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Overview of the Home Loan Process
Buying a home is an exciting experience, but it can be one of the most challenging if you don’t understand the mortgage process. Many families feel overwhelmed because of the amount of paperwork they must complete. Knowing what to expect, especially if you’re a first-time homebuyer, will help you make solid decisions about your home purchase.
Be sure to work with your loan officer to complete the application accurately and completely and take your time when answering the questions on the application. If you put false or inaccurate information on your mortgage application, it can seriously harm your chances of being approved and is illegal. All of the personal information on your application is confidential and protected by federal law.
Important Documents to Complete Your Application
■ Paycheck stubs for the past 30 days.
■ W-2 forms for the past two years.
■ Information about long-term debts, like car loans, student loans, etc.
■ Recent statements from all of your bank accounts.
■ Tax returns for the past two years if you’re self-employed.
■ Proof of any supplemental income.
Once the application is complete, your loan officer will review it with you and ask you and any co-borrowers to sign it. Your loan officer will then send it through their organization to obtain approvals. If it’s approved, you will receive a pre-approval letter, which is the lender’s conditional commitment to lend you a specific amount of money for the purchase of your home. With that pre-approval, you will know just how much house you can afford to buy. While this is helpful information, you need to decide for yourself if you can live comfortably with the amount of your suggested mortgage and the associated monthly mortgage payment.
After your lender has approved your mortgage loan application, you should receive a commitment letter that specifies the amount of the mortgage loan, the number of years to repay the mortgage loan (the term), the interest rate, the APR and the monthly charges. You usually must accept the commitment by returning a signed copy to the lender within five to 10 days and you might have to pay part or all of the origination fees at this time. Once the commitment letter has been received, you are assured the financing needed to complete the purchase of your home and can now focus on completing the details required for closing.
Your loan officer should provide you with a copy of the Closing Disclosure at least 3 business days before you sign the mortgage loan documents at your closing. This document discloses the actual dollar amounts you will pay for the various fees and services associated with the closing of your mortgage loan. Your closing costs can typically range from 3 percent to 7 percent of the mortgage loan amount, so it’s important that you are aware of these costs and ask questions about them. The Closing Disclosure contains the final terms of your loan, as well as the final loan charges that you will pay at closing. The Closing Disclosure provides information regarding certain features of your loan, the amount financed, the finance charge and the total of payments.
When you are finished signing the closing documents, you will be given the keys to your new home. The mortgage process is now complete and you are officially a homeowner!