The Loan Process

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1. Organize Your Documents

If you are buying or refinancing a home:

  1. If you are salaried: provide two years W-2, federal tax returns and one month of paystubs OR if you are self- employed: provide two years federal tax returns (both personal and corporation/partnership) and a YTD profit and loss statement.
  2. If you own rental property, please provide rental agreements
  3. Please also provide two months bank statements (with every single page) for each bank, stock and mutual fund account.
  4. Provide recent copies of any stock brokerage or IRA/401K accounts that you may have.
  5. If you are requesting a cash-out refinance please provide a letter explaining what you plan to do with the proceeds.
  6. Provide a copy of divorce decree and settlement agreement if applicable.
  7. If you are NOT a US citizen, please provide us with a copy of your green card (front & back) or, if you are NOT a permanent resident provide us with your H-1 or L-1 Visa.

1a. Application Checklist

In general, the documentation you will need includes:

  • Check for application fee

Property Information (if you already have a contract on a house)

  • Purchase Agreement.
  • Copy of legal description and MLS sheet.
  • If you are selling your current home, copy of listing contract.
  • If you have sold your current home, copy of settlement statement (HUD-1).

Income & Assets

  • Pay stubs for the last 30 days.

For the past two years:

  • Names and addresses of each employer.
  • W-2s
  • Statements for each bank, mutual fund, and/or investment account for the last three months.
  • Estimated value of personal property and furniture.

If you have made any large deposits to your accounts:

  • Explanation and source for deposit.

If large deposit was a gift:

  • Signed gift letter (lender can supply).
  • Copy of gift check.
  • Copy of deposit receipt.

If you own more than 25% of a business:

  • Corporate or partnership tax returns.

If self-employed:

  • Tax returns for the last three years (with schedules).
  • Year-to-Date Profit and Loss Statement prepared by an accountant.

If you own rental property:

  • Tax returns for the last two years and current rental agreements.

If you are retired:

  • Pension Award Letter.

If you receive Social Security:

  • Social Security Award Letter.

If you are counting child support as income:

  • Copy of divorce settlement.
  • Copy of twelve months of cancelled child support checks.

Debts

  • Names, addresses, account numbers, balances and monthly payments.

Explanation of credit report anomalies, including:

  • Late payments, credit inquiries in the last 90 days, charge-offs, collections, judgments and/or liens.
  • Bankruptcy filed within last seven years (bring a copy of your bankruptcy papers).

VA Loans

  • Copy of DD Form 214, Report of Separation.

Miscellaneous

  • Photo ID and proof of Social Security number.
  • Residence addresses for the past two years.
  • If applicable, a copy of your divorce decree.
  • If you are not a citizen, a copy of the front and back of your green card.

1b. Documenting Assets

A critical step in the mortgage loan application process is to verify the sources for your down payment, closing costs and assets, as well as documenting income and debts. The lender uses this step to determine your qualifications as a borrower.

Down Payment & Closing Costs

Documenting that the down payment comes from your savings and that you will have savings and/or assets over and above the down payment gives the lender confidence in your strength as a borrower and your ability to repay the loan.

Take extra care to document the sources for any monies to be used for the down payment or closing costs.

Acceptable Down Payment & Closing Costs Sources

  • Cash in a bank account
  • Mutual funds / stocks / IRA / 401(K)
  • Proceeds from the sale of another property
  • Gift from an immediate relative

Assets

Collect information about your personal assets that add to your net worth and help to prove your credit worthiness.

Common Assets Considered in a Mortgage Loan Application

  • Stocks, bonds, mutual funds, 401(K) and retirement accounts
  • Life insurance
  • Personal property estimate - cars, boats, antiques, jewelry, etc.
  • Other real estate or property

Income and Employment

The lender will want to confirm your current gross income and have evidence of stable employment. Documentation requirements vary depending upon a number of factors - including the source of income (hourly, salary, salary + bonuses, salary + commission, commission, self-employed, etc.).

Debts

Your lender will want to review a list of all your current debts. This along with your credit report will provide the lender with a snapshot of your obligations. The lender will want to confirm that you will not be overextended when the mortgage payment is added to your current debt load.

2. Apply and Get Qualified

Getting qualified before you apply for a loan can help you understand how much you can borrow. When buying a house, you may get pre-qualified or pre-approved. You can typically get pre-qualified over the phone or on the Internet in a few minutes. A pre-qualification is not as beneficial as a pre-approval where you have to go through a more rigorous process which includes verification of your credit, income, assets and liabilities. It is highly recommended that you get pre-approved before you start looking for a house. This will help you:

  1. Find out the maximum house you can buy, so you don't waste time looking for properties you cannot afford.
  2. Puts you in a stronger position when you are negotiating with the seller because the seller knows that your loan is already approved.
  3. Helps you close quickly, since your loan is already approved.

3. Shop Loan Programs and Rates

To shop for a loan you will need to:

  1. Think about how long you plan to keep the loan. If you plan to sell the house in a few years you may want to consider an adjustable or balloon loan. On the other hand, if you plan to keep the house for a longer time, you may want to look at fixed loans.
  2. Understand the relationship between rates and points. Points are considered to be prepaid interest and are tax deductible. Each point is equal to one percent of the loan. So for example 1 point on a $150,000 loan is $1,500. The more points you pay, the lower the rate you will get.
  3. Compare different programs. Shopping for a loan can be difficult. With so many programs to choose from, each of which has different rates, points and fees, it's hard to figure out which program is best for you. That's where an experienced loan officer can help you make a decision that's best for you.

4. Obtain Loan Approval

Once your loan application has been received we will start the loan approval process immediately. This involves verifying your:

  1. Credit history
  2. Employment history
  3. Assets including your bank accounts, stocks, mutual fund and retirement accounts
  4. Property value

Based on your specific situation, additional documents or verifications may be required. To improve your chances of getting a loan approval:

  • Fill out the loan application completely.
  • Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
  • Open door for the appraiser at your earliest convenience.
  • Do not make any major purchases. Do not buy a car, furniture or another house until your loan is closed. Anything that causes your debts to increase might have an adverse affect on your current application.
  • Do not move large sum of money into or out of your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us.
  • Do not go out of town around the closing date. If you do plan to be out of town when your loan is expected to close, you may sign a power of attorney to authorize another individual to sign on your behalf.

4a. Getting a Loan Faster

We should say that "working with us" is the first way! When you let us help you find the loan that's right for you, you truly are taking advantage of some of the area's best technology and expertise to get you a loan decision and funding on your loan quickly.

But here are five "other" ways you can speed up the process of getting a mortgage loan:

  1. Have everything ready and in one place. Elsewhere on our website, you'll find a list of things you might need in support of your mortgage application. If you get them all together and keep them in a safe, portable place like a special pouch or folder, you can cut down on time spent rooting around for things we may need. Also, you'll help cut down on your own anxiety and confusion.
  2. Be honest and complete when you fill out your application. "Fudging" your employment or residence history or omitting open credit accounts you'd rather not have considered doesn't increase your chances of getting a favorable loan. In 100 percent of cases, it makes it harder, and take longer.
  3. Respond promptly to requests for additional information. During processing, we or the lender considering your loan may need additional information. Provide it as soon as you get the request, or return the call as soon as you get the message.
  4. Be prepared to explain derogatory items in your credit report. This is really part of number 2 above. If you had an illness or a divorce where you missed or made late payments, or you have other instances of late payments or delinquencies on your credit report, be prepared to explain them. Be honest, and don't be nervous! The loan processor isn't judging you, they're trying to fill in all the blanks in their paperwork.
  5. Let the appraiser in! The appraisal is one of the lengthiest parts of the mortgage loan process. Studies have shown that the single biggest factor in appraisal "lag time" is the appraiser's inability to reach the homeowner to make an appointment. If you're refinancing and the appraiser calls to make an appointment, make it as soon as convenient for both of you.

And remember that the appraiser doesn't want to buy your house. He or she will say what the house is worth clean and tidy and in reasonable repair, even if you have some dirty laundry on the laundry room floor or dirty dishes in the sink. Cleaning doesn't get you a higher appraisal! Letting the appraiser in as soon as possible gets you a loan faster, though.

5. Satisfy Loan Conditions

Loan approval usually comes with loan conditions that ask for more supporting documents or clarification of certain issues. To expedite the final signoff:

  • Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
  • Keep a close contact with The Loan Story staff or loan officers.

6. Close the Loan

After your loan conditions are satisfied, you will be required to sign the final loan documents. This will normally take place in front of a notary public. We will review the closing statement and note before your signoff. Be prepared to:

  • Review the final loan documents. Make sure that the interest rate and loan terms are what you were promised. Also, verify that the name and address on the loan documents are accurate.
  • Sign the loan documents at your earliest convenience. It is always a good idea to do it early rather than late.
  • Write a personal check for closing, if the amount is less than $5,000.
  • Prepare a cashier’s check or wire instruction for down payment or closing costs after your signoff and all the numbers are clear to you.

Your loan will normally close shortly after you have signed the loan documents. On refinance and home equity loan transactions federal law requires that you have 3 days to review the documents before your loan transaction can close.