Home Loans From Start To Finish ...

The most important step in obtaining a first time home loan is to find a mortgage provider who will lend you the money you need for your dream home matched with your credit. We have also listed other important information that will help you, the first time homeowner, get the loan you want.

Step One: The Loan Application
Completing a loan application is the first step in obtaining a mortgage. This usually takes place over the phone with the loan officer, or, if you prefer, the application may be completed via the internet. You will be asked to provide information about employment, earnings, savings, and other pertinent financial data. Documentation, such as W-2’s, recent pay stubs, or copies of your income tax return will be required to substantiate the information. The loan officer will also check your credit report to ensure accuracy. It is very important to make sure your application is complete and accurate. Missing or incorrect information can delay the process or may cause you to be turned down for a loan. A good loan officer will take time with you and not rush through the process.

Step Two: Loan Processing
Once your loan application has been completed, the loan officer passes the application to the processor. The processor’s role is to organize all paperwork and make sure all documentation is complete. It is common for the processor to contact the borrower in order to verify facts or request additional documentation. The processor will then analyze the information to clearly evaluate your income as well as determine your liquid assets (cash) as part of the overall loan process. Your credit report will also be updated as needed to accurately reflect your loan eligibility.

Step Three: Underwriting
When the loan application has been thoroughly reviewed by the processor, the file will be forwarded to an underwriter. The underwriter will compare the facts in an applicant’s file to the guidelines of the loan type being offered to ensure that all conditions are met favorably. Assuming all guidelines of the loan are met as specified, your loan will be approved. Occasionally, missing information at this point may delay your loan approval. For example, if a required appraisal of the property has not yet been completed, the underwriter will conditionally approve the loan, pending completion of the specified criteria, which, in this case, is an appraisal of the property indicating sufficient value. The application will be returned to the processor who will verify that all conditions are met.

Step Four: Closing and Funding
With the approval of the underwriting department, your loan will go to closing. Closing is the process wherein the lender communicates with a title company to prepare paperwork to complete the loan process or settlement. At this point, the funds are made available for the loan. Banks and many mortgage companies use their own money to fund loans, so no wire transfers from other entities are needed. But in many cases, especially with mortgage brokers, another entity actually funds the loan. The money is wired electronically in advance of settlement to ensure availability at closing.

At the Settlement Table
All documentation is complete indicating that conditions of the loan have been met and that funds are available. Before you get to the settlement table, however, your lender should provide a Good Faith Estimate of Settlement Costs. Carefully review this document to make sure you understand the information before proceeding to settlement. It all comes together at the settlement table where several parties are represented. The buyer and the buyer’s real estate agent will be there, as will the seller and his or her agent. A settlement attorney, who acts on behalf of both the buyer and the seller, conducts the final transaction. Buyers and sellers will each be given a settlement sheet and asked to review the numbers to make sure they are correct. Since the numbers are often confusing, the agents and attorneys are available to answer any questions that may arise.

Closing Costs: What to Expect
There are various costs associated with closing on a mortgage. In addition to your down payment and the settlement attorney’s fees, the following are other expenses you should expect to incur in closing costs for a first time home loan:

• Loan origination fee and discount points – Based on a percentage of the total mortgage cost, this is how lenders are compensated for their services.
  
• Appraisal fee - $300 to $400. A professional appraiser visits the sale property to determine its value and condition.
  
• Credit report fee - $50, to determine the borrower’s creditworthiness.
  
• Title company fee - $250 - $350. This is how the title company is compensated for their services of researching the title and preparing the deed.
  
• Title insurance – Usually 1/2 to 1% of the total mortgage cost. Title insurance ensures that if there is ever a problem with clear title to the property, the lender’s money will not be at risk.
  
• Underwriting fees, document preparation fees, and processing fees – These are costs incurred during the loan application process.
  
• Recording fees and state and transfer taxes – taxes and fees paid to the locality where the property is located.
  
• Private mortgage insurance – often required by a lender if your down payment is less than 20% of the property’s value.
  
• Mortgage interest for the current month
  
• Homeowner’s insurance – you will probably need to show proof of this at settlement.
  
• Property taxes
  
• Homeowner Association Fees.
  
• After settlement, most mortgage lenders will sell your loan to another company, who will then take over the servicing of that loan. This is the norm rather than the exception. You may want to ask at settlement what you can expect in this regard.

Applying for a loan for the first time? Make sure you check out our first time home buyer programs including financing in Pennsylvania, New Jersey, Maryland and Florida.