When you buy a home, and repairs are needed, it’s important to make sure your Sales Agreement is written the right way. Here’s a few tips on what your mortgage lender will expect, and how to make your home loan process go smoother!
Applying for a home loan is quite a process. A good place to get familiar with the process is the home loan application. I made a video awhile back showing the different sections of the loan application:
Some things to know when you apply for a home loan:
- Detailed residence history for the last 2 years
- Detailed employment history for the last 2 years
- Knowledge of your various bank accounts, retirement accounts, and other liquid assets
- Social Security number
- A good idea of your credit history – dates of bankruptcy discharge, etc
Obviously, there’s more to it than that. But those items might be things you wouldn’t usually think about. It helps to have the following put together when you fill out the loan application:
- Most recent 30 days of paystubs for all borrowers
- Most recent bank statements; all pages, all accounts
- Most recent retirement or 401k statements
- Last 2 years Federal tax returns; all pages, with w2s
- Business tax returns if applicable
- Divorce decree/child support paperwork if applicable
- Award letters for Social Security/VA/Disability if applicable
- Pension letters/Annuity statements if applicable
- Bankruptcy Discharge paperwork if applicable
That sounds like a lot of stuff to put together, but the truth is it will help your Mortgage Professional put your application together, and the underwriter will need to document and verify all of those items anyway.
You might as well begin prepared.
For more information about the home loan application, and a copy you can download and get familiar with, check out my website. I try to provide valuable information about home loans in Oregon and Washington, rather than empty sales pitches. Thanks!
Jason Hillard – homeloanninjas.com
Mortgage Advisor in Oregon and Washington MLO#119032
Pinnacle Mortgage Bankers
a div of Pinnacle Capital Mortgage Corp
1706 D St Vancouver, WA 98663
NMLS 81395 WA CL-81395
Awhile ago I produced a video about some conversations between certain Realtors and my team.
I like to go back and watch the video from time to time because it makes me laugh, and that is a rare commodity in today’s Real Estate market. While I was watching it, I thought I would share with the audience here what I consider to be the ideal home loan process, and exactly how the appraisal fits in to that timeline.
1) Pre-application Consultation – Ideally, home loan applicants would sit down with a competent, licensed Mortgage Professional 6 months before they intend to enter the market. Many people have unique circumstances regarding credit, income, employment, etc., and 6 months is usually enough time to work through issues to present the best possible loan file to underwriting.
2) Gathering of Essentials – Before you apply, you should gather your last 30 days paystubs, 2 most recent bank statements, last 2 years Federal tax returns with w2s & 1099s, & most recent retirement statements. And, if applicable, any divorce decrees, award letters, child support orders, and last 2 years business tax returns for self-employed/business owners.
3) Fill out a Loan Application – When it’s time to fill out a loan application, do so with somebody you trust and get along with. You will be speaking with your loan officer a lot over the course of the coming weeks, so you might as well make sure that those conversations are with somebody you like and who is professional. They should clearly explain your loan terms, and all of the disclosures that need your signature so that you feel comfortable with the agreement you are entering into.
4) Behind the Scenes – This is where the real work starts. Your Loan Officer and his/her team will be verifying and documenting your income and assets, dissecting your credit report, pre-approving you through automated underwriting, ordering a preliminary title report and title insurance, and many other things that are just as exciting as they sound, but necessary. This prepares your file to be ideally what we call a “one touch” file in…
5) Underwriting – Despite the possibility of unexpected snafus, underwriting can still be a fairly smooth process if you have chosen the right Loan Officer to work with. Depending on underwriting turntimes, in a couple of days you should have a conditional approval. Think of this as the “to-do” list that you and your Loan Officer must complete before your loan documents can be drawn up.
6) Conditions – You will work with your Loan Officer to get all of the “to-dos” done and submitted to the underwriter. Once you are sure that all conditions can be satisfied, this is when you would order the…
7) APPRAISAL! – Your Loan Officer will order your appraisal through an Appraisal Management Company. Depending on the company used, and the demand for appraisals, this process will take a few days to a week. It has to be completed within 10 days, but it usually doesn’t take that long. Assuming the appraisal comes in at an acceptable value, the next step is to order the…
8 ) DOCS! HOORAY!! – The docs, or loan documents, are the paperwork you sign at closing. These include the final application, disclosures, the note, and sometimes your last 2 years tax returns need to be signed (if you e-filed the previous 2 years). Next step is…
9) FUNDING!!! – There will be some “prior-to-funding” conditions, but most of the time its standard escrow items. The escrow company sends all of the documents you signed at closing to the lender, and the lender reviews those documents for accuracy and completeness. If everything is ship-shape (which it should be if you are working with the right people), then you can…
10) MOVE IN!!!!! – Time to pay for pizza and beer in an attempt to trick your friends into helping you move.
And there you have it, the ideal home loan process. Each individual loan carries its own set of circumstances, so it isn’t out of the realm of possibility that your process might deviate from these 10 steps. However, if you select the right person to work with, you should have a good idea of what you are up against from the beginning.
If you have any questions about Real Estate financing in Oregon or Washington, or the home loan process in general, feel free to shoot me an email at firstname.lastname@example.org or check out the wealth of information at http://www.homeloanninjas.com/! I started the site because I continue to be appalled by the complete lack of reliable information about home loans in the mainstream media. I sincerely hope it is a true resource that helps to educate everyone to become a better home loan consumer.
- The Median Price Fallacy, by Brett Reichel, Brettreichel.com (oregonrealestateroundtable.com)
- Why Are Appraisals So Bad?, by Brett Reichel, Brettreichel.com (oregonrealestateroundtable.com)
- Fannie vs. Freddie Earnings; Loan Limit Reduction Ahead; Jumbo Market Chatter; Think Tank Opinion on GSEs, by Rob Chrisman. Mortgage News Daily (oregonrealestateroundtable.com)
- What is the process or procedures for obtaining a home loan (wiki.answers.com)
- Appraisal Institute Warns Appraisers About Liabilities When Working with Some AMCs (appraisalnewsonline.typepad.com)
- Is home appraisal paid before receiving money from loan (wiki.answers.com)
- Mortgage Definition: Appraisal Cutting (zillow.com)
- Steps of the Home Buying Process… (Put Simply) (bonniebesserer.wordpress.com)
this post was originally published on home loan ninjas on July 2nd 2010
Perhaps the biggest advantage to being an affiliate branch of a mortgage bank is our inherently “hybrid” nature. We are the bank; we have more responsibility and control than ever before. However, there are some hard and fast guidelines that all loans we originate and underwrite “in-house” must adhere to. These are policies that ensure our good standing with the investors we sell the loans to. Without access to these investors, we wouldn’t be in business because we do not service loans.
One of these steadfast rules is a minimum FICO score of 640, regardless of the loan program. This is where the “hybrid” nature of our operation kicks in and really sets us apart from a traditional bank. If we have clients that don’t meet certain underwriting criteria as prescribed by our investors, we can broker the loan to another bank. Hybrid: part bank, part broker. It really is a beautiful thing because it allows us to assist more customers than before. And we can be faster on our feet because we aren’t always relying on third parties, and provides more options to the consumer.
This, of course, brings up an important question…
Just because we can, does that mean we should?
My partner and I, as I have previously mentioned, rarely fill out a client’s home loan application the first time we talk to them. Many people out there don’t qualify for their “ideal” mortgage right away. Others don’t know how much income they truly make. The point is, we get to know the down and dirty details before we begin the process in earnest. Outside of a few exceptions, this is the only responsible way to do business.
Now many times one of those details is a “less than perfect” credit score. Frequently, this can be remedied in 6 to 12 months with a little hard work, diligence, and a willingness to pay the items that are negatively impacting the client’s credit score.
We help people climb back up. Its what we are supposed to do. We are advisors, not just salesmen.
Can you make a case in the post-bubble (fingers-crossed) era for doing loans for people with a 580 credit score?
Right now, we have quite a few clients that are in this range. Actually, we always do because we talk to a lot of people and we don’t believe in simply turning people down with no plan to become “approvable”.
So how do we determine whether or not to proceed?
The answer, to me, lies in whether or not the consumer is climbing the stairs up, or riding the slide down.
Let’s say we had a client come in to review their credit history with us 6 months ago, and at that time, their score was 493. We highlighted a plan of action, and they set their minds to achieving those goals. Let’s now assume that client followed all the steps and now they have a 597 credit score. They mention that they saw a house for sale over the weekend that they absolutely fell in love with. They want to know if they can get approved to purchase the home. I am morally OK with my Originator beginning the process with them. They have worked hard to improve their situation, and want to take an advantage of the opportunity to buy a house they really want, rather than settling for something now and trying to upgrade later.
Now let’s look at another situation that isn’t uncommon. A borrower comes to my mortgage company to get pre-approved to buy a “to be determined” property. They have a 641 credit score at the time of application. They start house-hunting, but can’t find anything they want for 60 days. Then they find something, put an offer in, and the offer is rejected. They put an offer in on another house; this one’s a short sale. They go back and forth with the seller over the next few weeks about closing cost concessions and inspection addendums. Suddenly the credit report is over 90 days old, which means we have to pull a new one. Low and behold, the borrower has maxed out a credit card, or taken a new loan out and missed a payment. Their credit score has dropped to a 599. Should we go ahead with the home loan?
The answer is not so clear cut, but I am damn certain about this: we are not acting in the consumer’s best interest if we don’t at least review the situation with them and determine the delinquency’s validity. It’s not professional to negotiate a mortgage for someone who is on the slippery slope of credit decline.
We aren’t trying to be “negative”, just honest and professional. The collective irresponsibility of borrowers, brokers, lenders, and banks got us into the current mess, and professional responsibility is the only way to prevent a repeat.
question mark image credit Image: jscreationzs / FreeDigitalPhotos.net
slide image credit Image: Tina Phillips / FreeDigitalPhotos.net
- Are banks unfairly denying certain loan applicants? (seattletimes.nwsource.com)
- Banks Tighten Mortgage Standards for FHA-Insured Loans (dailyfinance.com)
- HUD investigates lenders’ fair-housing practices (thegrio.com)
- Home buying gets tougher as lenders restrict FHA loans (seattletimes.nwsource.com)
- Housing Shaky as Lenders Tighten (online.wsj.com)
- Consumer advocates allege mortgage discrimination (reuters.com)
- Group accuses banks of violating gov lending rules (sfgate.com)
(originally posted on October 2nd, 2010)
I have had this rolling around in my head for a few weeks now, and with the change in FHA mortgage insurance monthly premiums bearing down on us in a few days, I had to share my thoughts. We’ve been doing a lot of FHA loans in Oregon & Washington, as I’m sure is the case all around the country, and this change is going to affect a lot of people. (I apologize for the low quality of the video, I have successfully screwed my phone’s camera up!)
Again, everything that’s changing about the mortgage industry is done under the auspices of avoiding another meltdown, curbing foreclosures, and making the mortgage-backed security a good investment. So, if you have an insurance policy which is designed to avert the risk of a loan in default to the lender, why would you want the premium on that insurance policy to be collected over time?
From a simple risk-assessment perspective, it would seem that the more time you are exposed to loss, the greater the likelihood that it will happen. The fear is that homeowners will default on their loan payments, so why would you push more of the premium to the monthly payment side (rather than the upfront funding fee) if the reason for the policy is to protect the investor from people who default on those payments?
It seems like the reasonable position would be to get the premium covered from day one. This reminds me of when the downpayment requirement for FHA went from 3% all the way up to a whopping 3.5 per cent. Does that extra .5% really invest the homeowner so much more that it reduces their likelihood of default? I’m not saying their should be less “skin in the game”, but if that’s going to be your approach, why not really DO IT? Make the downpayment 5%, or make some portion of the upfront mortgage insurance on an FHA home loan payable from the borrower’s own funds?
It may just be that I am making the age-old mistake of applying logic to government policy, but I am thinking that the intended purpose isn’t really what we are being told.
You can read some related posts on FHA loans and mortgage insurance:
If you have any questions about FHA financing, mortgage insurance, or home loans in general, feel free to send us an email or comment on this post! And if you have any thoughts on why the monthly mortgage insurance premiums for FHA mortgages are increasing while the upfront funding fee is decreasing, we’d love to hear them!
- It’s official – FHA has formally announced the mortgage insurance changes for FHA loans (annarborundressed.com)
- FHA Mortgage Insurance Premium Changes Made Official (fhaloanadvice.com)
- FHA To Increase Mortgage Insurance Premiums Nearly 64% – Prospective Buyers Tip (chicagonow.com)
- FHA Raising Annual Mortgage Insurance Premiums (fhaloanadvice.com)
- FHA Mortgage Insurance fees changing Oct 4th (seattlecondosandlofts.com)
- FHA 2010 Mortgage Guidelines (brighthub.com)
- FHA Feature: FHA is Changing…What is the Upside? (pinkbananaworld.com)
- Mortgage Definition: FHA 2/1 Buydown (zillow.com)