GETTING A MORTGAGE (A BRIEF OVERVIEW)

Acquiring an affordable mortgage depends not only on what you feel you can afford, but more importantly, on what a lending institution determines what you can afford. This is true whether you are seeking a mortgage to purchase a residence or an investment property.  Before lenders will issue a commitment to lend large sums of money, they must be assured that the borrower can afford to repay the loan and that the value of the property is sufficient collateral to guarantee repayment of the loan in case of default.  These are primary concerns for the lender.  

THE PRE-APPROVAL LETTER

The pre-approval process is the beginning of your journey to homeownership. We begin this segment of the journey by gathering basic information on you -- credit score, employment history, and income documentation.  You will sign a few documents that authorize me to acquire these data.  Once I have reviewed your credit report and credit history, I can guide you as to what mortgage loan options are available, what the next steps are in improving your credit score if necessary, and tell you how much you can be approved for.  Ideally and strategically, you should complete this step before you meet with a real estate agent and begin searching for and looking at houses.  (Most real estate agents will not begin representing a buyer until they have a pre-approval by a lender.  A real estate agent's time is extremely valuable and they generally do not want to waste their time and resources on someone who is not yet approved to actually make a purchase. Having a pre-approval indicates that you are a serious buyer and will motivate your agent to commit their time and resources to seek out the house that you desire and can afford according to your pre-approval letter.)  Furthermore, having a pre-approval gives you greater leverage and power of negotiation with sellers because they will feel comfortable that you can back up your offer.  In essence, once you are armed with a lenders pre-approval, you are better able to demonstrate that you are a serious and qualified home buyer.  As a mortgage advisor and loan officer, all my efforts and strategies will be directed toward getting a pre-approval designation on your behalf.  

Once you have been issued the pre-approval letter, you will then be fit to go see some homes with your real estate agent. If you do not already have a real estate agent, I can refer you to a member of my network that specializes in homes in the neighborhoods and areas that you are interested in.

I will meet with you and fill out the paperwork needed to apply for a home loan. (In most  situations there will be an initial meeting that will be conducted over the phone.) I will instruct you on the necessary documents that I will need from you to begin the process. Generally, the documents I will need are:

• Two-year employment history including name, address, and phone numbers
• W-2's for the past 2 years
• Federal tax returns for the past 2 years (all pages and all schedules if self-employed)
• If self-employed, a year-to-date P&L
• Checking, Savings, IRA, and 401K statements for the last 2 months, with all pages
• One full month's recent paycheck stubs
• Rental agreements for investment properties
• DD 214 or Certificates of Eligibility (VA Only)
• Present mortgage statement (For Refinance only)
• Current homeowners insurance declaration page (For Refinance)
• Social Security Numbers for all borrowers

Conveniently, you will be able to simply fax or email these documents (only to a secured email address or fax number that I or one of my associates will provide you).  They will allow me to do a preliminary assessment of what your mortgage options are. This will take approximately one to two days to determine.   We will discuss the type of mortgage(s) that will best suit your needs and review the various documents I have asked you to supply me with in support of your application.  I will also explain the required disclosures that are specifically designed to keep you informed of your rights and obligations.  The more accurate and complete your application is at the meeting, the less there will be for us to do before closing on your home. Generally, once a mortgage plan has been created for your unique profile, I will forward your profile to a one of my network members licensed mortgage loan officer/advisor that will provide you with the appropriate mortgage product according to your profile.   

 Step 2: Processing

Once you have found a property you want to purchase,  I will forward your file to a processor who will order the appraisal of the property, and full credit reports, and will mail any necessary verification documents to your employer and your bank to officially verify your credit, employment, and income.  Once this formal process is complete, a good faith estimate is generated and will be sent to you.

Step 3: Underwriting

The underwriter reviews the documents and property appraisal report for final approval.  The more documentation the underwriter receives upon the first transmission, the quicker the approval. Any missing documentation that is required by the underwriter becomes a "condition of the loan". That means the loan will not close until the documents have undergone the final stage of approval.  This is why it is very important that you supply me with all of the documents that I request of you as soon as possible, so as to not hold up the approval. The commitment letter is sent to you, your attorney, and the seller's attorney.  Upon receiving your commitment letter, you should contact your attorney to review your conditions and discuss the action that he/she will take in obtaining the legal documents.  Your attorney will contact the seller's attorney to obtain the updated abstract, (or new survey), current tax bills, and satisfaction of any liens.

Step 4: Conditions

Generally, the conditions will be listed on the last page of the commitment letter.  If you are unsure of what is being requested, it will be my pleasure to explain everything to you and guide you every step of the way.  (Remember, it is my obligation to you to help make the process as easy-going as possible -- alleviating all your anxiety.)  All of the conditions must be met before you can be scheduled to close.  If the property needs repairs, they must be completed and re-inspected prior to closing.  Your real estate agent will notify me when the repairs are complete.  At this time you should obtain homeowner's insurance. For your convenience, I can refer you to one of the insurance professionals within my network, as I am also a fully licensed independent insurance agent /advisor, and I will already have the relevant information to obtain the homeowner's insurance requirements set by the mortgage underwriter; or, of course, you may acquire this on your own from any insurance professional you choose. (Legal Disclosure: If it is your desire that I obtain your homeowner's insurance for you, I will be legally representing you as your insurance agent at that point, and for that particular transaction, which is a separate, different, and distinct representation from acting as your mortgage advisor and/or loan officer.)

My clients like the fact that I am also a licensed insurance professional, especially first-time homebuyers,  because it eliminates the additional running around they would have to do on their own; and of course that lessens the anxiety they may have about the home-buying process.

Step 5: Schedule The Closing

Once all of your conditions have been satisfied, your loan is ready to close.  Your attorney will send the property's legal work to the lender's attorney and then contact us to schedule your closing.

 This is what it has been all about!  You get the Keys to your new home! And it certainly will be my pleasure to see the big smile on your face(s) when this happens.  One of my greatest joys is knowing that my work and dedication has led to this great moment in my clients' lives.  

This article is written by

Frederick W. Ford

Insurance, Mortgage, Real Estate, and Retirement Advisor

NMLS# 640619
DIRECT TEL. 888.410.8853  

This article is for informational purposes only and is not an advertisement nor solicitation.