What you need to know about the loan process
A pre-requisite for submitting an offer on a home. I will need a complete loan application and a copy of your credit report. I will also need to verify two years employment and look at a most recent paystub. Often times your file will be run through our ‘Desktop Underwriter’ to ensure that we will get an approval on your file.
An account set up by your Service Provider/Bank/Lender where your taxes, insurance and Monthly Mortgage Insurance (where applicable) will be deposited.
A term referring to the amount of time funds have been in a banking/trust account. The typical time required for funds to be ‘seasoned’ is two months. These funds will usually be used as a down payment or to apply towards closing costs.
Funds obtained from a ‘relative’ to assist with down payment. On an FHA loan the entire 3.5% of the down payment can be gifted. On a Conventional Loan the borrower needs to have at least 5% of their own funds to put towards the down payment. If 20% is being gifted, then the borrower DOES NOT need to contribute any of their own funds towards the down payment.
Once I have Pre-Qualified you, and have received a Purchase Contract from your Realtor, your file goes into Processing. At this point additional information will be required : Two months Bank Statement; copy of Driver’s Licenses; Two years W2’s/Tax Returns; 30 Days pay stubs; a Copy of your Cancelled Earnest Money Check, a signed Borrower’s Authorization, and a signed 4506T. The Processor will also order the appraisal, title report, and request hazard insurance information on the property.
Once the Processor has received all the above mentioned information the file is then submitted to an Underwriter. This person’s role can be likened to a tax auditor. They are required to review the information on the file to see if everything makes sense from income to appraisal. If there is anything on the file they want further explanation on, they will condition the file, which means that we have a little more information to gather and present to the Underwriter. Once all the conditions on the file have been met, the Underwriter ‘signs off’ on the file and we have a clear to close.
Your file is now sent to the closing department and closing instructions prepared to send to title where your deal is actually closed. Title will review our closing instructions and prepare HUD’s or Settlement Statements which are sent back to us. If they are correct, we then forward these along to you for review.
DEBT TO INCOME
The ratio used to calculate all your debt versus your income. This usually needs to be at 45%
LOAN TO VALUE
Depending on the Down Payment you are making on your purchase or the equity you have in the home for a refinance. Needs to be 96.5% for and FHA Loan and 95% for a Conventional Loan.
The acronym used for your credit score. Three scores are pulled from the credit bureaus and your ‘mid’ score is utilized. It needs to be 640 for an FHA Loan and 680 for a Conventional Loan.
Required on ALL loans where the borrower is placing less than 20% towards the down payment.
UP FRONT MORTGAGE INSURANCE
A fee charged on an FHA and some VA loans. This is a government fee and is shown as a closing costs, but it is in fact funded back into the loan amount.
FUNDING AND RECORDING
The day you sign your Settlement Statement at Title is not typically the day your loan Funds. It usually funds the following day before noon. Once Title has received funds from Security National, they then go ahead and record your loan. This usually occurs before 4:30 pm that day. You are then eligible to receive keys from your Realtor. On a Refinance, you have 3 days of recession before the loan funds. This is intended to allow the borrower to consider their choices and give them an opportunity to change their mind.