteran Affairs.

 

Conventional Mortgage

Conventional mortgages are loans offering a wide range of options for borrowers. Some features may include monthly or single premium mortgage insurance, second liens, and higher loan amounts.

 

Fixed Rate Mortgage

This is a mortgage loan for which the interest rate is fixed for the life of the loan. The principal and interest payment does not vary. As with every loan, the escrowed portion of the payment may fluctuate up or down depending on the tax or homeowner’s insurance changes.

 

Adjustable Rate Mortgage (ARM)

This is a mortgage loan for which the interest rate may change annually, often after a set number of years. ARMs are tied to indexes which are used to determine changing rates to align with the current market. The principal and interest payment may vary up or down, along with the escrowed portion of the payment.

 

Annual Percentage Rate (APR)

The APR illustrates the annual cost of financing, including interest rate, fees and charges and is expressed as an annual interest rate. Because you may be paying loan discount points and other prepaid finance charges at closing, the APR disclosed is often higher than the interest rate on your loan. This APR can be compared to the APR on other loan programs to give you a consistent means of comparing rates and programs.

 

Pre-Qualification

A process by which a lender assesses whether a borrower qualifies for a mortgage based on information provided by the customer. Typically, a prequalification is an informal review as a preemptive to pre-approval and full loan approval.

 

Pre-Approval

A process by which a lender verifies information including credit, income and asset information to assure the borrowers qualify for the mortgage. A pre-approval is much more powerful in negotiating as it provides peace of mind for buyers, sellers and agents.

 

To learn more about the mortgage process and to determine how much you qualify to borrow for a home purchase, contact Home Team Mortgage at 972-665-1900 or customerserviceyhtm@yhtm.com.