3. Applying for Your Loan
E. Loan Lock
The first item that requires your attention is the selection of a lender and completion of a mortgage application. Please plan to accomplish this within five business days of signing your Purchase Agreement. Take the completed Purchase Agreement with you when you first visit your lender. We offer the following information to assist you in this process, but are not responsible in any way for financing. Generally, your real estate agent can further assist you in this process.
Your lender’s job is to understand your particular financial circumstances completely. All information on the application will be reviewed at your meeting with the loan officer. Rarely does a situation arise that your loan officer has not encountered in the past. Do not hesitate to discuss any questions you have regarding your assets, income, or credit. By providing complete information, you can prevent delays or extra trips to deliver documents.
The amount of documentation and information required for a mortgage can seem overwhelming. You can facilitate the application process by collecting as much of the needed information as you can before your appointment. The checklist that follows is a general guide to assist you with the loan application. Some of the items listed may not apply to you and almost certainly your lender will request some items that we have not mentioned, but this list will get you off to a good start.
__ The Purchase Agreement will include the legal description of the property and the price.
__ Social Security number and drivers license for each borrower
__ Home addresses for the last two years
__ Divorce decree and separation agreements, if applicable
__ Most recent pay stubs
__ Documentation on any supplemental income such as bonuses or commissions
__ Names, addresses and phone numbers of all employers for last two years
__ W-2s for last two years
__ If self-employed or commissioned sales, copies of last two years tax returns with all schedules
and year-to-date profit & loss for current year, signed by an accountant
__ Documentation of alimony or child support, if this income is to be considered for the loan
Real Estate Owned
__ Names, addresses, phone numbers and account numbers of all mortgage lenders and
landlords for the last seven years
__ Copies of leases and two years tax returns for any rental property
__ Market value estimate
__ Complete names, addresses, phone numbers and account numbers for all bank accounts,
credit union, 401K, investment accounts
__ Copies of three months most recent statements for all bank accounts
__ Copies of any notes receivable
__ Value of other assets such as auto, households goods, and collectibles
__ Cash value of life insurance policies
__ Vested interest in retirement funds, IRAs, etc.
__ Name and account number for all revolving charge cards, balance and current monthly
__ Name, addresses, phone numbers and account numbers for all installment debt, approximate
balance and monthly payments for such items as autos and mortgage
__ Alimony or child support payments
__ Names, addresses, phone numbers and account numbers of accounts recently paid off, if to be
used to establish credit
Please note that you will be asked to pay for a credit report and an appraisal upon signing the application.
Once all preliminary information has been given to your loan officer, your lender sends verification forms to your employers, banks and current mortgage company or landlord and also orders a credit report and appraisal. You must sign a release to authorize these steps. Your lender will provide you with a Good Faith Estimate and a Truth-in Lending Disclosure.
The Good Faith Estimate lists the costs you will incur at closing. Some of the numbers listed on this form are prorated, subject to change based on the actual date of the closing. Others are set fees that should remain the same.
The Truth-in-Lending Disclosure shows the total cost to you, over the term of the loan, for your specific financing. The calculation is based on the assumption that you own the home and make regular payments throughout the term of the loan.
The lender sends Verification of Employment (VOE) forms to all employers for the last two years. The employers complete the form, sign and return it to the lender. The forms show the dates of employment, the amount of money you earned last year, and how much you have earned so far this year. The VOE forms also document any bonuses and overtime you have earned.
Verification of Deposit (VOD) forms go to each banking institution listed on your application. The institutions indicate the date you opened each account, average balances for the last three months, and the amount of money you have in each account on the day they complete the form. Any loans or overdraft accounts you have with the bank will also be shown.
Mortgage companies and landlords complete Verification of Mortgage (VOM) forms. These document for the lender how much you owe, the amount of your monthly payment, and whether you make your payments by the due date.
Your Credit Report shows the amounts of money you owe to each of your creditors, minimum monthly payments, and your manner of payment.
The Appraisal confirms the value of the home you are purchasing for you and your lender.
Typically several weeks pass as these reports and forms are returned to the lender. If any delays are encountered, the loan officer may contact you for assistance. The credit reporting agency may call you to verify that the information they have gathered is correct.
Once the loan processor has collected this standard documentation, you may be asked to write letters regarding your assets, income or credit. Few loans are finalized without some additional information being obtained just before the package is submitted to the underwriter for final approval. At this point you may become frustrated with the loan process. Please remember that your lender requests these letters to assist you in obtaining your financing. Do not hesitate to discuss your concerns with your loan officer. Perhaps he or she can provide some additional insight on what may seem to be redundant requests.
Prior to the processor submitting your file to the underwriter for final approval, he or she will verify the final sales price. Make sure that copies of all addenda, such as change orders signed after the original purchase agreement was completed, have been sent to the lender. This assists the lender in determining the exact loan amount. If change orders affect the total price after this point, the loan may have to be resubmitted for the higher amount or the lender may ask you to pay for the changes additional items in cash.
During your first meeting, you and your lender determine the timing to obtain prequalification. This allows us to start the home even though final approval is still pending. You will discuss additional items that may be needed to obtain final loan approval. Several weeks after your first meeting with the lender, you should receive loan approval. If any of the documents requested have not been returned to the lender in a timely manner, approval may take longer.
Loan approvals often carry "conditions of approval." The sale of a previous home or proof of funds are two examples. Discuss any concern you may have about such conditions with your loan officer and obtain any requested documentation as soon as possible. Once all contingencies are met, final loan approval can be obtained.
The only thing anyone knows for certain about interest rates is that they will change. Do not rely on anyone’s predictions regarding rates. Locking your rate prematurely can result in extra expense if your new home is not complete in time to close within the lock period. We are happy to update you throughout the process of construction on the expected delivery date. Until we reach a point in construction where factors outside our control can no longer affect the delivery date, the decision to lock your loan is at best a gamble.