The Loan Process
Set up a meeting with your loan officer to fill out the loan application. After you provide the required documents, a credit report will be ordered by the loan officer.
Your application is processed. The title work (assuring that your new home has a legal title) and appraisal (determining property value) for your new home are ordered.
Once the title work and appraisal of your new property are completed, these documents are added to your application file. All your information is then sent to underwriting. This is where your application is approved, denied, or additional information is requested.
Once approved for your loan, your information is forwarded to the closing department. Documents and instructions for closing the sale of your new property are prepared and sent to the title company handling your closing.
The closing. Final documents are signed, funds are disbursed and payments (as they spelled out in the terms of your mortgage loan) begin.
Types of Mortgages:
Adjustable Rate Mortgage (ARM)
A home loan in which the interest rate is changed periodically based on a standard financial index. Most ARMs have a Cap (limit) on how much the interest rate may increase. The caps protect you from drastic market changes, but ARMs do not offer the stability of a fixed rate loan. ARMs could be a good choice for someone who knows his or her income will rise and at least keep pace with the loan rate's periodic adjustment cap. If you plan to move in a few years and are not concerned about the possibility of a higher rate, an ARM also could be a good choice.
An ARM's rate is based on a money market index. The one-year U.S. Treasury bill is commonly used. To come up with the ARM rate, the lender will add a "margin", usually two to four percentage points, to the index.
A home loan which is payable in full after a period that is shorter than the term of the loan, with typical terms being 5, 7, or 10 years. On a 7-year balloon for example, the payment is calculated over a 30-year period but the balance due on the loan after 7 years, must be either paid off or refinanced.
Balloon mortgages are similar to ARMs in that the interest rate is not fixed. Borrowers run the risk of higher interest rates at the end of the balloon period.
A mortgage on which the borrower makes half of the monthly loan payment twice in a month. This works out to 26 payments in a year, rather than the typical 24 and the loan is paid off more quickly.
With a conventional mortgage, the lender obtains a lien on the property in return for the payment of the amount the loan. A home loan that is not guaranteed by the VA (Veterans Administration) of insured by the FHA (Federal Housing Administration).
An FHA mortgage is a mortgage which is insured (against loss) in whole or in part by the Federal Housing Authority. The borrower pays the mortgage insurance premium. Typically, the down payment for an FHA mortgage is low but the amount that can be borrowed is also low.
Home Equity Loan
A mortgage on the borrower's principal residence, usually for the purpose of making home improvements or debt consolidation.
Home Equity Line of Credit (HELOC)
A mortgage set up as a line of credit, from which a borrower can draw, up to a maximum amount. Money can be drawn from the line by writing a check, using a credit card or other forms of withdrawing money.
Interest Only Mortgage
The scheduled monthly mortgage payment consists of interest only and no part of the payment goes toward principal, so the loan balance will remain unchanged. The option to pay interest only lasts for a specified time period, usually 5 to 10 years. This type of loan is flexible in that, borrowers have the option of paying more than just the interest only payment (paying toward principal).
A LIBOR mortgage is an adjustable rate mortgage on which the interest rate is tied to the London Inter-Bank Offered Rate. This s the interest rate offered for U.S. dollar deposits by a group of London banks. There are different types of LIBORS depending on the length of maturity of the deposit made to the London banks.
(Veterans Administrations mortgage)- A mortgage available to both active and former servicemen and women. No down payment is required, and the lender is insured against loss by the Veterans Administration.
Purchase money mortgage
A purchase money mortgage is one that is given to secure the loan which is used to buy the property. A first (senior) mortgage on the property has priority over any second (junior) mortgages.
A loan to a homeowner, usually 55 or older, on which the balance rises over time and which is not repaid until the owner dies or sells the home.
Please contact me with any questions you have about the loan process.
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