like to have your own house but don’t have enough money to
buy. What would you do? This article gives a “snapshot” picture
of how a home finance mortgage company will help
you to borrow a home loan and make your dream home a reality
finance mortgage companies are basically private finance institutions
that engage in mortgage finance operations. Besides, many
credit unions, and banks such as Bank of America engage in
mortgage finance operations. They help the borrower right
from the beginning when the borrower needs to decide on what
kind of home that he requires [detached single family home,
townhouse, condominium etc] until he gets the loan.
lending is a flourishing business in the United States. The
Federal Housing Administration administers programs such as
“Fannie Mae” and allocates funds to mortgage companies to
encourage home buying all across the US.
happens in a mortgage company?
You submit your loan application to the mortgagecompany.
The loan officer in the company collects your application
with supporting documents [a list of which is given in the
appendix at the end of this article] and places them in your
file. He assesses the application carefully and finds out
whether you qualify for the type of loan you seek in the application
and meet every requirement. If he anticipates a bottleneck,
he suggests solutions.
The loan officer forwards your application and the supporting
documents, by emphasizing your strong points, to the loan
The loan processor, studies the package and solicits any additional
information that may be needed, for instance, pay stubs, statement
of your checking account etc any colateral secuirity if need
steps 1 to 3 take about a week.
The loan officer seeks reconfirmation from you. If you confirm,
he makes calculations and lets you know the cost of the loan.
It includes the interest rates, the annual percentage rate,
the monthly payment, up-front costs [that are related to down
payment, closing and settling in] and on-going costs [such
as property taxes and homeowner’s insurance]. Some homeowners
are offered Employer Assisted Housing [EAH] Program that reduces
down payment, closing costs and sometimes, the interest rates.
Your loan package is submitted to the underwriter. He reviews
the file and assesses whether the application and documentation
are in compliance with the government rules and regulations
pertaining to the loan option. He makes a very careful assessment
of your credit situation. This is the most important step
in the loan process.
are four possible outcomes in this step:
If you are not qualified, your application is declined. Usually,
this doesn’t happen if the loan officer has performed his
function properly particularly in counseling and remedial.
Your application is placed under “suspension”. This means
that your loan package raises some additional issues that
need to be explained. If this is done satisfactorily, the
loan is approved.
Your application is approved if everything is in tact. This
is a near ideal situation. In most loans there tend to be
some issues, however trivial they may be.
Your application is approved subject to certain conditions
known as “stipulations”. This is the most common outcome of
home mortgage loan applications.
If your loan application is declined, the loan officer reviews
the package to determine if it needs modification [“repackaging”]
to get the approval. If the loan application is suspended,
the loan officer and the loan processor help gather the required
documentation or information needed, and forward the application
to the lender for approval. If the loan application is approved
without conditions, it is forwarded to the lender. If the
loan application is approved conditionally, the loan officer
and processor work with you and respond to the conditions,
and forward the papers to the underwriter. The underwriter
reviews all the responses to confirm whether they satisfy
the stipulations. [Today, many mortgage
make use of computer assisted automated underwriting tools
to make this task fast and efficient]. Then he passes them
on to the lender for approval without any condition.
The lender approves your loan application.
The lender forwards the loan package to the title company.
The title company makes a careful review of the loan package
in full, approves it and enters into a mutual written agreement
The title company sends the signed agreement to the lender
The lender transfers the funds to the title company. The title
company records all the legal documents, closes the loan and
disburses the fund to you.
of most important documents needed when applying:
Completed sales contract signed by the home buyer [borrower]
and the seller
Applicant’s Social Security Number
Complete residential address for the past two years (including
names and addresses of landlords)
Names and, addresses of employers for past 24 months
Total income earned in employment for past 24 months
W-2 forms pertaining to past 24 months
Most recent pay stub
Monthly payment and current balance for any existing loans
and charge accounts
Most recent three months statement of bank checking accounts,
savings accounts, stocks, bonds, mutual funds etc
Proof of income from child support, alimony etc. [including
copies of court endorsement of cancelled checks to show receipt
of payment] if applicable
Credit Report [with credit score]
companies need all the above documentation to make sure that
you are likely to pay back your loan].
Report is one of the most important documents, based on which
mortgage companies determine whether you qualify for the loan
or not. It is always advisable to keep your credit report
in good stead by managing your money efficiently.
are many ways of economic spending that can enhance your credit
score. One of them would be to spend not more than 30 percent
of income on housing expenses and not more than 35 percent
on debt repayments including the monthly mortgage payment].
is very important that the mortgage company is an accredited
one and that you consult as many mortgage companies as possible,
at least tree, collect quotations of different options, compare
and decide on the best so that eventually you can make your
dream home a comfortable reality!
finance and banking