Pre-qualification starts before the loan process actually begins, and is generally the first step after initial contact with the loan officer.
The lender gathers information about the borrower’s income, debts and other relevant information to help make a determination about how much the borrower qualifies for in order to purchase a home. Different loan programs may allow for different values, so it is important to obtain a pre-qualification for each type of loan program that is suitable.
The application is the beginning of the loan process. The buyer, now referred to as the borrower, completes a mortgage application and supplies all of the required documentation for processing.
Various fees and down payments are discussed and the borrower will receive two documents: a Loan Estimate (LE) and a Closing Disclosure (CD) statement, which itemizes the rates and associated costs for the loan. Both of these documents will be sent to the borrower within three days.
We will then analyze all income sources – including pensions, Social Security, IRAs and 401(k) plans – as well as your credit history. We will look closely at how much money is left over after paying typical living expenses and decide whether to set funds aside to pay for future tax and insurance payments. If we determine that you won't be able to keep up with property taxes and hazard insurance payments, we are authorized to set aside a certain amount of funds from your loan to pay future charges. The amount set-aside will be based on the life expectancy of the youngest borrower.
Processing generally occurs between 5 and 20 days into the loan process.
The processor reviews the borrower’s credit reports and verifies his or her debts and payment histories as the VODs and VOEs are returned. Should there be any unacceptable late payments, collections for judgments, etc., a written explanation will be needed from the borrower. The processor also reviews the appraisal, survey and looks for property issues that may require further review.
After receiving all pertinent information from the homeowner and obtaining other required items, the loan package is submitted to the Loan Underwriter for final approval. It generally takes anywhere from 1-5 days to underwrite a loan. Underwriting involves verifying all information and making sure the loan complies with all laws and regulations.
Underwriting will generally occur between 21 and 30 days into the loan process, or sooner.
The underwriter is responsible for determining whether the combined loan package passed over by the processor meets all the required guidelines. At this time, if more information is needed, the loan is put into “suspense” and the borrower is contacted to supply additional documentation.
Please note - the HECM must always be in first position.
Pre-Closing occurs approximately between 25 and 30 days into the loan process, as long as no issues occurred in the previous steps.
During this time the title insurance is ordered, all required approval contingencies are met, and a closing time is scheduled for the loan.
Closing usually occurs between 25 and 45 days into the loan process (depending upon the designated length of your escrow).
At the closing, the lender “funds” the loan with a cashier’s check, draft or wire to the selling party in exchange for the title to the property. This is the point at which the borrower finishes the loan process and actually buys the house.
Fifteen-year loans became quite popular in the 90′s. Thanks to historically low rates, borrowers can use a 15-year loan to pay off their...home loans quickly without an unbearably high mortgage payment.
The benefits are simple: You could own your house free and clear more quickly and you might save a great deal of interest. For example, a couple in their mid-40s may like this concept knowing that by the time they reach age 60, they own their home and will no longer have mortgage payments. For a young couple in the mid-20s, it may not make as much sense as having a longer term 30-year loan.
The key to deciding is to compare the monthly payments and see how comfortable you are with the higher payments of a 15-year loan. If you want to pay off your loan early but can’t quite handle the payments on a 15-year loan, ask us about our 20-year loans. For those who want to pay off their loan even more quickly, we can offer a 10-year fully amortizing loan.
WHAT ARE CONFORMING, HIGH BALANCE AND JUMBO LOAN PROGRAMS?
Conforming Loans are loans that meet Fannie Mae (FNMA) and or Freddie Mac (FHLMC) underwriting requirements. In other words, income, credit,... and property requirements must meet nationally standardized guidelines. There are additional guidelines, pricing and restrictions regarding conforming loans for manufactured housing.
Conforming loans are subject to loan amount limits that are set annually by Fannie Mae and Freddie Mac. These limits vary based on the region in which the subject property is located as well as the number of legal units contained in the subject property. Under the FNMA and FHLMC Charter Acts, the loan limits are 50% higher for first mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
When FNMA and FHLMC limits don’t cover the full loan amount, the loan is referred to as a jumbo mortgage. The average interest rates on jumbo mortgages are typically higher than for conforming mortgages.
A high-balance mortgage loan is between a “conforming” and a “jumbo” loan. The loan amounts for a high-balance loan depend on the county you live in. Rates on a high-balance loan are typically higher than conforming but less than jumbo. Jumbo investors may have additional overlays and qualification requirements above FNMA/FHLMC.
WHEN SHOULD I GET A 30-YEAR FIXED LOAN?
The traditional 30-year fixed rate mortgage has a constant interest rate with the monthly payments (principal and interest only) that nev...er change for both conforming and jumbo loan programs. This may be a good choice if you plan to stay in your home for seven years or longer. If you plan to move within seven years, adjustable-rate loans are usually more cost effective.
As a rule of thumb, fixed-rate loans may be harder to qualify for than adjustable-rate loans. When interest rates are low, fixed-rate loans are generally not that much more expensive than adjustable-rate mortgages and may be a better deal in the long run because you can lock in the rate for the life of your loan.
A mortgage in which the interest rate is adjusted periodically based on a pre-selected index. It is also sometimes referred to as the renegotiable-rate mortgage, variable-rate mortgage, or Canadian-rollover mortgage.
On an adjustable-rate mortgage, it is the time between changes in the interest rate and/or monthly payment — typically one, three or five years, depending on the index.
Loan payment of equal periodic payments calculated to pay off the debt, as well as the accrued interest on the outstanding balance, at the end of a fixed period.