Applying for a home loan is a big decision whether you are just starting out and buying your first house or refinancing your current house. At Residential Mortgage, we make the home loan process as quick and hassle free for you as possible. We have loan programs to accommodate just about anyone in any situation. We have taken steps to ensure you are informed of your options at every level of the process. Below we have explained some of the common choices you will need to make when applying for your loan.
Choice 1 - Purpose of the Loan
Purchase – You are buying your first home or looking to buy a new home.
Refinance – You have a mortgage and want to improve the terms of your loan to lower your monthly payment or decrease the length of time you have to repay your loan. You can even refinance to convert some of your equity into extra cash. You can use that cash to buy a new car, pay off your student loans or as extra savings towards your retirement.
Consolidate Debt – You want to wrap your current debts into one low interest rate loan. This will give you the convenience of one statement each month instead of keeping track of multiple bills.
Choice 2 - Fixed or ARM
Fixed – Fixed rate loans offer the dependability of the same monthly payments for the life of the loan.
ARM – Stands for Adjustable Rate Mortgage. Usually an ARM starts off with lower initial monthly payments than a fixed rate mortgage for the first 1-7 years before adjusting based on an interest rate index. When adjusting, your rate may go up or down depending on market conditions.
Choice 3 - Life of the Loan
The most common loans taken out run for 15 or 30 years, but you can choose terms that run for 10, 20 and 25 years as well. For simplicity sake we will compare the advantages of the most common 15 and 30-year loan.
15-year – You build equity in your house faster and have a lower rate than a 30-year loan, but your monthly payments are higher since you are paying off the loan in a quicker time period.
30-year – Lowest monthly payments for a fixed loan, but over the life of the loan you pay more interest than the 15-year loan.
Choice 4 - Rates and Points
Once you know what type of loan you qualify for you may choose to lock in the rate for that particular loan request.
Rates – The lower the interest rate you lock in will result in lower monthly payments and total interest paid for a given set of loan terms.
Points - One way to save the maximum amount of money each month is to "buy down" your rate. Discount points may be paid to the lender to obtain a reduced rate. These discount points may be refinanced into the total loan amount, along with other closing costs.
Choice 5 - How to Apply
Now - Fill out the information online and get the process moving.
You’ve done your part by applying and now it’s time for us to do ours. Residential Mortgage will start to review and process the information you submitted from the application. Below we’ve outlined the progression of the approval process.
Residential Mortgage takes great satisfaction in their ability to offer a loan program regardless of a few setbacks in your credit history. A credit check is performed to verify the information you presented. Your credit history is examined to compile the list of loan products that you are qualified to choose from.
At this time our loan professionals will request any documentation they need to complete the process. Possible documents they will ask for include pay stubs, bank statements and investment information such as IRA’s or 401(K) statements.
Once we have double-checked all the documentation needed we will send a qualified appraiser to the property. Their job is to assess the value of the house to help determine if the property supports the loan amount requested.
Underwriting is the examination of the appraisal report, a review of all documents you have provided and an evaluation of your credit profile. It is after underwriting that your loan application may be approved for closing.
If your loan comes back approved, Congratulations! It’s
now time to move on to the final step towards getting your money:
You are at the doorstep. You have been approved. Now it is time to take that final step towards finalizing this transaction. At closing, you will meet with a qualified Settlement Agent of your choice, in a location close to you. All of the loan documents will be forwarded to the Settlement Agent by Residential Mortgage. Once there, you will review all documentation provided and with the assistance of your Settlement Agent sign where necessary. Below are some of the closing cost items you can expect to see.
The lender costs may include items such as discount points, processing fees and underwriting fees. Please refer to your Good Faith Estimate for the items your lender assesses.
Third Party Costs
These costs include charges paid to other entities for items like title policies, recording fees, appraisal fee, credit report fee and flood certifications. These are items required in order to obtain a mortgage loan. Your Good Faith Estimate that was provided to you earlier will list the items that will be assessed. Just remember that the exact amount that a third party charges may not be known at the time your Good Faith Estimate was prepared.
Each year property taxes and hazard insurance will need to be paid. You may choose to pay these items yourself or you may set up an Escrow (or Impound) Account. By doing this, your taxes and insurance are added to your mortgage payment and these items are paid by you monthly, rather than annually in one lump sum.
You are Home Free
You are coming down the home stretch. After all closing documents
are properly executed, you now have your new mortgage. Whether it will
earn you the keys to your new home or turn some of your equity into
cash, we are thrilled to have you as a valued customer.