Processing Your Loan
Once your application is complete, your loan processor reviews
the file to make sure all of the required documents and information are included
and accurate. Typically, the load processor will:
- Verify the information by contacting financial institutions listed on your
application and employers to confirm that all of the information provided is
complete and accurate.
- Obtain a credit report from a reliable reporting agency that outlines how
you've handled payment of debts such as credit cards, auto loans, school loans,
etc. in the past.
- If a house is already found, arrangements for an appraisal will be made. If
you've applied for a loan before house hunting, this process will be completed
as soon as you've identified a property.
As the documentation described above is processed, it's possible
that additional information will be needed. If this is the case, you will be
contacted. A prompt response will help keep the processing time to a
minimum.
Approving Your Loan
After the documentation is received, the loan processor will
forward your completed file to an underwriter. The underwriter will analyze all
of the information in your file using industry accepted guidelines to determine
whether you can reasonably be expected to repay the loan amount requested and
whether the property you have chosen provides adequate security for a loan. As
soon as your loan is approved, you and/or your real estate agent will be
contacted by phone with the details, including the interest rate, term and
monthly payments.
Closing Your Loan
Once the loan is approved, your real estate agent or the loan
officer will contact you to set a convenient time and location for the closing.
You will be provided with a list of items which you will need to bring with you
to the closing.
Usually, these items are:
- Proof of homeowners insurance in the form of the policy or an insurance
binder and a paid receipt for the first year's premium.
- A cashier's or certified check made payable to you for the amount of the
down payment and closing costs. This amount should be very close to the estimate
given on the "Good Faith Estimate" provided when you applied for the loan.
- Your personal checkbook to cover any extra charges, if necessary.
- A photo ID.
- A list of addresses for the past 10 years.
Several people will probably attend the closing, including you,
your real estate agent, the seller, the seller's real estate agent, attorney(s)
representing you and/or the seller, and a closing representative.
During the meeting, which usually takes about an hour, you and
the seller will review all of the relevant closing papers, many of which you
will sign. Some of the documents presented at closing are:
- Mortgage Note
This states that you as the buyer will pay back the entire
loan amount to the lender, plus interest at the note rate.
- Mortgage or Deed of Trust
The pledges the real property being purchased
as security for the debt.
- Loan Settlement Statement (HUD-1)
This provides a breakdown of all the
costs that must be paid by you and the seller. (Required by Federal Law)
- Truth-In-Housing Disclosure
This provides important information about
the loan, including the annual percentage rate. (Also required by Federal Law)
Toward the end of the meeting, the title to the property you are
purchasing is legally transferred from the seller to you. At which point, you
become the proud owner of your new home!