Loan Process
Pre-Qualification In attempting to approve homebuyers for the type and amount of mortgage they want, Constant Funding, Inc. looks at two key factors. First, the borrower's ability to repay the loan and, second, the borrower's willingness to repay the loan. Ability to repay the mortgage is verified by your current employment and total income. Generally speaking, Constant Funding, Inc. prefers for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years. The borrower's willingness to repay is determined by examining how the property will be used. For instance, will you be living there or just renting it out? Willingness is also closely related to how you have fulfilled previous financial commitments, thus the emphasis on the Credit Report and/or your rental payment history. It is important to remember that there are no rules carved in stone. Each applicant is handled on a case-by-case basis. So even if you come up a little short in one area, your stronger point could make up for the weak one. Mortgage companies could not stay in business if they did not generate loan business, so it is in everyone's best interest to see that you qualify. Mortgage Programs and Rates To properly analyze a mortgage program, the borrower needs to think about how long he plans to keep the loan. If you plan to sell the house in a few years, an adjustable or balloon loan may make more sense. If you plan to keep the house for a longer period, a fixed loan may be more suitable. With so many programs to choose, each with different rates, points and fees, shopping for a loan can be time consuming and frustrating. Constant Funding, Inc. can evaluate a borrower's situation and recommend the most suitable mortgage program, allowing the borrower to make an informed decision in a timely manner. The Application The application is the true start of the loan process and usually occurs between days one and five of the start of the loan process. The borrower, with our help if needed, completes the application and provides all required documentation. The various fees and closing cost estimates will have been discussed while examining the many mortgage programs. These costs will be available on the Good Faith Estimate (GFE) and the Truth-In-Lending Statement (TIL), which the borrower will receive within three days of the submission of the application to Constant Funding, Inc. Processing Once the application has been properly submitted, the processing of the mortgage begins. Our processor orders the credit report, appraisal and title report. The information on the application, such as bank deposits and payment histories, are then verified. Any credit derogatories, such as late payments, collections and/or judgments require a written explanation. Our processor examines the appraisal and title report, checking for property issues that may require further investigation. The entire mortgage package is then put together for submission to the lender. Required Documents Depepnding on the type of loan, required documents may vary. It is better to have more than not enough. Please refer to my Required Documents page to get an idea of what may be needed. This should get you started! Credit Reports Most people applying for a home mortgage need not worry about the effects of their credit history during the mortgage process. However, you can be better prepared if you get a copy of your credit report before you apply for your mortgage. That way, you can take steps to correct any negatives before making your application. A Credit Profile refers to a consumer credit file, which is made up of various consumer credit reporting agencies. It is a picture of how you paid back the companies you have borrowed money from, or how you have met other financial obligations. There are five categories of information on a credit profile:
NOT included on your credit profile is race, religion, health, driving record, criminal record, political preference, or income. If you have had credit problems, be prepared to discuss them honestly with us. We will assist you in writing your "Letter of Explanation." My team and I at Constant Funding, Inc. realize there can be legitimate reasons for credit problems, such as unemployment, illness, or other financial difficulties. If you had problems that have been corrected (reestablishment of credit), and your payments have been on time for a year or more, your credit may be considered satisfactory. By now, most people have heard of credit scoring. The most common score (now the most common terminology for credit scoring) is called the FICO score. This score was developed by Fair, Isaac & Company, Inc. for the three main credit Bureaus; Equifax (Beacon), Experian (formerly TRW), and Empirica (TransUnion). FICO scores are simply repository scores meaning they ONLY consider the information contained in a person's credit file. They DO NOT consider a person's income, savings or down payment amount. Credit scores are based on five factors: 35% of the score is based on payment history, 30% on the amount owed, 15% on how long you have had credit, 10% percent on new credit being sought, and 10% on the types of credit you have. The scores are useful in directing applications to specific loan programs and to set levels of underwriting such as Streamline, Traditional or Second Review. However, they are not the final word regarding the type of program you will qualify for or your interest rate.
All things being equal, when you have derogatory credit, all of the other aspects of the loan need to be in order. Equity, stability, income, documentation, assets, etc., play a larger role in the approval decision. Various combinations are allowed when determining your grade, but the worst-case scenario will push your grade to a lower credit grade. Late mortgage payments and Bankruptcies/Foreclosures are the most important. Credit patterns, such as a high number of recent inquiries or more than a few outstanding loans, may signal a problem. Since an indication of a "willingness to pay" is important, several late payments in the same time period is better than random lates. Appraisal Basics An appraisal of real estate is the valuation of the rights of ownership. The appraiser must define the rights to be appraised. The appraiser does not create value, the appraiser interprets the market to arrive at a value estimate. As the appraiser compiles data pertinent to a report, consideration must be given to the site and amenities as well as the physical condition of the property. Considerable research and collection of data must be completed prior to the appraiser arriving at a final opinion of value. Using three common approaches, which are all derived from the market, derives the opinion, or estimate of value. The first approach to value is the COST APPROACH. This method derives what it would cost to replace the existing improvements as of the date of the appraisal, less any physical deterioration, functional obsolescence, and economic obsolescence. The second method is the COMPARISON APPROACH, which uses other "bench mark" properties (comps) of similar size, quality and location that have recently sold to determine value. The INCOME APPROACH is used in the appraisal of rental properties and has little use in the valuation of single family dwellings. This approach provides an objective estimate of what a prudent investor would pay based on the net income the property produces. Underwriting Once the processor has put together a complete package with all verifications and documentation, the file is sent to the lender. The underwriter is responsible for determining whether the package is deemed an acceptable loan. If more information is needed, the borrower is contacted to supply more information and/or documentation. If the loan is acceptable as submitted, the loan is put into an "approved" status. Closing Once the loan is approved, the file is transferred to the closing and funding department. The funding department notifies the broker of the approval and verifies broker and closing fees. The escrow company then schedules a time for the borrower to sign the loan documentation. At the closing the borrower should:
After the documents are signed, the escrow company returns the documents to the lender who examines them and, if everything is in order, arranges for the funding of the loan. Once the loan has funded, the escrow company arranges for the mortgage note and deed of trust to be recorded at the county recorders office. Once the mortgage has been recorded, the escrow company then prints the final settlement costs on the HUD-1 Settlement Form. Final disbursements are then made. Summation A typical "A" mortgage transaction takes between 30-45 days to complete. With new automated underwriting, this process speeds up greatly. Contact me today to discuss your particular mortgage needs or Apply Online and I will promptly get back to you. |
||||
|
