Mortgages - What You Want to Know

An Overview of the Mortgage Loan Process1) Organize your documentsTo finance the purchase or refinancing a Home, Condo or Co-op, you will need to gather a large umber of documents.If you are salaried you will need to provide two years of W-2s or tax returns and one month of pay-stubs, if you are self-employed: you will need to provide two years of tax returns and maybe a year to date profit and loss statement.Also, recent copies of any retirement, pension or IRA/401K accounts that you may have.If you have been divorced, you will need a copy of divorce decree.If you are not a US citizen, you will have to provide a copy of your green card (front & back), or if you are not a permanent resident a copy of your H-1 or L-1 visa.If you own rental property, have rental agreements and two years tax returns organized and ready.Also be ready to provide three months bank statements for each bank, stock and mutual fund account.2) Get Pre-approvedGetting pre-approved before you apply for a loan can help you understand how much you can borrow.When buying a house or apartment you will net to get pre-approved to have a real estate agent take you seriously and spend time with you. It typically only takes a few minutes over the phone or in person. A pre-approval process includes verification of your credit, income, assets and liabilities. The mortgage broker or loan officer will also be able to help you:Find out the maximum house you can buy, so you don't waste time looking for properties you cannot afford.Give you a sense of the rates, points and programs you have to choose among based upon your credit, assets and income.3) Shop Loan Programs and RatesTo shop for a loan you will need to:Think about how long you plan to keep the loan. If you plan to sell the house in a few years you may want to consider an adjustable/ balloon loan or interest only loan. On the other hand, if you plan to keep the house for a longer time, you may want to look at long term fixed loans with principal and interest payments.Understand the relationship between your credit score, rates and points. Points are considered to be prepaid interest and are tax deductible. Each point is equal to one percent of the loan. So for example 1 point on a $150,000 loan is $1,500. The more points you pay, the lower the rate you will get. The better your credit, the better your rates and the fewer pointsCompare different programs. Shopping for a loan can be difficult. With so many programs to choose from, each of which has different rates, points and fees, it's hard to figure out which program is best for you. That's where an experienced mortgage broker can help you make a decision that's best for you.4) Loan ApplicationOnce your loan application has been received the loan approval process starts. This involves verifying:1. Credit history2. Employment history3. Assets including your bank accounts, stocks, mutual fund and retirement accounts4. Property valueBased on your specific situation, additional documents or verifications may be required. To improve your chances of getting a loan approval:Fill out the loan application completely.Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.Do not make any major purchases. Do not buy a car, furniture or another house till your loan is closed. Anything that causes your debts to increase might have an adverse affect on your current application.Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us.Do not go out of town around the closing date. If you do plan to be out of town when your loan is expected to close, you may sign a power of attorney to authorize another individual to sign on your behalf.5) Loan CommitmentWhen a bank make a loan commitment, carefully read its terms and conditions, how long the commitment is for and if the interest rate is locked, and for how long. Also, importantly, review the details and make sure they correspond to what you expect, interest rate, term, payment, amortization etc.Costs of the LoanCosts involved in obtaining a mortgage differ by lender and are often difficult to figure out. But, each lender should provide you with a "Good Faith Estimate" of what their charges are in connection with the loan, among the charges that you are likely to see, are the following: application fee (paid up front, often refunded at or after closing), credit report fee, appraisal fee, commitment fee, underwriting fee, tax service fee, etc. 

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