Learn More about The Home Loan Process
The Home Loan Process
Getting Started
Once you select us to obtain your home loan, you'll be amazed at how quickly and simply the loan process moves. Before you know it, you'll have a mortgage that suits your lifestyle and saves you money.
Throughout the loan-application process, we will provide you with regular updates. You can also check the status of your loan via our secure Web site; the status of your loan is updated in real time as we process your loan. We will provide you with a user id and password so that you can check the status of your loan online. You can also e-mail us with questions or new information. And if you need assistance, a mortgage expert who can answer questions is just a phone call away.
Here's a general overview of the loan-application process
1. Apply Now! Getting started is easy
When you've selected a property and have a contract with the Seller, the next step is to complete your loan application, which can be done easily through our Web site. To get started, select an application from the list on the left. At the appropriate time, we'll order an property appraisal for you.
2. Your Loan is Approved and Funded
Your Real Estate Agent or the Seller will designate an Escrow/Title Company to handle the funding of your loan, along with many other factors which make your purchase go smoothly. We will coordinate with the escrow team and you'll sign the final papers at their office.
What you will need
The following information is usually required during the home loan process:
Standard Items
- Your Social Security number
- Current pay stubs or, if self employed, your tax returns for the past two years
- Bank statements for the past two months
- Investment account statements for the past two months
- Life insurance policy
- Retirement account statements for the past two months
- Make and model of vehicles you own and their resale value
- Credit card account information
- Auto loan account information
- Personal loan account information
If you currently own Real Estate:
Mortgage account information
Home insurance policy information
Home equity account information (if applicable)
Key Reminders
Here are a few of the key actions you should take, and the points at which you will need to make decisions.
Determine the mortgage payment that you can comfortably afford. As a very general rule of thumb, multiply the new mortgage amount by .0065 to your monthly principal and interest (P&I) payment. This will would be your monthly payment, consisting of principal and interest, at a 6.5% interest rate.
Remember to include 1/12 of the annual cost for property taxes and insurance that you'll have to pay on your new home. For example, if you buy a $ 200K house and the annual property taxes are $3,600, and the annual insurance premium is $1424, then your mortgage payment calculation should include $300 per month for property taxes and $118 per month for hazard insurance. This is called the tax and insurance payment, or escrow payment. If you have questions about how much taxes and insurance will be, check with your Realtor, local tax office, or insurance agent.
At a maximum, your mortgage payment, including the tax and insurance portion, should not exceed 40% of your sustainable, gross monthly income. You can include the income of anyone who will be living in the house and obligated on the loan – like your spouse. This does not necessarily mean that you should stretch to 40% of your gross income. It is very important to determine a monthly payment that you can comfortably afford.
Determine the amount of cash funds that you can spend for down payment and closing costs. When you calculate this, leave a reserve equal to at least two months cushion of mortgage payments after closing. For example, if you think your new payment will be $2,000 per month and you have $20,000 in available cash, leave $4,000 in reserve and use only $16,000 for the down payment and closing costs.
Ask your Realtor and lender to help you correctly estimate closing costs – don't under estimate and find yourself short at closing. Closing costs will likely fall into the following categories:
Your down payment
Lender fees, paid in cash and not financed into your loan, for arranging and closing the loan
Appraisal, credit report, and document preparation fees (usually about $550)
Interest from the date of closing to the last day of the month in which you close (take the interest rate on your loan, multiply it by the loan balance, divide that by 360 and multiply it by the number of days from closing to the end of the month in which you close)
Two month's reserves for taxes and insurance (1/6 of the annual totals for taxes and insurance) + 1st years hazard insurance premium on your new home
Title company charges (vary by closing agent)
When you are ready to proceed, contact your lender and ask them to issue a pre-approval letter. Your Realtor will want to see that so he/she can assure the seller of any home on which you make an offer that you are qualified.
Go find your dream home
Once you have a signed contract that has been accepted by all parties, you are ready to make formal loan application. If you are refinancing, this is also the point at which you will make application. You or your Realtor will also designate a title company that will handle the closing of the transaction.
Carefully compare the rates and fees of the lenders from whom you get rates and prices. The lowest rate is not always the best deal.
When you are ready to apply, ask the lender to lock in and guarantee the rate and lender fees that you were quoted. Make sure that the guarantee is good to at least the date on which you plan to close the purchase of the new home, or the date at which you want to refinance.
The lender will ask you to pay upfront for the cost of the appraisal and the credit report fee. This usually costs about $ 365. The lender will then order the appraisal.
The lender will ask you for documentation to support the income and assets listed on your loan application.
Once the lender receives all of the income and asset documentation, the lender will complete the credit underwriting process and advise you that you are qualified, or not.
When the appraisal is completed, the lender will review the appraisal to assure that the price you agreed to pay for the home, or the attributed value if you are refinancing, is supported by market data. As long as the appraisal is equal to or greater than that value, there should be no problem. However if the appraisal indicates the need for property repairs, the lender could require that those be made before the transaction can close. If the appraisal value is less than the sales price or the value you thought your home was worth, the lender could reduce the loan amount that they are willing to provide. You then have the option of renegotiating the sales contract or paying the difference in cash. Most people try to renegotiate the sales contract. Some try to order another appraisal. Ordering a new appraisal is usually a fruitless effort.
Once the credit and appraisal are approved, the lender orders the title work. The title company issues a preliminary title commitment that assures you can acquire clear title at the closing of the transaction. For instance, the seller could have a federal tax lien that would have to be paid before they could deliver you clear title. The title company checks the public records to assure that the seller has clear title to the property, and the authority to deliver clear title to you. If any obstacles exist, they make sure those are resolved prior to or at closing. The seller normally pays for an Owners Title Policy that guarantees your title. Your lender will require a separate policy, paid for by you, to assure they are in a first mortgage position. That policy is usually less than $300 and it is called the mortgagee's or lender's title policy.
You and the seller attend the closing at the title company and sign all of the required legal documents. You bring a cashier's check to closing for your down payment and closing costs. Once all of the paper work is signed and reviewed by your lender, they fund their loan to the title company, the seller gets their money and you own your new home. If you are refinancing, your old lender is paid off.
The 1st payment on your new loan will normally be due on the 1st day of the second month following the closing of your loan.
CONGRATULATIONS!
The home loan process does not need to be complicated. Your Hinton Mortgage loan professional will guide you through the process. We also provide on line access to your loan status - available to you 24/7!
