What Are The Steps To Getting A Mortgage Loan?

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If you’ve ever bought a home before, you already know that getting a mortgage loan doesn’t happen overnight. But if you’re new to the process, you probably don’t know quite what to expect. So consider this article an “extra edition” to our Home Loan 101 educational series, as we walk you through the general steps that take you from “I love this house!” to “I can’t believe I OWN this house!”

Do I Need A Pre-Qualification Letter or a Pre-Approval Letter?

Whether buying a new or resale home, most real estate professionals or home builders will require you to obtain at minimum a Pre-Qualification Letter before signing a purchase agreement (or in some cases, before even taking you to view homes). This is not only common in the industry, but reasonable. After all, what’s the point in viewing homes unless you are reasonably certain you’ll be able to complete the purchase?

A Pre-Qualification is a simple step and does not require documentation or a credit check. By providing the lender with basic information, they will be able to give you a rough, unverified estimate of the loan size you may be qualified to receive. (Most lenders will give you a pre-qualification letter based on your verbal self-reporting of your income, assets, debts, and down payment amount.) One thing to remember: You don’t need to take out a loan from the same lender that gave you your pre-qualification letter.

For a Pre-Approval, lenders must verify everything you’ve told them (with identification documents such as your Social Security card, proof of income, assets, and employment, as well as records of any debts you hold.) Once you’re pre-approved, you’ll receive a conditional letter stating the exact amount of loan for which you’re approved.

• Note: If you have a simple situation – such as stable employment with no debt – this process can be as short as one to two weeks. But if you’re self-employed, own several other houses, have had a previous divorce or bankruptcy, have a pending court case or lawsuit against you, are in the U.S. on a temporary visa, or have other complicating factors, the loan officer may require additional documentation and this can possibly extend the process several weeks or months.

All things being equal, sellers often prefer to work with buyers who have Pre-Approval letters, rather than Pre-Qualification letters, particularly in a competitive market where homes get multiple bids. In some cases, it can mean the difference between getting the home you want – or sellers choosing another buyer because they have a firm Pre-Approval letter.

Comparison-Shop For Your Loan

It’s unlikely you would buy a car, piece of furniture, or appliance without shopping around. So it stands to reason that you definitely shouldn’t think about taking on a 30-year loan without doing some serious research.

If you know the approximate cost of the mortgage loan you’ll need – you can actually do your comparison shopping before you even select your new home. How? Because you’re shopping costs and rates at this point – not actually applying for a mortgage loan.

These are the 3 important points to keep in mind when comparison shopping:

1) Mortgage Broker vs. Mortgage Lender. As we explain further in our “Shop and Compare” video, and in even greater depth in this recent articlenot all mortgage lenders are the same. So simply knowing the difference between a mortgage broker and a mortgage banker is critical because the two don’t have to operate according to the same regulations. (Spoiler Alert: Mortgage brokers are more strictly regulated and must disclose all costs to the borrower – mortgage bankers don’t have the same legal obligation.)

2) Shop At Least 2 Lenders. It’s important to meet with several lenders so that you can obtain Loan Estimates from each. Then you can compare not only the fees they will be charging you, but also the interest rates.

That’s because the interest rate can mean additional costs to you over the duration of your loan of several thousands of dollars. Why? It goes back to the Broker vs. Banker rules. Mortgage bankers are allowed to add fees to your loan through what are called “Service Release Premiums” – and they don’t even have to tell you about them. Mortgage brokers are not allowed to charge these fees – by law.

3) Ask About Fees. Another thing to look for on your Loan Estimate is fees – such as Loan Origination Charges, Document Fees, Underwriting Fees, and others (commonly known as ‘junk fees’). These can add up to $4-$8,000 or more – and they come right out of your pocket at closing. At Premier Mortgage, we’re proud to offer a true “No Fee” loan that charges $0 for these items.

But the good thing is, by reviewing the actual Loan Estimates you receive you will be able to do an apples-to-apples comparison of how much your loan will cost you with each lender. The bottom line is that by shopping around for the right mortgage loan, you can save money. A lot of it.

And remember – although each lender will look up your credit information, you don’t need to worry every inquiry will hurt your credit score. The Fair Isaac Corporation, or FICO, allows people to “rate-shop” for a mortgage without dinging their credit scores, as long as you do all of your shopping within a 14-day window. Abide by that timeline and the credit bureaus will regard that first credit pull as a “ding,” but ignore the subsequent ones.

Obtaining Final Loan Approval

Armed with your pre-approval letter, you make an offer on your dream home and then (hopefully!) it’s accepted by the seller. (Hooray!) Next, you’ll need the lender to conduct an appraisal. There may also be requirements in the purchase agreement to allow for home inspections, to make repairs, and other items specifically requested by the buyer and/or seller.

As these will vary from one transaction to another, the time required to complete these steps will vary, too. While home inspectors are normally available with short lead time, a licensed appraiser may have a backlog of up to two weeks or more. Appointments must be scheduled that accommodate all parties – so being flexible with your schedule can help. And it can also take several days to receive these reports back which, if approved, will then allow your loan to continue through escrow.

Then, you’ll need to arrange for insurance on your new home and work with the escrow company to provide any necessary legal documentation that is required. The escrow company must also conduct a title search, issue title insurance, obtain loan documents from your lender, and more.

In some (uncomplicated) cases, the entire process can be managed in under 30 days. In other more complex situations it can take several weeks or even months to conclude. But by providing the documents requested by your mortgage lender in a timely manner and meeting all of the buyer’s obligations as quickly as possible – you can effect a huge difference in the amount of time it takes to get final loan approval for your mortgage – and then plan your move into your new home!

More questions? That’s what we’re here for. Give us a call to discuss your situation, and we’ll be happy to help!

Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.

You Chose The Home. You Should Get To Choose The Mortgage Loan, Too.

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Shopping for a home? That’s the easy part. Well, what we mean is that when it comes to choosing the right home to buy – that’s one decision that’s all up to you. It’s all your taste, your preference, your favorite floorplan, and the neighborhood where you want to live.

But if you’ve bought a home before, you might have felt that getting to choose the house was the only decision you got to make. Because after you made the offer and it got accepted, it seemed as if there was one hoop after another that you had to jump through to get to the finish line.

“The truth is, before someone actually hands you the keys and the “Congratulations and welcome to your new home!” – you have to deal with Realtors, inspectors, repair crews, escrow and title companies, insurance agents, credit bureaus, and mortgage lenders,” reveal Rick Piette, owner of Premier Mortgage Lending in Las Vegas. “And if it seems they’re all spending the next several weeks telling you what to do – well, they probably are. That’s okay, though, because you rely on their guidance and expertise to ensure a smooth, worry-free real estate transaction. They are, after all, getting paid to do that.”

However, when one of those parties decides to put their interests ahead of yours, you may find that your trust has been misplaced. What’s worse, you may not even be aware of it – either during escrow or after your closing takes place.

How can that happen?

Piette goes on to explain, “You may receive a referral from your agent to a particular service provider to help you complete one of the necessary steps in your purchase process. But the truth is, you might have been steered to them because your agent (or their broker) received a financial incentive to do so. Sometimes, that referral and the end result both go in your favor. Then again, sometimes they don’t. Unfortunately, when they don’t, it usually means that it’s unnecessarily costing you money.”

Nowhere is that more true – or costly – than in your choice of mortgage lender. While a shoddy repair or paying a bit too much for an insurance policy is an unfortunate occurrence, not knowing your mortgage loan options can literally end up costing you thousands of dollars.

Seriously. Thousands of dollars. (We just want to let that sink in.)

The fact is, choosing a mortgage lender should be as much your choice as your home selection. As a home buyer, you should conduct your own due diligence with several lenders to ensure you are getting the most favorable terms, best interest rate, and the lowest fees.

In previous articles, we’ve shared at length about which questions you should ask your lender, to be sure you shop with more than one lender so you can compare prices, and how to discover if a lender is hiding loan charges (that you ultimately end up paying for without realizing it).

We’ve also explained the difference between mortgage brokers and mortgage bankers (they’re not the same) – and Premier Mortgage has developed a series of Home Loan 101 videos to help familiarize borrowers with the Consumer Financial Protection Bureau’s (CPFB) “Know Before You Owe” program that was specifically designed to protect mortgage borrowers. And we strongly recommend that anyone who is now (or soon will be) seeking a mortgage loan to click on those links and review that information. If will provide you with what you need to know to make the best decision for your needs.

“If your real estate professional doesn’t encourage you to shop around, or if they tell you that you only need to go to the lender they recommend – well, you may as well just hand over your checkbook to them,” continues Rick Piette. “Because without taking those steps, you can end up paying $4,000-$8,000 or even more for a mortgage loan than you should. And that will really hit you where it hurts – in your bank account.”

Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.