A Mortgage is a loan to finance the purchase of real estate, for which the borrower pledges the real property as security for the repayment of the loan. The borrower gives the lender a lien on the property as collateral for the loan. Most people deciding to apply for a mortgage, state, “I am going to GET a mortgage.” Actually, the more accurate statement is, “I am going to GIVE a mortgage” (on my future property).
Home Loan Pre-Qualification and Discussion of Mortgage Types
Before the loan process even begins, “prequalifying” is generally the first step after you make initial contact with a Bozeman mortgage broker. In prequalification, your lender gathers information about your income and debts after which he or she makes both a financial determination about how much house you, the borrower, may be able to afford and what loan programs would be appropriate for you to explore. Depending on whether you are qualified for them, different loan programs may lead to different loan amounts, so be sure to get a prequalification for the various types of programs for which you are suited.
You want a mortgage loan that best fits your financial goals and objectives and provides you with a comfortable payment.
First-time home buyers don’t be afraid to ask as many questions as you need. There are many Montana Home Buying Assistance programs and Montana Housing Resources available to Montana home buyers on this website or email Taunya (at) TaunyaFagan.com or call me at 406.579.9683 for help.
Home Loan Application
The beginning of the loan process is actually when you “apply.” Application usually occurs between days 1 and 5 of the loan. As the buyer, you are now referred to as a “borrower.” You complete a mortgage application with your loan officer, and you supply all of the required documentation for processing. You discuss points, various fees and down payments at this time and will receive a Good Faith Estimate (GFE) and a Cost Analysis, which itemizes the rates and associated costs for obtaining your loan.
Home Loan Pre-Approval
Once you have applied, your lender will submit your file for automated underwriting. The automated underwriting system reviews your credit scores, assets, income, liabilities, loan-to-value ratios, and your proposed loan details. The underwriting system will will render an immediate credit “opinion,” informing you: if your file has been approved: if all your information was input correctly; if all your information can be documented. Any issues will hold up the process and your file will then be referred to an underwriter for “manual” review.
Home Loan Processing
As soon as you submit all of the initial supporting documentation requested such as paystubs, W-2’s, and bank statements, your loan “processing” begins. When you sign initial disclosures and return them to your lender, money will generally be collected which will be used to order an appraisal. In addition, the lender will order a Title Insurance Commitment.
The “processor” reviews the credit reports and verifies your debts and payment histories as the VODs and VOEs are returned. If there are collections for judgment, unacceptable late payments, child support issues, etc., you are required to submit a written explanation. The processor also reviews the appraisal and survey and checks for property issues, the time to get a home inspection, that may require further understanding. Your processor’s job is to put together an entire package that the lender could underwrite. When all recognized documentation needs are met, the loan package is submitted to underwriting for review.
Note: Generally, your loan officer mails out direct requests for verifications for employment (VOE), bank deposits (VOD), and any other documents he/she needs for processing your loan. When initial documentation is reviewed, there may be questions or items that need to be addressed, which may require additional documentation.
Home Loan Underwriting
“Lender underwriting” occurs between days 15 and 25. An underwriter is responsible to determine whether the combined package passed over by the processor is deemed to be an acceptable loan. If you need to submit more information, the loan is put into “suspense” and you, the borrower, are contacted to supply more documentation.
“Mortgage insurance underwriting” occurs when the borrower has less than 20% of the loan amount to put towards the down payment. At this time, your loan is submitted to a private mortgage guaranty insurer, who provides extra insurance to your lender in case of your default. Similar to above, if more information is needed from you, the loan goes into “suspense.” Otherwise it is usually returned to the mortgage company within 5-10 business days.
“Closing” usually occurs between days 25 and 45 of the loan process. At closing, the lender “funds” to the selling party the loan with a cashier’s check, a draft, or a wire in exchange for the title to the property. This is the point at which you, the borrower, completes the loan process and actually buys your house.
(Note: Closings occur at different agencies in different states. For instance, some states require closings occur at a closing attorney’s office; other states use a Title or Escrow agency.)