Pre-approved
In spite of the attention the mortgage industry has received over the past year the process of actually getting a mortgage is one that continues to baffle most of us. I hope to clarify some of that for you today and offer some tips and tricks to help ease the inherent stress that seeking finance can bring.
In my eight years in the mortgage business the most important things that I could offer to my clients were consistency and communication. In Arizona we are fortunate because everyone involved with the process from the realtor(s), lender, and escrow/ title persons adhere to basically the same system. It is always best to secure lending first. This article will focus on the lending aspect. The steps include Application, Pre-Approval, Prequalification, Full approval, and Funding.
We will begin with Application and Pre-Approval. If you begin by consulting with a real estate professional, that person will immediately request that you speak to a lending agency, either a bank or a broker to get prequalified. The application is the first step towards that. A lender will sit down with you and take a four page application called a 1003 that includes a two year history of where you have lived and worked, your social security number, date of birth, contact information, basic salary information, available down payment, estimated sales price, declarations, and HMDA information A credit report will be pulled from all three major credit bureaus. Based on their experience and your input they can offer you mortgage options to suit you. Most often, thanks to technology, this information can be run through an automated system in the lender’s computer that has a matrix of basic qualifications for specific loan types and if you meet those then you are pre-approved. A pre-approval is NOT the same as a prequalification as this is based on a verbal exchange and not the written proof. Documentation supporting the information on the loan application must be reviewed by and Underwriter for a prequalification. At this time, a full package of initial disclosures will be provided to you to review- they are similar to what you will see at the closing but with estimated numbers. A prequalification is usually good for around 60 days before updated documentation will be required. Now you can confidently begin seeking a property.
A prequalification is half the process. YOU have been qualified. The property you choose must also fit the standards of the lending body and the loan type. Once you have an accepted and signed contract for a property an appraiser will be assigned to assess the value and condition of that property. Most lenders have a pool of appraisers that they work with and one is randomly assigned. The roof must be sound, the house must be “livable” with appliances and functioning bathrooms, and nothing of potential hazard such as broken drywall or windows. (An appraisal is not as thorough as a home inspection- your realtor and lender will recommend a home inspection for your protection.) This appraisal along with any additional conditions that may have come up during the prequalification process and the title report, wiring instructions, and fees from the title company will be submitted to Underwriting for a full Approval.
Once the Underwriter issues a full approval, final loan documents will be sent to the title company. In Arizona, the title company is the third party that will take care of your signing and receives and distributes the wired funds. In other states an attorney may serve this function.
That is the basic process. For ease of process I advise that you ask questions if you have them. Set up a system of communication with your lender such as best times and methods to contact him/ her to provide documentation and to touch base. Set reasonable timetables for one another. READ YOUR DOCUMENTS. The more information you have the better equipped you are to make decisions that are best for you. Please be patient and expect to have to provide additional information along the way. The lending environment is stricter of late and often documentation can give rise to additional questions by the underwriter. Even with the new restrictions most lending institutions are running between 30 and 45 days to close a deal from the time of contract. Please remember too that it IS the goal of everyone involved to get you into the best product, appropriate payment and interest rate, and into the house you want.
-Lindsey C. Dailey
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