The Mortgage Process - A Realtor's Perspective
Obtaining a mortgage is one of the most important steps in the home buying process. It is the very first question I ask when contacted by a client. , one of the first questions I ask is if they are approved for a mortgage and what are the details of their approval. Most of the time, they haven't moved that far into the process. They tell me they have already crunched the numbers and have determined what they think they can afford by using a mortgage calculator that they found online. Although, a mortgage calculator is a great tool for determining a monthly payment amount, it isn’t as effective as when you physically work with a mortgage broker and get a true picture of what you are approved for.
There are many factors that determine how much house you can afford. When a client works with a mortgage broker, it helps me as a Realtor perform my job better. I am provided with the correct price range for a buyer based on a monthly payment the buyer wants to pay, and the mortgage broker tells me the range of the taxes, homeowner's association fees, community district development fees (cdd fees) to stay within. It makes the home buying process much easier to determine the best house for their situation. Many families feel overwhelmed
because of the amount of paperwork they must
complete. Knowing what to expect, especially if
you’re a first-time homebuyer, will help you make
solid decisions about your home purchase.
This guide was written to help you navigate through
the mortgage process — from the people involved, to
the costs and forms you’ll be asked to complete —
and how you can take steps to make sure you keep
your home long term. Understanding the primary
purpose and function of the documents in the
mortgage process, as well as the role of the many
professionals involved, will make the mortgage process
much less intimidating.
Getting
During the mortgage process the executed contract on the property you intend to purchase is turned into the lender and the process begins. Here is what happens during the mortgage process:
Step 1: Complete the Mortgage Loan application
With the aid of a mortgage professional, the borrower completes the application and provides all Requested Documentation. This mortgage loan application includes several sections
that capture information about you, your finances and
details of your potential mortgage. It’s lengthy and at first
glance seems complicated, so in this section you’ll learn
about the reasons for each part of the form and why
you’re being asked to provide the requested information.
Your loan officer will help you fill out this form.Due diligence is performed. Here the lender’s underwriters will verify your employment, your credit, your assets and source your bank deposits. Credit Report Fee—the cost of getting copies of your credit report to assess your mortgage loan application. Your credit score, included in your credit report, is one of the most important factors in determining the interest rate that will be offered to you. What Does Your Credit Report Include? Your credit report provides information on money you’ve borrowed from credit institutions, in addition to your payment history, and includes: ■ A list of debts and a history of how you’ve paid them. This can include credit cards, auto loans, student loans, department store credit cards, etc. ■ Any bills referred to a collection agency. This can include phone and medical bills. ■ Public record information. This can include tax liens and bankruptcies. ■ Inquiries made about your creditworthiness. An inquiry is made when you apply for credit. Your credit report can also show if you were given credit based upon the inquiry.Important Documents to Complete
Your Application
You will most likely need the following information
to provide to your loan officer in order to
complete Sections IV–VI of the mortgage loan
application:
■ Paycheck stubs for the past 30 days.
■ W-2 forms for the past two years.
■ Information about long-term debts, like car
loans, student loans, etc.
■ Recent statements from all of your bank
accounts.
■ Tax returns for the past two years if you’re
self-employed.
■ Proof of any supplemental income.
Important note:
Cash deposits do not count because they can not be sourced.
Step 2: Order Appraisal
The appraisal is ordered. The lender needs to verify that the purchase price reflects the value of the property. An appraiser is sent out to the property and conducts an analysis of recent sales of similar homes within the area, the current condition of the home, the real estate market conditions and other factors as needed.
The lender wants to be sure that the price of the property you're buying is comparable to the values of similar properties. The lender will get an independent appraisal of the property prior to closing, and the results could affect the rate and terms of your mortgage. A licensed appraiser will provide an expert's estimated value based on a physical inspection and comparable, or "comps" -- prices paid for comparable properties that have recently sold in the neighborhood. An appraisal typically costs between $300 and $500. Appraisal Fee—the fee paid to the professional appraiser who will assess the value of the home you want to buy. Since the home is the security or guarantee for the amount you are financing with your mortgage loan, your lender needs to know that the value of the property covers the loan amount. Most lenders will not provide you with a mortgage loan amount greater than what the appraiser determines is the property’s fair market value.
How much does it cost to perform an appraisal?
Depending on the type of loan you qualify for, the cost for an appraisal can range an average of $425 and up. This is a cost the buyer will need to pay out of pocket and it can not be included in your final closing costs to be paid at closing.
I usually have the lender or mortgage broker I work with to hold off on ordering the appraisal until we know that the home inspection report comes back clear and that the buyer is willing to move forward with the property.
Step 3: title search and title insurance
After the appraiser has looked at the physical side of your house, a title company looks at its legal history. Your lender doesn't want to lend money against a house that may have claims on it. That's why a title company performs a title search.
The title company will research the history of the property, looking for encumbrances such as mortgages, claims, liens, easement rights, zoning ordinances, pending legal action, unpaid taxes and restrictive covenants.
The title insurer then issues a policy that guarantees the accuracy of the work. Your lender will require a title policy that protects the lender. In some cases two policies are issued -- one to protect the lender and one to protect the property owner.
Title services fee and title insurance—the fee paid to a title company to search county records to make sure that the title to the property you wish to buy is clear and free of any complications like pending debts or liens on the property. • Government recording charges—the fee required to register the property under your name and record the mortgage or deed of trust. • Homeowners insurance—This charge is for the insurance you must buy for the property to protect your property from a loss, such as fire, floods and storm damage. In many cases, homeowners choose to let the lender pay the insurance from an escrow account the lender sets up for you that you fund on a monthly basis. • Initial deposit for your escrow account— This represents the money that you are required to pay in advance to establish your escrow account, so that this account can be used by the lender to pay for homeowners insurance, property taxes and other charges, if applicable.
STEP 4: Acquire HOme Insurance
Homeowners insurance — This charge is
for the insurance you must buy for the property
to protect your property from a loss, such as
fire, floods and storm damage. In many cases,
homeowners choose to let the lender pay
the insurance from an escrow account the
lender sets up for you that you fund on a
monthly basis.
STEP 5: Lock In your Loan Rate
After the appraiser has looked at the physical side of your house, a title company looks at its legal history. Your lender doesn't want to lend money against a house that may have claims on it. That's why a title company performs a title search.
STEP 6: Underwriting
Once the processor has put together a complete package with all verification and documentation, the file is sent to the lender. The underwriter is responsible for determining whether the package is deemed an acceptable loan. If more information is needed, the loan is put into "suspense" and the borrower is contacted to supply more information and/or documentation. If the loan is acceptable as submitted, the loan is put into an "approved" status.
STEP 7: The Closing Disclosure
The Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).
We are required by law to give you the Closing Disclosure at least three business days before you close on your mortgage loan. This three-day window allows you time to compare your final terms and costs to those estimated in the Loan Estimate that you previously received from us. The three days also gives you time to ask us any questions before you go to the closing table.
STEP 8: Order Survey
After the appraiser has looked at the physical side of your house, a title company looks at its legal history. Your lender doesn't want to lend money against a house that may have claims on it. That's why a title company performs a title search.
STEP 9: Prepare for Closing
Once the loan is approved, the file is transferred to the closing and funding department. The funding department notifies the broker and closing attorney of the approval and verifies broker and closing fees. The closing attorney then schedules a time for the borrower to sign the loan documentation.
At the closing the borrower should:
- Bring a cashiers check for your down payment and closing costs if required. Personal checks are normally not accepted and if they are they will delay the closing until the check clears your bank.
- Review the final loan documents. Make sure that the interest rate and loan terms are what you agreed upon. Also, verify that the names and address on the loan documents are accurate.
- Sign the loan documents.
- Bring identification and proof of insurance.
After the documents are signed, the closing attorney returns the documents to the lender who examines them and, if everything is in order, arranges for the funding of the loan. Once the loan has funded, the closing attorney arranges for the mortgage note and deed of trust to be recorded at the county recorders office.
STEP 10: Signing
After the appraiser has looked at the physical side of your house, a title company looks at its legal history. Your lender doesn't want to lend money against a house that may have claims on it. That's why a title company performs a title search.
STEP 11: the deed
After the appraiser has looked at the physical side of your house, a title company looks at its legal history. Your lender doesn't want to lend money against a house that may have claims on it. That's why a title company performs a title search.
STEP 12: TITLE SEARCH AND TITLE INSURANCE
After the appraiser has looked at the physical side of your house, a title company looks at its legal history. Your lender doesn't want to lend money against a house that may have claims on it. That's why a title company performs a title search.