Mortgage Loan Process
1. Getting Started
Create a containment file. When applying for a mortgage loan to purchase an Ahwatukee home, a lender will request lots of information, document and statements. Maintain one central file for copies of financial statements, bank accounts, credit cards, auto loans, assets, debts, partnership records, payroll verification stubs and two years of tax returns.
Check your credit rating. Now is the time to address any conflicts in your credit history. You have a credit score that determines your credit worthiness that range between 400 and 800. The higher, the better. A score above 620 is generally considered good. Above 680 is usually considered “premium” and is often rewarded with a lower interest rate.
Visit the websites of the three major credit reporting agencies and follow the directions to get your credit report.
2. Choosing A Lender & Type Of Loan
You need a credible lender. One that is ethical and one that will clearly explain your options. Today there are many types of home loans that are designed to fit your objectives and credit rating. There are also government guarantee programs for those that qualify. An expert mortgage lender will suggest the right loan package for your unique situation. Special loan packages are often available for even those with less-than-perfect credit.
Choose the right type of loan. There are way too many variations of mortgage loans that it is beyond the scope of this page to explain. Your preferred lender will explain the options along with the positives and negatives of each option. After an interview, an analysis of the information you provide and an initial credit check, your loan officer will generally recommend the right kind of loan for you.
Implement initial action. Review your credit reports for any discrepancies and take immediate action for resolution. Now is not the time to change employment since lenders consider stability. Do not create new debt, bring all payments current and begin accumulating funds towards the down payment on your Ahwatukee home purchase.
3. Get Your Loan Preapproved
A prequalification is merely an opinion by a lender of the maximum loan amount based upon information provided by the buyer. While this process is quick and provides some negotiating benefit, a home loan is never approved or rejected until it formally goes through the investigative process.
Get preapproved. It gives you confidence and carries a negotiating advantage. With a letter of preapproval, you will know exactly how much home you can afford. By becoming preapproved, it will reduce the length of time of escrow close and funding. Usually for this reason, a seller is more motivated to accept an offer by a homebuyer that has been already approved versus a buyer with only a letter of prequalification.
4. The Loan Application Process
There will be forms to fill-out and documentation to provide. All information will be verified and your credit score will be determined to qualify you for a mortgage loan. The following items are generally required to process the loan application:
The loan application will go through the “underwriting” process. An underwriter (loan analyst) will verify all information and “crunch” the numbers to determine the buyer’s ability to repay the home loan. Often there is a loan approval committee which will review the underwriter’s conclusion of credit worthiness. Questions invariably arise so stay in-touch with your mortgage broker to keep the process moving forward expeditiously.
5. Loan Funding
Your mortgage broker will have you sign the final documents usually with a notary or escrow officer present. Be prepared at signing with a photo identification. If it’s at escrow close, a cashiers check may be required to cover the down payment and your share of closing costs. Don’t take the loan signing process lightly. Allow yourself enough time to read the documents carefully to verify that all terms and conditions were exactly as you expected. Once you sign, it will likely be too late to resolve conflicts.