Mortgage Terms and what they mean to you.
Before you receive a mortgage loan, you will need to pre-qualify for a loan. This is an important step in house hunting! Because if you pre-qualify for a loan before you start looking for your new house, you will know how much you can afford. Or if your looking to apply for a refinance, consolidate your debts, or home improvement loan a pre-qualify will help you see the funds you can borrow and what your new monthly payments will be
In order to pre-qualify, you will need to give personal and financial information to your broker/lender. The broker/lender will evaluate your income, debts, and ability to pay for determining the total amount you can borrow. The broker/lender will be able to show you different types of loans, qualifications and which one suits your needs the best.
Apply for Loan
You will complete a mortgage application with the lender of choice. This is actually the beginning of the loan process. Various fees will be discuss at this time, along with the total amount of your down payment. After this process you will receive a Good Faith Estimate and Truth in Lending statement that will itemizes the rates and associated costs for obtaining the loan.
The lender will verify your employment, income, debts and credit report for payment histories. If there is a negative credit report, then the lender will send a refusal letter with an explanation. If the credit report is acceptable then there will be an appraisal, land survey and other property issues that may need further attention. This process will gather all the above information so that the lender may underright your loan.
Lender underwriting usually occurs between days 21 and 30. The underwriter is responsible for determining whether the processed information, above, is deemed as an acceptable loan. You will be contacted at this time, if there is any more information needed. Until you supply the needed information, your loan application process will be held in a state called, “Suspense”.
If you’re down payment is 20% or less, you will be required to purchase mortgage insurance. The loan will be submitted to a private mortgage guaranty insurer, who provides extra insurance to the lender in case of default. Again, you will be contacted at this time, if there is any more information needed. Until you supply the needed information, your loan application process will be held in a state called, “Suspense”. Once insurance is obtained your application will be returned to the mortgage company.
During this time the title insurance is ordered, all approval contingencies, if any, are met, and a closing time is scheduled for the loan. Pre-Closing occurs between days 25 and 30.
This is the point at which the borrower finishes the loan process and actually buys the house. Closing usually occurs between days 25 and 45 of the loan. The lender provides the funds to purchase your home.
Credit Bureaus and your credit reports
It is important to understand that Credit Bureaus are nothing more than keepers of your credit account records.
Credit Bureaus keep a record of:
- who has given you credit?
- when they gave you credit.
- how much credit you are given.
- how much your current payments are.
- whether or not you paid it back on time.
The lender will check your credit report to verify financial history when you want to obtain credit for:
- credit cards accounts
- misc. loans
- financing for a car
- home finances
- personal or home property leases
- apartment rental
The people who request your credit file pay the Credit Bureaus.
Credit Bureaus own large computer systems capable of storing credit information on everyone in the United States. However, because of the large amounts of information, their method of storing information is very basic and may have many errors. You should always get a credit report before applying for any type home loan and verify all the information is correct. If not, this will give a chance to correct errors, before the mortgage lender views your report.