By Sharon Hassler:
1. Where to Find a Loan Officer
We can’t stress enough the importance of finding an experienced, reliable loan officer or mortgage broker. Start with a referral. Ask your family, friends, co-workers, real estate agent, attorney or accountant. Banks, credit unions, mortgage companies, and mortgage brokers are all sources for home loans but the individual you work with is more important than the source or the interest rate.
2. When to Apply If You’re Buying a Home
If you’re planning to buy a home, apply as soon as possible. It’s better to get pre-qualified or pre-approved before you start looking for houses so you search in the appropriate price range. Also, having a pre-qualified or pre-approved letter from your lender can give you more bargaining power when negotiating with a seller, especially if you’re located in a “hot” market.
3. What You Need for the Application
Whether buying or refinancing a home, unless you’re requesting a ‘low-document’ or ‘no-document’ loan, you’ll need to submit the following information or copies of these documents for each applicant. If your lender asks for additional information, respond promptly to avoid delaying your approval.
- Addresses of residences for the last two years
- Social Security Number
- Driver’s License or other valid ID
- Names and addresses of your employers for the last two years
- Two recent pay stubs showing your year-to-date earnings
- Federal tax returns for the last two years
- W-2s for the last two years
- Checking and savings account statements for the last two months
- Loan information: names, addresses, account numbers, balances and payment amounts on all loans
- Credit card information: names, addresses, account numbers, balances and payment amounts on all credit cards
- Real estate loan information: names, addresses, account numbers, balances and payment amounts on all loans for other real estate you own
- Property information: addresses and values of other real estate you own
- Personal property information: your best estimate of the value of your personal property (including vehicles, boats, furniture, jewelry, television, stereo, computer, other electronics, etc.)
- For a VA loan, provide a Certificate of Eligibility or DD214s
- Divorce decree or death certificate if applicable
- Funds to pay upfront for the credit report and appraisal (This requirement depends on your lender.)
4. Employment Verification
Your lender will send a verification request to your employer. To avoid delays, alert your human resources department that a request is coming so they can return it in a timely manner.
5. Opening Escrow
Escrow basically is an account set up by an “uninvolved” third party who will be responsible for safeguarding the funds in the transaction. Your lender or your real estate agent will open escrow with a title company, escrow company or an attorney, depending on the standard procedure in your area. Your escrow person will handle the funds and all legal documents necessary to close the escrow, including paying other mortgages, transferring title as needed and recording the new deed.
6. Ordering the Appraisal
Your lender will order the appraisal on the home you are buying or refinancing.
7. Ordering Hazard Insurance
You are responsible for ordering (updating if a refinance) hazard insurance. Sometimes called fire insurance, the policy covers the dwelling and is required by your lender to protect their risk in the house. Your lender will explain the necessary coverage which is generally the value of the building(s) minus the lot value. If this is for a condominium, a master policy already exists which includes your unit.
Contact an insurance agent immediately after submitting your loan application. Insurance coverage is a condition that must be met before your transaction can close and is one of the most common reasons for delayed closings. The lender will not fund the loan without it.
Remember to discuss coverage for liability and personal belongings with your insurance agent. Hazard insurance does not cover these items.
8. Additional Conditions
Depending on your situation or the property involved, your lender may ask for additional conditions to be met. These may require action by you or the seller. While it can be frustrating to have more requirements than were expected, quick responses are needed to avoid delaying the closing.
9. After Loan Approval
After your loan is approved with all conditions met and just before your closing date, the lender will send loan documents to your escrow company. The person handling your account will prepare an estimated settlement statement detailing where the funds will go and, if this is a purchase, what funds you must bring to the closing appointment. Be prepared for this amount to be higher or lower than previous estimates due to changes in prepaid interest, prorated fees, courier fees, impound accounts or other items. When all the funds are dispersed and the new deed is recorded, the escrow is closed.