You 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 for you!
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. Mortgage
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.
What happens in a mortgage company?
1. 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
3. 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 be.
Usually steps 1 to 3 take about a week.
4. 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.
5. 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.
There are four possible outcomes in this step:
a. 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.
b. 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.
c. 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.
d. Your application is approved subject to certain conditions known as "stipulations". This is the most common outcome of home mortgage loan applications.
6. 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 company 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.
7. The lender approves your loan application.
8. 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 with you.
9. The title company sends the signed agreement to the lender for funding.
10. 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.
List 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]
Mortgage companies need all the above documentation to make sure that you are likely to pay back your loan].
Credit 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.
[There 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].
It 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!