Buying
Buyer's Handbook: Obtaining Financing
Once you learn the seller has accepted your offer, your key job is to obtain financing. If you have already been pre-approved, you're well on your way to having all the needed information and documentation organized. Here's a list of information you will need to provide for most loan applications.
10 Things Most Lenders Request
- The amount of money you wish to borrow and the length of time you will need the money.
- Your current address and, if you've been at that address less than two years, your previous address.
- Your Social Security number.
- Your present employer's address, and if you've been at your present job less than two years, your former employer's address.
- Copies of your paystubs. Your gross monthly income.
- Copies of monthly bank statements.
- A list of your assets – real estate, personal property, paid-up life insurance.
- A complete list of outstanding debts and the account numbers.
- A copy of the sales contracts for the property you wish to finance.
- A written statement clarifying any problems with the loan application.
With this information, the lender will follow these steps to process your application:
- Verify the facts.
- Request and review your credit report.
- Make a property appraisal.
- Review your application.
- Determine whether to make the loan.
Things You Should Ask the Lender
- What types of mortgage loans does the financial institution offer?
- Is the mortgage open-ended?
- Can you borrow up to the amount of principal you've paid to make home improvements?
- What is the interest rate?
- If the rate drops, what is the cost to refinance at a lower interest rate?
- Will mortgage insurance be required for loans other than FHA-insured or VA-guaranteed mortgages?
- How much principal must be paid before the insurance requirement is dropped?
- What are the premiums and are the premiums refundable if you prepay the mortgage?
- What reserve, such as those for property taxes or hazard insurance, are required?
- How long must you pay into these reserves?
- At some point, will you pay these costs directly?
- What fees will be charged at closing, including points, loan origination, abstracts, attorney's fees, appraisals, termite inspections reports or credit reports?
Within three days of applying for the loan, your lender should issue you a good faith estimate of the fees charged for closing. This estimate may not include deposits for hazard insurance or property taxes.
What to Expect
- Loan origination fees are a percentage of the loan that cover the lender's administrative costs. The loan discount, referred to as points (with each point equaling 1% of the loan), is extra interest paid to the lender to make up the difference between market interest and the interest of the loan.
- Survey, appraisal or inspection charges that the lender incurs to establish the value and condition of the house.
- Assumption or transfer fees on assumable mortgages.
- Charges to title/abstract searches, and recording and transfer charges.
- Mortgage interest, the first year's hazard insurance and the first year's mortgage insurance (if required) that are paid to the lender in advance.
- Reserved deposits that are used by the lender to pay for hazard insurance, property taxes and mortgage insurance are also paid at closing.
- Other fees may include a variety of services, such as document preparation, notary services, handling the schedule and warranties.
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