Loan Process

The 9 Steps to Securing a Home Loan
One Step at a Time

1. Determine how much you can afford
By understanding upfront what you can afford to borrow, you can focus on homes in the right price range. I will quickly help you determine your borrowing capacity. Three numbers are critical here: 1) your credit score; 2) preferred amount of your down payment; and, 3) your total amount of monthly debt payments as a percent of your monthly household gross income.

2. Investigate loan programs and rates
Step 2 often happens at the same time as Step 1, because different loans enable different levels of borrowing capacity. For example, interest-only programs give you more home-buying power because the monthly payments are lower, and low-down payment options help you to get more of your dream home now without putting as much cash in. I will help you evaluate the variety of options — and the trade-offs among them — to meet your specific financial objectives. Interest rates vary by loan type. For example, rates for adjustable-rate mortgages (ARMs) are typically lower than those for fixed loans because you are accepting the risk of your rate changing over time. Rates for most loans change every day, so you will get an idea of what your rate will be now and will know your exact rate when you lock.

3. Get pre-approved for your loan
In today’s competitive home-buying environment, you are in a stronger negotiating position if sellers know you are already pre-approved for your loan. To secure a pre-approval letter, you will fill out a loan application nearly to completion, setting in motion the checking of your credit, income, assets and liabilities. At application, we will typically collect money upfront for an appraisal. Going forward you will need to gather and share your recent financial documents with me. In most cases the following is what you will need to gather:

• W2s for the previous 2 years for salaried borrowers; or two years personal and business returns for self-employed borrowers. Underwriting will want to see all pertinent schedules.
• Paystubs representing your last 30 days worth of pay and showing year-to-date earnings
• Your last two months bank/brokerage/retirement statements. All pages must be included and if you are able to access statement through the Internet, then your full name and account numbers must be on the printouts.

Depending on your scenario, I may ask for other documentation, but the above is the basic starter set for any borrower.

4. Find your dream home
Congratulations! You have found the home that’s right for you, with an accepted bid and a signed contract to purchase. At this point, we will set your financing in motion.

5. Lock your rate
When you lock your rate, you are making a choice to finance your home with a specific loan program and interest rate. The lock ensures that regardless of what happens in the financial markets, your rate will not change during the time that it is locked. Lock extension are available, however, a cost may be associated with such action.

6. Complete your application
The good news for homebuyers is that if you have already been pre-approved, you have only a few remaining pieces of information to share, including the price and details of your chosen property, the final loan amount, your closing date, and the signed contract to purchase. If you are refinancing, you will fill out a loan application fully now, setting in motion the checking of your credit, income, assets and liabilities. I will help you complete the application, which normally takes about 30 minutes. So, you will need to gather your recent financial documents. The required documents will vary based on your loan program.

7. Complete appraisal, title & underwriting
A lot of work happens during this step. We hire an appraiser to review your property. As a lender, we need to know that the market value of your home can support your loan. Also, a title company, which may be selected by you, will ensure that the ownership title of the property is free and clear for transfer to you with the financing. Then, our expert team reviews this information, in combination with your application and financial documents, to ensure your ability to repay the loan. That is what underwriting is all about. Your application package will be underwritten and typically a conditional loan commitment is offered with final conditions that must be satisfied. Either myself or my processor will help you gather the necessary information to satisfy those conditions, allowing underwriting to sign off on your loan and get you to “clear to close” status.

8. Get final approval
Once you get “cleared to close”, your complete loan package has cleared the underwriting process You will be informed by either myself or my processor that you loan is now ready to move to the closing department.

9. Close your loan
My goal is to make your settlement day a joyous yet uneventful day. To do this we strive to get you a final settlement sheet – called a HUD1 – at least 24 hours before your settlement time. That allows us — and you — to go over the final numbers and make any necessary changes in a timely fashion. Once we have the final numbers you will be instructed to get a bank check – certified or cashier’s – made out in your name for the amount that will be due at settlement. The settlement will be led by a representative of the title company. At settlement, you will then sign over the check to the title company. Most settlements last anywhere between 60 to 90 minutes. The title company’s representative will lead the proceedings, as you take ownership of your new home and sign the final loan documents for your purchase or refinancing. In addition to the HUD1 statement, the loan package at closing and will detail the key figures in your financing, including the pay-off amount of your prior mortgage (if you are refinancing); your down payment; your escrow requirements for mortgage interest, insurance and property taxes; and any points or closing costs that you may have opted to pay. Congratulations on your newly financed home!