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Navigating the Fine Print: Mortgage Tips to Help You Close the Deal

Buying

There’s so much more to buying a home than just searching for your dream house and moving in. If you didn’t win the lottery, chances are you’re going to need a mortgage. Mortgage lending has been around for a while, and although some things haven’t changed, other parts of the process are brand new.

Got questions? We’ve got answers!

Mortgage Tips To Help You Close The Deal

1. How do I know if it’s better to keep renting or buy my first home?

Without knowing your specific circumstances, one of the best ways to determine if it’s better to keep renting or make the investment to buy is to calculate the financial advantages of owning vs. renting. There are a handful of free “rent versus buy” calculators available online that can help you make this decision a little easier.

2. When is a good time to buy?

Between “hot markets” and “buyer’s markets,” it can be easy to get caught up in real estate valuations and home price cycles. While many of these considerations are useful to factor in, the best time to buy is when you (and only you) decide that it’s right.

3. What is the difference between getting prequalified and preapproved?

All this “pre-“ stuff can feel overwhelming, but when simply put, just remember: verify first, approve last. Although the terms prequalified and preapproved sound similar, their differences matter.

A prequalification is generally not much more than a conversation with a loan officer who asks a series of questions such as how much you make, what kind of car payments you might have, etc. If the new house payment is below a certain percentage of your gross income and your total debts are under another certain percentage of your gross monthly income, then, boom, you’re prequalified.

Once you’re seriously shopping and ready to move forward, a prequalification means very little. Now, you need to get preapproved. Preapproval verifies all that information you provided earlier and at this point, your credit will also be pulled to verify your ability and willingness to repay a mortgage.

4. What are the benefits of getting preapproved?

Before you ever step foot in an open house, you should have your preapproval letter in hand. Know before you go. Preapprovals speed up the home buying process and allow you and your agent to proceed with confidence knowing there are no big road bumps to work around.

But don’t crack open the champagne just yet. You will most likely have some conditions to factor in.

5. What are loan conditions?

Loan conditions mean that your loan is approved, “conditionally.” For example, your loan may be approved pending one condition: “Explain why you were late on a car loan payment last year.” If you satisfy the conditions, you loan would be approved and the process can move forward.

Until you hear that final word, “congratulations,” this can add time and tension to the whole mortgage approval process.

6. Who are the key people in the loan approval process?

  • The loan officer helps you complete the mortgage application and oversees your loan package throughout the process.
  • The loan processor keeps track of your documents; what’s in and what has yet to arrive. They organize them to either go to the underwriter or straight to order your loan papers.
  • The loan underwriter is the person who ultimately says “yes” or “no” on a loan file by ensuring the loan conforms to loan guidelines.
  • The inspector makes a visual inspection of your home for defects, pests or necessary repairs before the house can close.
  • The appraiser determines the market value of your home by comparing the sales price of similar homes in the neighborhood. Don’t pay for an appraisal until your home has passed inspection.
  • The closer reviews the loan and prepares the lender’s closing documents.
  • The settlement agent can either be an attorney or an escrow agent depending on the state you live. This person verifies that the sale of the home goes according to state laws and lender’s requirements and verifies that you are who you say you are.

 

7. What is the 1003?

Your loan application is commonly referred to as the 1003, which is Fannie Mae’s form number for a mortgage application. Freddie Mac uses the same form but is numbered Form 65. With ten sections of close to 350 spaces to fill out, the loan application asks a lot of questions and can sometimes use unfamiliar language. If you’re unsure of how to answer a question, leave it blank and ask the lender when you’re done.

The ten sections include:

  1. Type of mortgage and terms of loan
  2. Property information and purpose of loan
  3. Borrower details
  4. Employment information
  5. Monthly income and housing expenses
  6. Assets and liabilities
  7. Transaction details
  8. Declarations
  9. Agreement
  10. Government monitoring information

8. What happens next?

After your lender has verified all necessary information using third party sources, they are required by federal mandate to send you your Good Faith Estimate (GFE) of Settlement Charges and your Truth in Lending (TIL) documents within three days. These documents give you an estimate of your settlement charges and loan terms if you are approved for the loan.

Tray tables up, seat belts securely fastened. . . it’s time to close your deal!