Before you apply for a home loan, it’s best that you fully understand the process of applying for a mortgageA mortgage is a home loan… a loan on real estate granted by a lender.. At Homerica Mortgage Corporation, we’re here to assist you in this complex process in any and every way. We’ve outlined below the process for applying for a mortgage and the steps that you need to take to get your home loan application approved as quickly and as painlessly as possible.

Check Your Credit History

The first order of business is to check your credit reportA credit report is a record of your history of borrowing and then repaying what you’ve borrowed. It includes information about late payments and bankruptcy as well as your credit score… also known as your FICO score. and take steps to correct any negatives before applying for your home loan. As lenders, we will check your credit report and your FICO scoreFICO stands for Fair, Isaac and Company and the term FICO score stems from the fact that - at one point in time - Fair, Isaac and Company determined your credit-worthiness. As such, your FICO score is the credit rating used to determine the level of risk a creditor will take when offering you a loan. Your FICO score determines the interest rate that you’re eligible for – based on how well you pay your bills. to determine if you are credit-worthy – specifically – if you qualify for a mortgage… the size of the loan that you may qualify for… and your ability to pay it back. Please see our About Credit page to learn more about your credit report. Additionally, be sure to visit our page on How to Improve Your Credit if you have less-than-stellar credit.

Required Documentation

As you’re about to learn, applying for a mortgage requires considerable paperwork. As such, your next order of business is to gather up your documents and documentation and have it at the ready for when you prepare your mortgage application form. We’ve compiled a list of the most common required documents and listed them on this website for your convenience. Click here to learn more about the required documentation needed when applying for a home loan.

Determining How Much You Can Afford – or – Pre-Qualification

You’ll need to know what monthly payment you can afford in order to determine the size of your mortgage and in order to determine the amount you can spend on a house.

Download this pre-qualification worksheet to help you determine just how much you can afford to borrow.

  Pre-Qualification Worksheet (514.7 KiB, 312 hits)

At Homerica Mortgage Corporation, we’re happy to help you with pre-qualification. Please call us today at 877-451-3100 or click here to contact us online. Once we have gathered the necessary information about your income and debts and the amount you have saved for a down payment (if any), we can make a determination as to just how much you can afford to pay in monthly payments. If the loan program is a conventional loan or a government loan, a fixed rate mortgageA mortgage with an interest rate that remains the same throughout the life of the loan. or an adjustable rate mortgage (ARM)An adjustable rate mortgage is a variable rate mortgage… the interest rate on the loan is periodically adjusted based on the financial index., it may cause different valuationsValuation is an estimate of what a piece of real estate (real property) is worth.. It’s best that you get pre-qualified for each type of loan for which you might qualify. For Homerica Mortgage Corporation to approve your mortgage, we look at two key factors… your ability to repay the loan and your willingness to repay the loan.

Your ability to repay your mortgage is determined by reviewing your employment history, your current salary and your total income. How long have you been employed by your current employer? If less than two years, how long have you been in the same line of work? Hopefully, your answer is at least two years.

Your willingness to repay your home loan is determined by asking how the property will be used? Will you live in the home? Or will you rent the home while living elsewhere? How have you re-payed any previous loans? To determine this, we’ll look closely at your credit report, your repayment history on previous or current loans and/or your rental payment history.

Remember that nothing is set in stone. Each application is reviewed on a case-by-case basis. If one area of your application is weak, you may have other, stronger areas on your application that can make up for such weaknesses. Again, if you have questions concerning your pre-qualification, don’t hesitate to call us at 877-451-3100 or click here to contact us online.

Mortgage Programs and Rates

To determine the best mortgage for your needs, you need to ask yourself how long you plan to keep the loan. If you only plan to live in the home for a few years, ask us about adjustable or balloon loansA balloon loan is a long-term loan with low interest rates and small payments initially but with a large “balloon” payment at the loan’s maturity.. If you anticipate living in this new home for a longer period of time, ask us about fixed rate mortgages.

Every mortgage has different rates, pointsPoints are the fees paid by the buyer to the lender. There are origination points and discount points to be paid, each of which is equal to 1% of your loan amount. For example, if your loan is $200,000, each point costs $2,000. and fees. Determining the best mortgage for your particular needs is time-consuming, not to mention that it can be frustrating. Call us at at 877-451-3100 or click here to contact us online. We’ll help you obtain the right mortgage whatever your situation.

The Mortgage Application

The mortgage application asks for very detailed information about you, about your employment history and about the home you’d like to purchase. Don’t go it alone. We’re here to help you fill out your home loan application. As you know, credit reports will be run and your employment will be verified. All the other information you provide on the mortgage application will be verified as well. This is where all those required documents that you gathered come in. You’ll use those papers to document your income, your spending habits, and your ability to pay your bills on time. Naturally, it’s best to be honest with your lender about all aspects of your credit and your income, etc. At Homerica Mortgage Corporation, we want you to feel that you are part of a team. We want to get you approved for a home loan every bit as as much as you want to be approved. Please understand that – as part of that team – you need to provide us with honest responses on your mortgage application.

The time it takes to process your application may vary depending on the complexity of your mortgage, the current market conditions, and whether or not we need you to us with provide additional information. Decisions are usually made within 15 days after we receive all the necessary information. However, applications for FHA loans or VA loans may take longer.

Appraisals

How much do you want to borrow? The maximum loan amount will be determined by the value of the property and your personal financial condition. We’ll ask a real estate appraiser to give his or her opinion about its value. Based on the market – how much comparable homes have sold for in similar neighborhoods, the physical condition of the home, whether or not the home has additional “amenities” such as marble counter tops or central air conditioning – the appraiser will provide us with an estimated value of the propoerty. The appraisalAn appraisal is a report made by a qualified person – known as an appraiser – as to the fair market value of a property at a given date. will be an important factor in determining whether you qualify for the size of mortgage you want. We’ll lend you up to a certain percentage of the appraised value of your potential new home, perhaps as much as 80 or 90 percent, and we will expect you to make a down payment to make up the difference. If the appraisal is below the asking price of the home, the down payment you planned to make, coupled with the amount we’re willing to lend you may not be enough to cover the purchase price. We may have to suggest a larger down payment to make up the difference between the price of the house and its appraised value.

Approval Process – or – Underwriting

Once we have gathered all of your documentation and assisted you in filling out your mortgage application, we must submit your complete application to one of our mortgage underwriters. In preparation, we’ll order your credit report, the appraisal and a title report. The information that you have submitted to us on your mortgage application will be verified. Any derogatory marks found on your credit report – such as late payments, collections or judgments – will be explained by the aforementioned letter of explanation. We’ll also examine the appraisal and the title report for any issues that may require further investigation. When we’ve satisfied all of our requirements, we then forward this entire mortgage application package to a mortgage underwriter for approval. It is the mortgage underwriter’s job to ensure that the information on your mortgage application translates into an acceptable loan. At times, underwriters may request more information. Your application will then be put into “suspense” status until you provide us with the additional information. If your application is deemed acceptable, the loan is approved.

Closing Costs and Fees

When purchasing a new home, the property is conveyed from the seller to you, the buyer, via a real estate contract. The point of time at which the contract is executed and the title is conveyed from seller to buyer is called the “closing.” There are costs associated with a closing – miscellaneous fees charged by lawyers, real estate brokers and lenders involved with the home sale – and both and seller can incur these costs. Some sellers include closing costs in the sale of their home as an incentive to potential buyers.

Many people think that the biggest hurdle to homeownership is coming up with the down payment, but they often fail to consider the costs involved in the closing. Closing costs vary from mortgage to mortgage and – as such – are determined prior to applying for your loan. At Homerica Mortgage Corporation, we will present you with various mortgage options and determine the closing costs prior to submitting your loan application. Then, these closing costs will be verified by the Good Faith Estimate (GFE) and a Truth-In-Lending Statement (TIL). You will receive the GFE and TIL within three (3) days of the submission of your loan application. As a new home buyer, you should expect to pay anywhere from 2 to 4 percent of the total sale price of your new home total in closing costs.

Typical fees associated with a closing include but are not limited to:

  • Attorney fees. Do you need a lawyer to represent you as the buyer? Yes, you do. You will be expected to pay his or her fees for the preparation and recording of the official documents pertaining to your new home transaction – unless the seller has agreed to incur these costs.
  • Title search and other title service cost(s). The title service costs can be paid by either the buyer or the seller according to the contract but the seller  usually pays the majority of these fees for title search, title insurance, and other title services.
  • Recording Fees. Official record of the transfer of title must be recorded. These fees can be paid by either party and are required by the government for recording the deed.
  • Document or Transaction Stamps or Taxes.  Excise taxes are paid upon the transaction – again – by either or both parties (depending on the location (area of jurisdiction). These taxes are required by law.
  • Survey Fee. The lot or land and all structures on it must be surveyed to confirm the lot size and dimensions and to check for encroachments. The survey is required by lenders and can be paid for by either party,
  • Brokerage Commission. Real estate brokers make their money by charging the seller a commission on the sale of their home. This commission – usually computed as a percentage of the sale price – compensates the broker(s) who marketed the home, found a buyer and assisted in the negotiations. Oftentimes, the seller is represented by one broker and the buyer is represented by another. The commission is then divided between the two brokers.
  • Mortgage Application Fees. These fees are paid by the buyer to the lender and cover the costs of processing their loan application – unless the seller agrees to pay the buyer’s closing costs. At times, the buyer pays the lender the application fees directly prior to closing. But sometimes the fee is included in the buyer’s closing costs at the closing.
  • Points. Unless the seller agrees to pay the closing costs, the buyer is responsible for paying the “points.” Points are prepaid interest paid to the lender in lieu of higher interest rates on the mortgage. One point equals one percent of the loan principal.
  • Appraisal Fees. As discussed above, lenders require an appraisal on the property as a condition of the loan verifying that the sale price of the property is equal to or less than the fair market value of the property.
  • Inspection Fees. Buyers should always ask for an inspection of the property before buying and the sale should be contingent on the results of this inspection. As such, the inspection fees are usually paid for by the buyer unless the seller agrees to incur this charge. Quite often, lenders require inspection of the property for termites or other pests as well as any structural problems. Lenders need to know that the home is in good condition and will retain its collateral value in the event that they need to foreclose on the property.
  • Pre-paid Property Insurance. Lenders will typically require that a mortgaged property be insured at all times throughout the life of the mortgage, and will usually require that the first full year’s property insurance premium be paid in advance by the buyer. If the buyer has not already paid the insurance company directly, this would become another closing cost payable at closing.
  • Pro-rata property taxes, paid by the seller, the buyer, or both. Most (but not all) jurisdictions assess taxes on real property, which are usually payable at a specified date annually. Since all but a tiny fraction of real estate transactions close on a date other than this one specified annual date, most transactions must include an adjustment to assure that both the seller and the buyer end up paying their share of the annual property tax, proportionate to the percentage of the year that each has ownership of the property. Usually required by institutional/commercial lenders and by the real estate contract.
  • Pro-rata Interest, paid by the buyer but may be reimbursed by the seller. The monthly mortgage payment is calculated and payable on a specified day each month. If the closing does not actually fall on that specified date (which is usually the case), then an adjustment must be made to calculate the interest on the loan for the number of extra days until the first payment is due.

Once your mortgage has been approved, the file containing your application and all other pertinent information is sent to the closing and funding department. (Is that correct? is there a better phrase than “closing and funding department”?) The date and time of the closing will be determined ensuring that all parties and their attorneys can attend.

What Happens at a Closing?

At the closing, you’ll review the finalized loan documents making certain that the interest rate and the terms of the loan are what you and the lender agreed upon. You should also review the HUD-1 Settlement Statement to verify that the agreed upon dollar amounts have been entered. If so, you (the buyer) and seller will sign all loan documents and the HUD-1 Settlement Statement.

You’ll provide the lender with verification that homeowner’s insurance has been obtained for the property in the form of an insurance receipt.

Both you and the seller will give the closing agent certified checks to cover the closing costs. (Personal checks will delay the closing while your check clears your bank.)

The closing agent will then establish an escrow account for you as the buyer to cover property tax, homeowner’s insurance, interim interest, and – most likely – private mortgage insurance.

You’ll sign a deed of trust.

The lender will then give the closing agent a check to cover the mortgage amount.

You will then receive title to the property. A warranty deed is given to the buyer, signed by the seller.

At the end of the closing, you will receive the keys to your new home. One caveat! It’s a very good idea to change the locks on your new home to prevent anyone with duplicate keys from entering the home. The seller may also provide you with appliance manuals, warranties and any transferable service contracts.

The recording of legal documents is the final step in the closing. The attorney or possibly the escrow/closing company or the title company that handles the closing will complete the recording of these documents. This process officially records certain documents such as the warranty deed and the security instrument with the recorder’s office within the county where you’re new home is located.

What should you bring to the closing?

  • Your down payment and closing costs in the form of a cashiers check.
  • An insurance receipt that proves that your new home is insured.
  • Identification of some form such as a driver’s license or other photo ID.

What if I’m Turned Down for a Home Loan?

If your application is turned down, federal law requires that we tell you, in writing, the specific reasons for our denial of your mortgage application. We’re sure to provide you with our reasons for denying your application and will be happy to help you understand what you need to do to qualify for a mortgage.