Your FREE EZ PreQual has started the process for you…now we're ready to get going to determine what the steps are as you complete the process. We've already discussed that two key factors are the borrower's ability to repay the loan and, second, the borrower's willingness to repay the loan. Ability to repay the mortgage is verified by current employment and total income. Generally speaking, it is preferable for you to have been employed at the same company for at least two years, or at least be in the same line of work for two years.
The borrower's willingness to repay is determined by examining how the property will be used. For instance, will you be living there or just renting it out? Willingness is also closely related to how you have fulfilled previous financial commitments, thus the emphasis on your credit history and your mortgage payment history (or, rental payment history if a first-time home buyer). It is important to remember that there are no rules set in stone. Each applicant is handled on a case-by-case basis. Even if you come up a little short in one area, your stronger points can make up for weak factors. Do not assume you cannot qualify.
The application is the true start of the loan process. The borrower completes, with the aid of a Mortgage Professional, the application and provides all Required Documentation.
The various fees and closing cost estimates will have been discussed while examining the many Mortgage Programs and these costs will be verified by the Good Faith Estimate (GFE) and a Truth-In-Lending Statement (TIL) which the borrower will receive within three days of the submission of the application.
Most people applying for a home mortgage need not worry about the effects of their credit history after initial pre-approval. However, in some instances there are credit reconciliation issues which would position you better if certain items were "cleared up" prior to going forward with your full submittal. Talk to us about these exceptions.
You can be better prepared if you get a copy of your Credit Report before you apply for your mortgage. That way, you can take steps to correct any negatives before making your application. See Credit Reports & You!
When analyzing a borrower's loan application, two different debt ratios are used to determine if the borrower can afford his proposed obligations. Known as the "Top" and "Bottom" ratios; the top ratio consists of monthly housing expense known as PITI (principal, interest, taxes, homeowner's insurance and homeowner's association fees or PMI Insurance, if any) divided by gross monthly income. The bottom ratio consists of PITI plus all monthly consumer debt payments (cars, credit cards, and student loans) divided by gross monthly income.
Fannie Mae/Freddie Mac guidelines and USDA, VA and FHA debt ratios vary. Direct underwriting exceptions may apply. If your ratios exceed the standard guidelines, don't worry. Many programs will let back end ratios can go higher with compensating factors such as low Loan to Value (LTV) or high borrower liquidity.
As your initial EZ PreQual has been completed early in the process, you know exactly what consumer debt is reporting on the credit bureaus. This will also give you a chance to improve your ratios by considering the paying off low consumer installment debt balances.
Once the application has been submitted, the processing of the mortgage begins. Your disclosure copies are signed, and the processor orders merged Credit Report(s), the Appraisal and Title Report. The information on the application, such as bank deposits and payment histories are then verified. Any credit derogatory items, such as late payments, collections and/or judgments require a written explanation. The processor examines the Appraisal and Title Report checking for property issues that may require further investigation. The entire mortgage package is then put together for submission.
Once the processor has put together a complete package with all verifications and documentation, the file is submitted. The underwriter may require additional documentation or information. If this is the case, the loan is put into "suspense" and the borrower is contacted to supply the requested items. If the file is acceptable as submitted, the loan is put into an "approved" status. Only underwriters issue "Final Approvals" on Complete Mortgage Submissions.
Once the loan is approved, the file is transferred to the closing and funding departments. Ask us about the advantages of having your own "separate-side" closing. The funding department notifies the closing agent of the approval and verifies fees. A closing time is then scheduled for the borrower(s) to sign the loan documentation papers. The closing agent prepares the final settlement costs on the HUD-1 Settlement Statement to be signed at closing, along with other required loan documents, which may vary, depending on the specific requirements of the wholesale agency/investor. At the closing the borrower(s) should:
After the documents are signed, the closing attorney/agent returns the documents to the Funding Department for examination. If everything is in order, the loan is funded. Final disbursements are then made. Once the loan has funded, the closing attorney/agent arranges for the mortgage note and deed of trust to be recorded at the office of the county recorder where the subject property is located.