The mortgage process
Verification of assets. Credit reports Insurance applications. Many home buyers are wondering where the process begins and where it ends.
To help better understand the process, we have outlined the basic steps involved in buying a home. The length of time will vary depending on the geographic location, the loan, you and the institution that grants you the loan.
Request
You have chosen a loan program and are now ready to complete the loan application with the help of the lender.
In order to expedite the application process, the lender may provide you with a list of the documents you must bring with you. If you have already met with the lender to obtain a pre-qualification for financing, you may have already given some of this information. Even so, take the documentation with you again when you return to submit your mortgage loan application.
When you have completed the loan application, the lender will verify or confirm all the information that you have provided. Depending on the requirements of the loan program, the lender may request additional information.
Shortly after you have submitted the loan application, you will receive these documents from the lender:
The Loan Estimate (LE, for its acronym in English)
It is the provider's best estimate of what the closing costs will be. It shows a calculation of the amount of the rates that the lender can charge you to process or close the loan, such as mortgage insurance, title insurance and property registration expenses.
It also provides a summary of how the loan will be paid and details the costs associated with the loan application. Indicate the financing charges, the annual percentage rate (APR), the amount of payments you will make, the amount of each payment (in the case of fixed rate loans), the charges for payment outside of term that may correspond and the total amount you will pay of capital and finance charges throughout the term of the loan. The information in the Comparison of Loan Estimate section will help you compare the cost of different loan offers. To compare the costs, you will want to make sure you compare the same type of loan.
Letter of engagement
The lender will send you a Letter of Commitment, which is a promise on your part to make a loan. It includes all the specific information of the loan, as well as the conditions that must be met before or at the time of closing, as well as information about the loan amount, the term, the origination costs and the interest rate.
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Request for documents for the loan file
The lender requests the following documents and then waits for them to be delivered:
Appraisal of property
The appraisal is requested to estimate the market value of the property. The maximum loan amount offered by the lender will be based on the purchase price or the appraised value, whichever is lower.
Credit report
If you do not have some traditional type, you must provide some other evidence of your ability and willingness to pay debts, such as payment order receipts or canceled checks for rent or service bills.
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Evaluation
The lender generates a loan file with all the required information and passes that file to a risk assessor.
The risk assessor ensures that all requirements are met. Sometimes a risk assessor needs additional information to make a decision. The two typical scenarios that the lender may present to you are:
More information is needed to be able to approve the loan. In that case, it is essential that you provide the additional information as soon as possible.
The risk evaluator approves the loan "with conditions". That means that you must provide additional information during the closing of the operation, before the loan becomes final.
Preliminary closing
Once the loan is approved:
The insurance for the title is requested.
The conditions for approval are met.
The closing date is scheduled.
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Closing
Once the closing date is scheduled, the lender applies for homeowners insurance, which covers damages or losses caused by events such as theft, fire, vandalism or windstorms. Since your property is the guarantee of your mortgage loan, your lender wants to be sure that the value of your home is protected in case it is damaged or destroyed. Contact your insurance agent to obtain a provisional policy.
At the time of closing, the borronee recidives the proceeds of the loan and presents a certified check to coverr The avance balance and closing costs. The loan is closed. The borrower moves to his new house.
Tips for the test: Obtain the mortgage
You must know and understand the following information in the Get Mortgage section:
Your rights as a home buyer
According to the Fair Housing Law, no lender can charge excessive fees or refuse to grant a mortgage loan based on:
Sex / gender
nationality
Religion
Race or skin color
Family status
Disability
Abusive mortgage loans, the practice of knowingly lending more money than a borrower can pay, takes credit line borrowers and destroys the benefits of owning a home.
The points are an expense that is paid only once to the lender, and covers its operating cost. One point equals 1% of the loan amount.
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Choose the best loan
An advantage of the fixed-rate mortgage is that the monthly payment of principal and interest is predictable and invariable throughout the term of the loan.
Variable rate mortgages are possible options for borrowers who are able to handle increases in payments on the fly.
To choose the most suitable loan according to your needs, you must take into account the possibility of significant increases in the interest rate, how long you intend to live in the house and whether your income is stable or fluctuating.
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The mortgage process
A Loan Estimate could include the amount you will pay in points on the loan, the estimated charges for securing the title deed, and an estimate of closing costs.
A provider may require the following documentation to examine your income: W-2 forms that cover the most recent two fiscal years, the most recent proof of payment from year to date, and bank statements.
Some of the benefits of mortgage insurance are that it allows the buyer to acquire a home with a little advance or without it, financially protects the lender by making it possible to make more loans with low advance and allows the buyer to acquire a home sooner and accumulate property capital more quickly
