No broker fees, No hassles, low rates
Many people describe the mortgage lending process as a tangled maze, difficult to navigate. Years ago this may have been true. Since the introduction of Web lending services and automated underwriting systems from Fannie Mae and Freddie Mac the process of securing a loan has become downright easy. The following is an introduction to the process of securing a loan, along with some basic information on how we decide whether or not to lend to a borrower and his/her property.
We assemble the information and order a preliminary credit report to get current mortgage balance and term as well as a confirmed credit history which is then submitted electronically directly to an automated system. The approvals are instantaneous, reducing the waiting time for your approval from days or weeks to just minutes! On a refinance transaction, we prepare a payback analysis (which you can request online) at the interest rate for which you may qualify. On a purchase, we provide you with monthly payment info. We review this with you and if it makes financial sense we process a full application (15 minutes on the phone or through our ON-LINE APPLICATION and provide you with a pre-qualification approval.
Many borrowers are referred to mortgage brokers by well-intentioned realtors, family members, and friends. While many brokers are diligent, most are limited in the range of products and services they can offer. As licensed mortgage bankers, we are making the lending decision and are not at the mercy of another party. We have the flexibility to offer a wider selection of loan programs. There is no middle-man to increase your cost and to slow down or complicate the processing of your loan application.
If you walk into your local bank or S&L, they’ll usually take your application there, perhaps underwrite your loan there, and lend their own money, too. If your loan is declined for whatever reason, you will need to begin the process again with another source. With a direct lending source such as Federated Lending Corporation, you have another chance if that one lender doesn’t approve your loan.
For simplicity’s sake, we’ll describe the overall process that is common to all loan applications.
Whether you walk into a bank, you apply for your loan on the Internet, or a mortgage officer meets you in your home, all lenders require an actual application. The form is standardized and known as the “1003” which is the Fannie Mae designation for this form.
The lender will want to verify certain information about the borrower(s) and will require additional information on the property. Borrower information will include verification of income and employment, assets, and credit history of the applicants. Some of this information will be provided by you, the applicant, as part of your application process. For example, you will be requested to provide copies of W-2 forms for 2 years, pay stubs, and bank statements for asset verification. Other information, such as your credit history, will be obtained directly from the credit bureaus even if you have a current credit report on hand. The lenders will always verify this information independently.
For the property itself, the lender will order an appraisal and a legal description of the property, such as a title report. Certain lenders will work with certain appraisal companies, so if you have an old appraisal it may not necessarily be accepted by the new lender. Even if the loan is to be made with a relatively large down payment, the lender still wants the property appraised. In the case of a purchase, other inspections may also be done, but are separate from the appraisal for the loan.
During the “processing” and/or “underwriting” period, your credit, assets, income and other determinants are checked and compiled. At the end, your loan is either approved with conditions or approved without conditions or declined. Sometimes a loan is labeled suspended which while sounding harsh, is simply another way of saying that the lender requires more information to decide. Don’t be alarmed if your loan is suspended, this is not necessarily a step towards being declined. Usually you can submit additional documents and turn a suspension into an approval.
Conditions are further documentation or checks that the lender needs to finalize your loan before funds can be dispersed. Many borrowers become frustrated by conditions that surface at the end of a loan transaction and can’t understand why they are being raised so late. This is because the loan may go through several review processes prior to actual funding, and the final conditions are added on sometimes as late as after the loan documents have been signed. Just work with the lender and remember, the process is not perfect and the lender is simply trying to meet conditions imposed by other sources on them. Since most loans these days are sold and serviced by other parties, the lender must verify that the loan will be salable upon close. Whether or not you are serviced by your original mortgage lender or a new party shouldn’t matter, your payment will simply be made to the new institution. No other terms of your loan can be changed after you have signed your final loan documents.
When all conditions are met, your loan documents are drawn up and forwarded to the place of settlement or closing. You sign everything and in some states the lender reviews the package one last time.
Do not make any adverse changes to your financial “picture” during this delicate time between approval and when funds are dispersed. Believing the “approval” is the final stage or that the lender won’t find out about the change in debt or income or other factors can lead to real headaches. Innocent mistakes range from applying for a new department store credit card to purchasing a refrigerator for the new house, to buying two new automobiles, to quitting a job to go full time into a new business. These changes will at least force an explanation to be given and at worst may cause your loan not to fund and the approval to be withdrawn. Often a lender obtains another credit report and calls your employer one last time before funding the loan.
Simultaneous to funds being dispersed, an instrument is recorded at the county recorders office to give the lender security to your property. This last step varies from state to state.
Sometime before your loan documents are drawn, you will “lock in” a rate for your loan with the mortgage source. The purpose of the lock is to allow you a loan at the “locked-in” rate if the loan closes before the lock period expires, even if rates are higher at the time of funding. This could be offered at the application, upon approval, or anywhere in between. Most multi-lender sources give you the choice of when to lock. Typically the shorter the time period between your lock and the actual closing the cheaper the interest rate or points.
To summarize, there are many ways to approach your home financing process beginning with the source that you choose to borrow from. The advantages of working with a mortgage banking company are substantial and account for the shift away from large banks. Understanding the loan process can minimize the likelihood of frustration during the loan transaction. Remember to work with a source that has established itself as a company with integrity that cares for the borrower throughout the experience.