How smoothly your home loan application flows from step to step in the mortgage approval process is an important factor in how quickly you can move in to your new home, the terms of the loan you receive and the closing costs you pay.

Broadly speaking, there are six phases your mortgage loan application or refinancing application will touch upon or move through before your new home is financed. All of them require your involvement.

  1. Determine what area you want to live in, do your research and decide what size of home and loan your monthly budget will accommodate.
  2. Get all of your loan qualifying documents organized.
  3. Evaluate your current credit profile so you can anticipate what level of loan qualification to expect.
  4. Review loan programs and rates.
  5. Get your loan approval.
  6. Close out the loan.
Determining the area you will live in
For most of us, relocation requirements and home budgets control the choice of areas we have in establishing a new household. Although its human nature to reach for the maximum home we think we can afford – it is good practice to carefully consider all budget items that are included in home ownership. Good Real Estate buying practice is to locate several candidate homes, do your research (expected utility bills, association fees, condition of home and therefore, maintenance costs, local taxes… and so on) and then look for “best buys” in that area.
If you can, choose a new residence that computes to 10% – 15% less than the maximum you can afford. This leaves you with some financial breathing room and helps to insure you will be able to make your payments on time and have reserves for unforeseen maintenance and repair emergencies. Remember – chances are this is not the last home you will buy, so the payment history and credit profile you earn over your years of ownership will pay good dividends when you apply for your next home loan.
Getting your loan qualifying documents organized
Applying for a home equity loan

  • If you own rental property, provide copies of the rental agreements and two years tax returns on the business.
  • Provide a copy of your first mortgage note – normally located in your loan closing file.
  • Provide a letter that explains your plans for the cash proceeds
  • If divorced, provide a copy of divorce decree.
  • If you are NOT a US citizen, provide a copy of your green card (both sides), or if you are NOT a permanent resident provide your H-1 or L-1 visa.
Buying or refinancing a home

  • If salaried, provide two years W-2 and one month of paystubs
  • If self employed: provide two years of tax returns and a YTD P&L.;
  • If you own rental property, provide copies of the rental agreements and two years tax returns on the business.
  • Provide recent copies of any IRA, 401K or brokerage accounts you have.
  • You can speed up the approval process by providing three months of bank statements for each bank, stock and mutual fund account you have.
  • For cash out refinance applications, provide a letter that explains your plans for the cash proceeds.
  • If divorced, provide a copy of divorce decree.
  • If you are NOT a US citizen, provide a copy of your green card (both sides), or if you are NOT a permanent resident provide your H-1 or L-1 visa.
Evaluate your current profile so you can anticipate what level of loan qualification to expect.
We would suggest that you review the “credit issues” link on the navigation bar to your left. Knowing what type of credit issues could come up allows you to repair inaccurate credit damage and prepare explanatory letters that help the Underwriter put more perspective on perceived credit dings found in your loan package.
Also, when buying a house, you should get pre-qualified or pre-approved. You can typically get pre-qualified on the phone or Internet in a few minutes. A pre-qualification is not as powerful as a pre-approval – where you have to go through a more intense review process that includes verification of your income, assets, liabilities, and credit score. We recommend that you get pre-approved early in your house hunting cycle – so you can:

  • Determine the range of homes you can buy – and not waste time on properties you can’t afford
  • Be in a stronger negotiating position with the seller – who will know that your loan is already approved..
  • Close more quickly because your home mortgage loan is already approved.
Review loan programs and rates.
This is important since there are such a wide array of home mortgage loan programs available to new and experienced homeowners. Your loan broker is a seasoned professional who can guide you through the menu of loan options available for your credit profile. When you’ve (jointly) decided upon one or two financing strategies, your broker will explain the loan process involved for each one of them.

As part of the above process, think about a few other factors that may have a considerable impact on the cost and payment terms of your loan:

If you don’t plan to keep the home more than a few years – you might want to consider an ARM (adjustable rate mortgage) or Balloon Loan. These low interest loans can be safely used when you know for certain what your exit strategy is for the property. Lower interest rates mean lower payments – thus improving your cash flow position and helping you to maintain a healthy credit report.

Get your loan approval.
Get the loan application filled out and into our offices so we can start the loan approval process immediately. This will require verifying your:

  • Credit history
  • Employment history
  • Assets including your bank accounts, stocks, mutual fund and retirement accounts, and
  • Property value
Additional documents or verifications may be required based upon your credit situation. To increase the chances of getting your loan approved:

  • Fill out your loan application completely.
  • Respond promptly to requests for additional documents, particularly if your rate is locked or you plan to close by a specific date.
  • Do not make any major purchases such as buying a car, furniture or another house until your loan is closed. Anything that causes your debts to increase might have an adverse affect on your current credit profile.
  • Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, let us know because we may determine that a letter of explanation needs to accompany the bank statements.
  • Do not leave town near the closing date. If you plan to be somewhere else when your loan is expected to close, you may sign a power of attorney, to authorize another individual to sign on your behalf.
Close out the loan.
Once your loan is approved, it will be necessary to sign the final loan documents. This should take place in front of a notary public. When you come down to close out the loan:

  • Bring a cashiers check for the down payment and closing costs as required. Personal checks are rarely accepted.
  • Review the final loan documents and make sure the interest rate and loan terms are what was promised. Also, verify the accuracy of the name and address on the loan documents.
  • Sign the loan documents.
Your loan should close shortly after you have signed the loan documents. On home refinance and home equity loan, Federal law requires that you have 3 days to review the documents before your loan can close.