A short, simple overview of the loan process

Make no mistake, there's a lot involved in getting a mortgage loan. You wouldn't be here on our website if you could fill out a one-page application and get the best loan for you funded the same day. What we do is do most of the heavy lifting for you, so you can concentrate on what's important -- preparing to move into your new home, saving money, or making plans for your home equity check.

There are four main steps involved in getting a loan. You'll see that we've made your part in them as easy as possible, and we do all the work! That's what we're here for.

Step one: determine how much you can borrow

This is a function of a couple things. How much of a monthly payment can you afford? And given your unique credit and employment history, income and debt, and goals, how much will a lender loan you? The first part you can get a rough idea of by using the calculators on our website. We'll also help you through different scenarios by asking a few simple questions. Based on standard lender guidelines, we'll get you a good idea of what kind of terms and loan program you can expect to benefit most from.

Step two: pre-qualify for your loan

This is where the rubber meets the road and you save the most money. You supply information about your employment, your assets, your residence history, and so on. We get your permission to run your credit score. When we review all this information we give you a Pre-Qualification Letter. Handle it with care -- to a home seller, it's like a suitcase full of cash! Your realty agent will use your Pre-Qual (as they may call it) to make the best offer on the home you choose, and the seller knows you're pre-qualified. It gives you buying clout! And while you're picking out the home that's right for you, we're busy finding the loan that's right for you.

Step three: apply now! We make it easy

Once you've made an offer and it's been accepted, it's time to complete the loan application. It couldn't be easier, we'll navigate the paperwork for you. When the time is right, we'll order an appraisal of your new home.

Step four: your loan is funded

Your realty agent and the seller's will work together to designate an escrow/title company to handle the funding of your loan once it's approved.

We'll coordinate with the escrow company to make sure all the papers your lender will need are in order, and you'll sign everything at the escrow/title company's office, or our office, whichever is more convienent for you.

You've answered a few questions, given us some detailed information, applied online, and next thing you know, you're moving in! We're in the business of mortgage loans, you're not -- so we do most of the work. Here is a more thorough explanation for the curious:

How Purchase Loans Are Made, Step by Step

1. Pre-qualification – Lenders are encouraging buyers to get pre-qualified for a mortgage even before they begin looking for a house. This way, buyers know ahead of time how much house they can afford. Neglecting to mention an outstanding car loan or a previous credit problem, for instance, could nullify the pre-qualification.

2. Loan Search – Borrowers should choose an experienced, reputable mortgage broker, like East Bay Loan Consultants - Finance and Credit Experts. As a mortgage broker, we have the advantage over banks and savings and loans in that we can and will get you the best loan product available for your situation, having access to a wide variety of lenders and loans in the wholesale market and using a lot of clout. You may also choose a direct lender, such as a savings and loan, commercial bank or mortgage banker. It is advised to refrain from aquiring any additional financial obligations or debts from this point on in the loan process.

3. The Hunt - At this point, the buyer can begin shopping for a house. When the right one is found, the terms of the sale are negotiated, including the sale price and often the type and conditions of the loan being sought. A buyer sometimes will submit a loan pre-qualification letter to the seller, which in a competitive market, can tilt a sale in a buyer's favor.

4. Loan Application - It's crucial to supply the lender with as much information as possible, as accurately as possible. All outstanding debts as well as assets and income should be included. The loan representative is the borrower's main contact throughout the process.

5. Documentation - Paperwork supporting the application also must be submitted. Information commonly sought includes pay stubs, two years’ tax returns and account statements verifying the source of the down payment, funds to close and reserves.

6. Truth In Lending - The Truth-in-Lending Act (TILA) is a federal law enacted to promote the informed use of consumer credit by requiring creditors/lenders to disclose various terms and conditions of credit. The TILA requires a creditor to be responsible for furnishing certain disclosures to the consumer before a contract for a loan is made. The Truth in Lending statement (the initial estimate of loan costs) will be sent to you by the Lender within 72 hours of our submission of the loan to them.

This document is for your information and no action need be taken on your part. You may have questions at this point - please contact us for clarification.

7. Appraisal - Lenders require an appraisal on all home sales and refinances. This step could jeopardize a deal if a big discrepancy were to exist between the sale price / loan to value ratio and appraised value of the house. For this reason, it is very important for you to inform your appraiser of all improvements you have made to your home or investment property.

8. Title Search - This is the time when any liens against the property are discovered. A lien may have been placed on a property to ensure payment of outstanding debts by the owner. All liens must be cleared before a transaction can be completed.

9. Termite Inspection – Most purchase loans require an inspection for termite and water damage. Some problems may need to be repaired before finalizing the sale.

10. Processor's Review - The lender's loan processor packages all pertinent information to be sent to the lending underwriter, including any explanations that may be needed, such as reasons for derogatory credit.

11.Underwriter's Review - Based on the information put together by both the loan representative and the processor, the underwriter makes the final decision on whether or not a loan is approved. Lenders are looking for borrowers who will make their payments on time and for property that will cover the cost of the investment if a buyer defaults.

12.Mortgage Insurance - Many lenders require private mortgage insurance

(PMI) when borrowers put down less than 20 percent on a loan or borrow more than 80% of their homes' value. Even if a loan meets the standards of a lender, a mortgage insurance company could choose to deny coverage. It is usually advisable for borrowers to split a home loan that exceeds 80% of the home value into first and second mortgages, thereby avoiding PMI. Second mortgages usually carry higher interest rates, however the overall monthly payment is usually lower with these two loans than paying PMI. As your mortgage brokers we will help you decide which route is best for your unique situation.

13.Approval, denial or counter offer - In order to approve a loan, the lender may ask the borrowers to put more money down to improve the debt-to-income ratio. The borrower may also need a bigger down payment if the property appraises for less than the purchase price. In some cases, repairs or improvements on the property may be required. The lender may also have other conditions which must be met before issuing final loan approval and loan documents.

14.Insurance - Lenders require fire and hazard insurance on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone. In California, some lenders require earthquake insurance on condominiums. Please note: when refinancing your mortgage, your hazard insurance policy must be good for four months beyond the close of escrow otherwise lenders will require a renewal as a condition prior to funding.

15.Signing - Final loan and escrow documents are signed.

16.Close of Escrow - Documents transferring title are recorded with the County Recorder.

17.Lender Authorization - The title company then authorizes the escrow company to draft a check to the seller. The Lender reviews the signed documents, then issues Funding Condition Report and forwards it to the title company and us. This report may include items that you, the borrower, may have to provide (ie. latest pay stubs). In many cases. lenders may also rerun the borrowers credit report to make sure no major financial changes have taken place (ie. new auto loans, liens or past dues). As mentioned above, please do not acquire any financial debts at any time during this loan process as it may jeopardize your ability to qualify for the loan.

18.Funding - The lender sends a wire or check for the amount of the loan to the title company.

19.Begin Making Mortgage Payments

The typical home buyer obtains financing in a logical yet sometimes complicated process. We hope this guide we've provided is beneficial to your understanding of the loan process. It's just one of the many little ways we seek to educate and keep you informed during your home purchase and refinancing.

Haven't used our services yet? Let the Tannouri Team at Horizon Financial light your way to home ownership! Contact us today!