Choice 1 – Purpose of the Loan
Purchase – You are buying your first home or looking to buy a new home.
Refinance Rate and Term- 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.
Refinance Cash Out- You may be eligible to improve the terms of your current mortgage loan and also convert some equity into cash which can go towards a home remodel, college fund, paying down debt, savings and many possibilities. If you have a first and a second mortgage you can consolidate the two mortgages into one lower mortgage payment to make.
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 40 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 is best suited for you it’s time to lock in the rate for that particular loan program.
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.
A credit check is performed to verify your credit score. Your credit history will help your loan consultant process your loan application to take account of other monthly obligations you have and not exceed a payment for which will be unaffordable.
At this time our loan professionals will request any documentation they need to complete the process. Possible documents they will ask for include rental agreements, proof of homeowners insurance, and other related documents in order to secure a loan.
Once the loan application is complete and you agree to the terms for which you are applying by signing the loan application, you should receive an approval within a week. Your loan consultant will then go over an appraisal order with you in order to set up a time best for you to have an appraisal scheduled.
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 closing your loan:
The lender costs may include items such as discount points, processing fees and underwriting fees.
Third Party Costs
These costs include charges paid to other entities for items like title policies, recording fees, notary, and flood certifications. These are items required in order to obtain a mortgage loan. Your Loan Estimate that was provided to you earlier will list these items.
Each year property taxes and hazard insurance needs 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 put away in an account created for you to pay these items.
You are Home Free
You are coming down the home stretch. After all closing documents are properly executed your loan should fund and record. You have successfully closed your loan! We are excited to help you in this process whether you are buying a home or refinancing.