Pre-qualification starts before the loan process actually begins, and is typically the first step after initial contact with a loan officer.
The lender gathers information about the borrower's income and debts and makes a determination about how much home the borrower may afford. Different loan programs may allow for different values, so it is important to obtain pre-qualification for each type of program that is suitable
The application is the beginning of the loan process. The buyer, now refered to as the borrower, completes a mortgage application and supplies all of the required documentation for processing.
Various fees and down payments are discussed and the borrower will recieve a Good Faith Estimate (GFE) and a Truth-In-Lending (TIL) statement within three days, which itemises the rates and associated costs for the loan.
Processing occurs between 5 and 20 days into the loan process
The processor reviews the borrower's credit reports and verifies his or her debts and payment histories as the VOD's and VOEs are returned. Should there be any unacceptable late payments, collections for judgments, etc., a written explanation will be needed from the borrower. The processor also reviews the appraisal, survey, and looks for property issues that may require further review.
Underwriting will occur between 21 and 30 days into the loan process, or sooner.
The underwriter is responsible for determining whether the combined loan package passed over by the processor is an acceptable loan. At this time, if more information is needed, the loan is put into "suspense" and the borrower is contacted to supply additional doccumentation.
Pre-Closing occurs apporximately between 25 and 30 days into the loan process, as long as no issues occured in the previous steps.
During this time the title insurance is ordered, all required approval contingencies are met, and closing time is scheduled for the loan.
Closing usually occurs beween 25 and 45 days into the loan process (depending upon the designated length of your escrow).
At the closing, the lender "funds" the loan with a cahsier's check, draft or wire to the selling party in exchange for the title to the property. This is the point at which the borrower finishes the loan process and actually buys the house.
Looking to Buy?
My 1st Choice Mortgage will answer all of your questions and walk you through each step of the way! We make everything transparent from start to finish, our job is to make this process as simple and clear as possible while most importantly, getting you the best deal!
Thinking of refinancing?
Let us know what you need. We are able to offer a wide range of refinance options.
If you’re looking for cash out, or to just get a better rate and term, were able to assist you.
We offer the following refinancing programs:
FHA Streamline | FHA Cash Out | FHA 203k | VA Streamline | VA Cash Out | USDA Streamline | Conventional | HELOC | Jumbo l Reverse Mortgage
Below are the different types of mortgages. See which plan best fits you!
Fixed-Rate Mortgage
Long-term fixed-rate mortgages are the staple of the American mortgage market. With a fixed rate and a fixed monthly payment, these loans provide the most stable and predictable cost of homeownership.
This makes fixed-rate mortgages very popular for homebuyers (and refinancers), especially at times when interest rates are low.
The most common term for a fixed-rate mortgage is 30 years, but shorter-terms of 20, 15 and even 10 years are also available. A shorter term means a higher monthly payment but much lower overall interest costs. Since a higher monthly payment limits the amount of mortgage a given income can support, most homebuyers decide to spread their monthly payments out over a 30-year term.
Some mortgage lenders will allow you to customize your mortgage term to be whatever length you want it to be by adjusting the monthly payments. You can also customize your loan term yourself with regular prepayments.
Adjustable-Rate Mortgage
Since monthly payments can both rise and fall, ARMs carry risks that fixed-rate loans do not. ARMs are useful for some borrowers — even first time borrowers — but do require some additional understanding and diligence on the part of the consumer. There are knowable risks, and some can be managed with a little planning. To get a better understanding of adjustable-rate mortgages and how they work, read HSH.com’s guide to adjustable-rate mortgages.
Traditional ARMs
Traditional ARMs trade long-term stability for regular changes in your interest rate and monthly payment. This can work to your advantage or disadvantage.
Traditional ARMs have interest rates that adjust every year, every three years or every five years. You may hear these referred to as “1/1,” “3/3” or “5/5” ARMs. These refer to how frequently the rate changes and how long the new rate remains. For example, initial interest rate in a 5/5 ARM is fixed for the first five years. After that, the interest rate resets to a new rate every five years until the loan reaches the end of its 30-year term.
Traditional ARMs are usually offered at a lower initial rate than fixed-rate mortgages, and usually have repayment terms of 30 years. Depending upon where interest rates are, high or low, these products may offer you a chance to get a lower rate today, enjoy that for a few years and then get an even lower rate in the future. Of course, the reverse is true, and you could end up with a higher rate, making your mortgage less affordable in the future.
Hybrid ARMs
Almost a “best of both worlds” product, Hybrid ARMs offer initial fixed interest rate periods of three, five, seven or 10 years; after that, they most frequently turn into a 1-year ARM, where the interest rate will change every year thereafter.
Like traditional ARMs, these are usually available at lower rates than fixed-rate mortgages and have total repayment terms of 30 years. Because they have a variety of fixed-rate periods, Hybrid ARMs offer borrowers a lower initial interest rate and a fixed-rate mortgage that fits their expected time frame.
These products carry risks since a low fixed rate (for a few years) could come to an end in the middle of a higher-rate climate, and monthly payments can jump. Because of this, Hybrid ARMs are best for borrowers who are very certain about how long they plan on remaining in the home, or those who have the ability to manage any payment increase in the future.
FHA
Although often discussed as though it is one, FHA isn’t a mortgage. It stands for the Federal Housing Administration, a government entity which essentially runs an insurance pool supported by fees that FHA mortgage borrowers pay. This insurance pool virtually eliminates the risk of loss to a lender, so FHA-backed loans can be offered to riskier borrowers, especially those with lower credit scores and smaller down payments.
FHA backs both fixed- and adjustable-rate mortgage products. Popular among first-time homebuyers, the 30-year fixed-rate FHA-backed loan is available at rates even lower than more traditional “conforming” mortgages, even in cases where borrowers have weak credit.
While down payment requirements of as little as 3.5 percent make them especially attractive, borrowers must pay an upfront and annual premium to fund the insurance pool noted above. These may also compete with other low downpayment mortgages in the market, such as HomeReady and HomePossible options.
VA
VA home loans are mortgages guaranteed by the U.S. Department of Veterans Affairs (VA). These loans, issues by private lenders, are offered to eligible servicemembers and their families at lower rates and at more favorable terms.
Jumbo
Also not a kind of loan, a “jumbo” mortgage refers specifically to the size of the loan being borrowed. Fannie Mae and Freddie Mac have limits on the size of mortgages they can buy from lenders; in most areas this cap is $453,100 (up to $636,150 in certain “high-cost” markets). Jumbo mortgages come in fixed and adjustable (traditional and hybrid) varieties.
QM and Non-QM Mortgages
Under regulations imposed by Dodd-Frank legislation, a definition for a so-called Qualified Mortgage was set. Essentially, a QM is a standard mortgage with no “risky” features such as interest-only payments, balloon payments, 40-year terms and other items. QMs also allow for borrower debt-to-income level of 43% or less, and can be backed by Fannie Mae and Freddie Mac. Presently, Fannie Mae and Freddie Mac are using special “temporary” exemptions from QM rules to buy or back mortgages with DTI ratios as high as 50% in some circumstances.
Non-QM mortgages can include interest-only payments, alternative income and asset documentation, 40-year terms and other features. Non-QM mortgages may be offered by lenders, who usually put them in their “portfolio” of loans they hold. For the most part, they are made only to the best qualify borrowers or those who have strong risk-offsetting financial characteristics, such as a large down payment or very high levels of assets. Currently, most non-QM mortgages are made to jumbo mortgage borrowers.
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