Home Loan Process

The loan process is simply a means of evaluating one's creditworthiness, one's cash flow and assets, and project forward one's ability to handle new debt, for a property of verified value, all of which culminates at a signing by the borrower coordinated by a title or escrow company.

Conversely, if one has no credit history, no cash flow or assets, or a property which will not support an expected value, one will have a devil of a time obtaining a loan regardless of anyone's pure motivations or good intentions.

Mortgage lenders come in all shapes and sizes, and abilities. Obtaining a real estate license is a low barrier to entry, so borrowers should be careful where they place their trust, as in any marketplace.

One should seek people with proven success in managing detail-oriented activities because the mortgage origination business is all about details.

In order of priority, find someone who is worthy of your trust. If you would not trust the person with your health, why would you trust anyone with your financial health, because that is what a mortgage represents.

Secondly, since your private financial inner self will be revealed to this person, you need to make sure that the person has your privacy as their utmost concern.

Next, recognize that you will be engaging your mortgage person's time and effort, so please be honest and upfront with them if you do not wish to do business with them. It will save them time and money and save you from feeling guilty about using someone's time and energy.

Once you have made your decision, be quick in giving the person all of the required information. Obtaining a loan is a time sensitive activity (Time is money and money is time.)

Your service provider will attempt to gather your name, address, SSN, value of your property, and amount of your loan. Next, the credit scores will be obtained from 3 credit bureaus. An application will be required to be signed as well as disclosure documents. Your W-2s from the last two years will be requjred, your most recent month of paystubs will be required and two months of bank/asset statements will be required at a minimum. (If you are self-employed then tax returns will be needed.)

The sooner you can get this information to your broker, the better. Once the broker has this, your loan will be "locked" which is a requirement by a given lender who is going to "commit" to a particular interest rate for a period of time. When demand is high, commitments can be 60+ days, when demand is moderate 45 days, when demand is average, 30 days. In today's marketplace, the average is 45 days.

Once locked, the loan package will be given to a setup person to obtain an electronic approval, prior to submission to the lender of choice. Each lender has their own requirements, so the process gets tricky when lenders each have their own quirks. Experienced processors can help reduce last minute problems caused by lender changes in policy or procedures.

The lender's underwriter will take an average of between 5-10 days to give an approval, at which point, the lender is then instructed to draw up the documents and send them to the title company. At this point, the title company will typically send an estimated closing statement to the broker who will review it and hopefully discuss it with the borrower. This document is called a HUD-1 form (Housing and Urban Development, HUD).

The items listed on this form will be all of the fees associated with the transaction. Rule of thumb, these fees will typically total 0.75-1.1% of the loan amount, averaging 1.1% of the loan amount when the amount is above $250,000. These fees would be expected to be paid by the borrower unless the broker agreed to pay for all Non-Recurring Closing Costs (NRCCs) from the rebate which is paid to the broker by the lender, for originating the loan.

During times of decreasing interest rates, the lower the fees, the easier it is to get people to refinance their mortgages, so the "No Point/No Fee" loan has become popular in the past few years as competition has enabled borrowers to reduce rates by shopping around.

Source : http://homeloans.blogspot.com/