If you are thinking about buying a home and wondering what procuring a mortgage loan entails, this article is for you. Like any legal or fiscal process, it’s always good to know what to expect so you are armed with the right documentation, information and questions ahead of time.
Step One: Preparation
Gather all documents pertaining to verification of your income, assets and debts. Income verification may include earning statements, pay stubs, W-2 forms, and tax returns for at least the past two years. If you have additional income in the form of social security, rental properties or from other sources, obtain verification of those income streams as well. Assets may include checking and savings account balances, savings bonds, motor vehicles that you own and have paid in full and any other investments. You should also have documentation of your debts on hand – Think of recurring payments for such things as student loans, car loans and furniture loans.
Step Two: Selecting a Lender
It’s best to do a little bit of light research when it comes to selecting a lender. Consider who you currently bank with (Bank of America, First Republic, etc.), and ask friends, family and co-workers if they’ve had good experiences with any lenders. Some banks offer more favorable lending terms if you bank with them – i.e. open savings and checking accounts or move a minimum amount of cash to their bank. Get on the phone with potential lenders or go visit them in person to determine what offers you the best opportunity.
Step Three: The Application
After you select a lender, a mortgage professional at the lending institution will fill out paperwork using the documentation you provide relating to your income, assets and debts. The application requires your signature verifying the information that will be submitted to the bank for review. At this stage, you will be asked for your social security number so that the lending institution can run a credit check. The mortgage professional will also determine which type of loan best suits your situation.
Step Four: Processing
During this stage, the lending institution reviews your application, verifies the information it contains and acquires your credit report. The processing of your application may take 2-3 weeks or longer, depending on how quickly the lender is able to get in touch with third parties (such as employers, landlords, etc.) for verification requirements. If there are no impediments, the lender will prepare disclosure documents that contain the terms of the loan being offered to you.
Step Five: Mortgage Underwriting
The length of this step varies depending on the volume in the market and whether or not your lender uses automated underwriting or an actual underwriter. The underwriter makes the ultimate decision on whether the loan is granted to you, double checking verification specifics and reviewing the appraisal and title report for the property you are interested in.
Step Six: Closing
If there are no clearing conditions that require you to answer additional verification questions or further explain anything in your application, then you’re almost there! You will have a few days to review the terms of the loan, and then it’s time to return to sign the official loan papers. Make sure that the numbers you see at the close reflect all of the numbers and agreed upon terms in your disclosures. A reputable lender will likely never purposefully change numbers on you, but it’s always good to triple check your terms.
Most importantly, remember that you are paying for this loan – this isn’t free money that the lender is giving you – so you have the right ask as many questions as you want and clarify anything that confuses you! We focus on mortgage litigation at McFarlin LLP and have helped many people deal with mortgage problems and achieve favorable outcomes. Let us know if we can help you.