Mortgage Office of America

Understanding the Loan Application Process

Buying a home can be one of the most exciting, confusing and stressful financial transactions you will ever undertake. Even experienced homebuyers find the process complicated and intimidating, particularly when it comes to getting a mortgage loan. At Mortgage Office of America, we believe that finding the "best" mortgage means balancing your mortgage options with your financial situation and your housing needs, now and in the future.

The key to this process is to find a loan that fits comfortably into your entire financial situation. By involving us early in the process, you’ll already have a strong working relationship when it actually comes time to buy your home.

You may even want to get pre-approved before you start shopping. Buyers with this pre-approval have a distinct advantage when they are ready to deal. An approved mortgage establishes a shopper's buying power.

Understanding the loan application process will help prepare you to quickly and successfully complete the loan application process so that you may start enjoying your new home.

The Loan Application Process consists of three stages:

1. Loan Application Interview
2. Loan Application Form
3. Processing the Loan Application

1 LOAN APPLICATION INTERVIEW

Choosing a mortgage loan is not as easy as simply finding the lowest interest rate. There are many other factors that will determine which mortgage is right for you. Your financial picture, including your income, savings, cash reserves, and debt-to-income ratio will determine how much you can afford to pay in monthly mortgage payments. MOA, as a critical member of your home buying team, can help you identify the types of mortgages that meet your specific financial needs—possibly increasing your home buying power or improving your financial situation after you’ve purchased.

In this meeting we will begin to collect the information needed to approve the loan. We will also explain the types of mortgage loans available, interest rates, fees for each type, and the qualification requirements. During this meeting, we will assist you in filling out the loan application.

Since even the shortest mortgages typically last at least 15 years, you will need to project how your financial situation and your housing needs may change over the life of the mortgage. How long do you intend to live in the house? Do you anticipate significant expenses in the near future, such as college tuition costs? Are you starting a business that may require significant funding? Do you expect your income to increase over time, which may allow you to pay more toward your mortgage each month? Planning for these eventualities will help you determine how much you can afford to allocate toward your mortgage.

Go to top

2 LOAN APPLICATION FORM

The loan application asks for information on the property, terms of the purchase contract, and employment and financial history of all loan applicants. We will need to verify all information to approve the loan, so it is very important to submit a complete and accurate application.

The loan application process will run smoother if you prepare for it ahead of time. Here is the typical information necessary to complete the loan application:

• Details of Purchase Contract and Property
• Personal Information of all applicants
• Employment History & Source of Income
• Personal Assets
• Personal Indebtedness

Go to top

3 PROCESSING THE LOAN APPLICATION

After the loan application has been completed, our processing department will put together all of the necessary documents and send them to an underwriter, where the decision will be made to approve or reject the loan. Our loan processors send out Verifications of Employment and Deposit and order the credit report, property appraisal and other documents. Nowadays Deposit verification information is critical due to the new Patriot Act. The time it takes to receive these documents affects the length of time required for approval of the loan. If you are transferring here from out of the local community, it may take longer to receive the credit and employment information. Processing times vary from one lender to another, but we should be able to give an idea of the processing time for your application.

Within three business days after receiving the application, we will provide you with a Good Faith Estimate of the anticipated closing costs. It will show costs associated with the loan settlement, such as origination fees, mortgage insurance, title insurance, escrow reserves and hazard insurance.

Within the same three days you will also receive a Truth-in-Lending Disclosure statement. This statement shows, among other things, the estimated monthly payment as well as the Annual Percentage Rate (APR), which is the total cost of all finance charges on your loan. The APR represents the dollar amount of finance charges you pay either up front or over the life of the loan, converted to an annual interest rate. Since the APR includes origination fees and other charges, as well as interest on the mortgage loan, the APR is usually higher than the interest rate on the loan.

Go to top

4 YOUR LOAN IS APPROVED!

Once the lender has approved the loan, you will usually receive an approval letter. If the loan does not close within the specified commitment period, the terms are subject to change. The approval may contain conditions you need to satisfy, so you should read it carefully. If the closing is scheduled soon after the approval the lender may give you verbal approval instead of an approval letter. This is not unusual, but make sure you understand the terms of the approval.

Once the approval letter is received, you are assured the financing you need to complete the purchase of your home. Now you can turn your attention to completing the details required for settlement and the excitement of moving into your new home.

Go to top

HOW TO MAKE THE LOAN PROCESS RUN SMOOTHLY

Many homebuyers needlessly worry during the loan process. Keep in mind the lender wants to make the loan. Loan underwriters are looking for ways to approve loans, not reject them. If you have come to the interview with the mortgage consultant fully prepared and have provided good documentation, you have done a great deal to assure prompt processing of your application and approval of your loan.

You need to keep the lines of communication open. You should be accessible if we need additional information or documents during processing. If you are from out of town, use your real estate agent as a contact, if necessary. Quick response to lender requests helps keep the process on schedule. Obtaining a mortgage loan need not be an ordeal that dampens the thrill of acquiring a new home. Mortgage Office of America is there to help you get into your dream home.

Tip: Do not make any adverse changes to your financial "picture" during the time between approval and when funds are dispersed. Believing that the "approval" is the final stage or that the lender won't find out about the change in debt or income or other factors can lead to real headaches. Innocent mistakes range from applying for a new department store credit card, to purchasing a refrigerator for the new house, to buying two new Mercedes Benz sedans, to quitting a job to go full-time into a new business. These changes will at least force an explanation to be given and may cause your loan not to fund and the approval to be withdrawn. Often a lender obtains another credit report and calls your employer one last time before funding the loan.

Go to top