Home Loan Process Explained

By: Shannon Gray

Step #1: Gather a list of documents you will need to ensure a smooth loan process and avoid any delays with your home loan:

• Copy of Purchase Sales contract or Offer to Purchase and all addenda (signed by buyer and seller)
• Past 2 years' tax returns and W-2s
• Past 2 years' employment history
• Last 3 consecutive paycheck stubs (5 if paid weekly)
• Name, address and phone for past 2 years' residence(s) and landlord(s). Renters should bring evidence of 12 months' rent payments.
• Last 3 months' statements for savings, checking, CD, money market accounts, etc.
• Recent statement on retirement accounts (IRA, 401K, 403-B, Annuity, etc.)
• Monthly payments and balances on all open accounts
• Divorce decree (if applicable)
• Bankruptcy schedules/Discharge papers (if applicable)
• If you are NOT a US citizen, provide a copy of your green card (front & back). If you are NOT a permanent resident provide a copy of your H-1 or L-1 visa.

Step #2: Find out how much you are qualified to borrow.

Contact us to get pre approved before starting your house hunt.

Being pre-approved will:

1. Let you know the maximum amount you can afford. This eliminates properties out of your price range.
2. Put you at an advantage with the seller. The seller may be more likely to accept your offer since you have been pre-approved.
3. May assist in closing fast, since your home loan professional has pre approved you.

Step #3: What loan program is best for your situation?

To figure out which option is best for you and your situation, consider the questions below.

1. How long you plan to keep the loan?
   
   Consider an adjustable-rate (ARM) or balloon loan if you plan to live in the home for only a short term. If you plan to live in your home longer, let's assume over 10 years, you may want to consider a fixed-rate loan.



2. How do points change your interest rate?
   
   Usually points are prepaid interest and might be tax deductible. Each point is equal to 1 percent of the loan. For example: 1 point on a $250,000 loan is $2,500. Typically, the more points you pay the lower your rate.



3. Did you explore and compare all the different options available to you?
   
   There are so many home loan options to choose from, so consulting with a reputable mortgage company will assist your decision making process. Keep in mind your short and long term financial goals when deciding which loan program you want.

Step #4: Now You Are Ready To Apply!

You can apply online or in person FREE! Complete and sign the residential loan application, Form 1003 and the attached loan info sheet, credit authorization and fair lending notice. Your loan originator may also request additional documents.

Well, now it's time to get to work. The lender will start verifying your:

• Credit history
• Employment history
• Assets including your bank accounts, stocks, mutual fund and retirement accounts
• Current property value

Since everyone has a different financial situation, additional documents or verifications may be required. Requests for more documentation from the lender is normal, so no need to stress. This just means you are one step close to closing your first home!

• Fill out the loan application completely. Cross your i's and dot your t's. Make sure you leave nothing blank.
• Promptly send additional requested documents, you don't want these to hold you up.
• Do not increase your debts as this may hurt your chances.
• Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us to discuss.
• 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.
• Do not apply for new lines of credit. Credit inquiries may lower your credit score and may have a negative effect on your loan approval.

Step #5: Sign and Make It Official!

After your loan is approved, you will be required to sign the final loan documents. This will normally take place in the presence of a notary public. Be prepared to:

• Bring a cashier's check for your down payment and closing costs if required. Personal checks are usually not accepted.
• Review the final loan documents. Make sure that the interest rate and loan terms are what we agreed upon. Also, double check to make sure your name and address on the loan documents are correct.
• Sign the loan documents. The notary will require that you have your picture ID with you. Some lenders also require seeing your Social Security card.

Your loan will normally close shortly after you have signed the loan documents. For refinance and home equity loan transactions, federal law requires that you have 3 business days to review the documents before your loan transaction can close. Purchase transactions do not have a 3 day rescission period.