The Mortgage Process

 

You've signed a contract to purchase new home. The next step is to apply for a new loan, unless of course you have the funds necesary to pay in cash, in which case a mortgage is not needed. When purchasing a home, you may have place an earnest money deposit upon signing a contract. This amount should be in the possession of an escrow agent, realtor's office, an attorney or a third unbiased party to the transaction.

The mortgage process will be broken down by the following sections

 

 

 


-Copy of picture ID (Passport or Drivers License)


-Social Security Card



-Pay stubs for all employment (current month)


-the last two years tax returns with all attachments, or W-2 for the last two years

-Documentation or proof of any other source of income, e.g. retirement, child support, 401(k) / 403(b), Social Security


-Last two months bank statements for savings, checking or other assets


-Rental/Lease agreements for any rental properties

-Any legal documents from a bankruptcy, divorce, etc. (all pages )

 
DEBT RATIOS

 

Once the lender has gone over the above documents, they will be able to calculate your debt-to-income ratio. This will allow them to see if you meet the requirements for a loan option they provide.

 

MORTGAGE PAYMENT

 

Part of your Mortgage payment is calculated by taking the mortgage amount, the length of mortgage and the interest rate to come up with the Principal and Interest (PI) portion. In a typical mortgage, your payment must cover the cost of the mortgage to the lender in the form of Interest. What remains reduces the principal portion of the mortgage balance. Once you have fulfilled the length of the term, your mortgage will have been paid in full. 

The Lenders typically require you to include additional monthly costs to your payment. They would include (T) for Taxes, (I) for Insurance (property & casualty) and (MI) Mortgage Insurance, if applicable. So you may hear the term PITI, which stands for Principal, Interest, Taxes and Insurance. Make sure your final payment includes the mortgage insurance, if you are required to have it with your loan.

Taxes and Insurance are generally required to be escrowed in a special account so the lender can control when taxes and Insurances are paid. If the tax increases, they will increase the amount they take each month to recover the difference. The same process happens for Insurance.

 

 

Certain information must be disclosed to you and to the Lender in writing during the application process. You will have to acknowledge receipt by signing documents to that effect. Examples of these disclosures include the Good Faith Estimate, Truth in Lending, Servicing Disclosure, Occupancy disclosure, etc. These disclosures may change on a state-to-state basis.

 

 


You will be given an estimate of the cost associatied with this loan in order to close. They include:

 

 


Once you sign anything throughout the real estate transaction you should be given a copy for your personal records. Your mortgage lender will keep you informed as to how your loan file moves along during process. Please note that sometimes more documentation may be required to further the loan application. Once this portion is completed, then your application will be placed in process.



 

 

The Mortgage Broker or Lender will request these items be done on the property prior to closing. Your mortgage lender will an approved appraiser sent to the property you are purchasing to determine its value and turn in a written report to the Mortgage Broker or Lender. The insurance agent will be contacted once the appraisal is completed to assure adequate coverage is placed on the property. The title company will verify the property is free from any liens and the property can be transferred with the Lending institutions as the Mortgagee.
All these documents are given to the Lender’s underwriter to verify the property has enough coverage and collateral to satisfy their guidelines signed. This written report is given to the Title Company for their records as well as the Lending institution.

 

Once all the documents are signed, the Mortgage Broker or Lender will put them all together in a package and submit it to the Underwriting Department of the lending institution. The underwriter verifies all the information, and makes a determination if the package qualifies with the risk regarding the amount and the terms requested. If there are any issues that the Underwriting department needs clarified, your Mortgage Broker or Lender will request additional information from you. Once all items are satisfactory to the underwriter then your file is placed in the category “cleared to close”.

 

As soon as you receive firm approval from the lender who is making your mortgage loan, you should confirm the actual date of loan closing.  At this time you should coordinate with your real estae agent to set up the best date and time for you. Look at your situation regarding a lease or another closing on your current home, whatever the case may be.