Choosing A Lender
The first step in the mortgage process is to choose a lender. SmartRateSearch.com understands
that you have better things to do than spend days and weeks surfing the web in search of the best loan. Negotiations with high pressure, commission seeking loan officers is even more aggravating. The mortgage industry refers to this as “the consumer's search for the best liar!” For more information on how to find the right lender, view our instruction on Choosing the Right Lender .
SmartRateSearch.com compares lenders through a proprietary Virtual Loan Shopper system which clearly displays and compares the lender's reputations and advertised rate and loan fees. The consumer can review our research, then choose to go anonymously to a lender's website to obtain rates and fees. These lenders rates are real time and are automatically adjusted, based upon personal history answers provided to the lender. If nothing changes regarding the personal information, rates and fees that are displayed during the process are guaranteed and should not change. The customer may then apply with the lender and lock in the displayed rate.
Below is a step-by step guide to help you understand the mortgage process
The Application – The first step is to submit a Residential Mortgage Loan Application. You can submit your application using several options, depending on which is most convenient for you. It is very important to complete your application thoroughly and honestly. Never sign an application or any other loan document that is inaccurate. For more information see our instruction on loan fraud .
- Call and speak with a Lender's Loan Consultant
- Securely submit your application online,
- Mail your application or fax your application to the lender.
You should NEVER pay any lender' fees up front! Up-front fees are used by unscrupulous lenders to force you to work only with their company! It is very hard to walk away from a $300 to $500 dollar application fee, even if the lender is attempting to raise your interest rate. These fees should only be paid at your loan closing; after you are satisfied with all the final loan terms.
Lenders should not charge lenders fees in advance. However, during the initial application step of your loan, you may be asked to pay for the credit report or the property appraisal report. A full color copy of this report should be provided to you at the loan funding. If an appraisal has already been completed on your property, it may be possible to have the appraiser assign that report to your lender. Contact your Mortgage Consultant to determine if your report is transferable.
Note: It is very important to schedule the appraisal inspection as soon as possible. Many lenders will not allow a customer to lock a rate until the appraiser has provided them with an initial value assessment.
Note: When purchasing a new home, a fully executed Purchase Agreement will be required to order the appraisal and lock your interest rate. Interest rates are locked on a property address, not on the borrower. If you have not yet located a property, you may wish to view the millions of available properties on www.SmartHomeSearch.com . We have provided millions of Agent' Listings, for sale by Owner listings, Special Seller Discounted listings, and Bank Owned properties for your comparison.
Upon submission of your loan application, it will also be necessary to provide extensive and accurate documentation to qualify for a loan approval. See typical documents required for your loan program. It is best to provide all of this documentation early in the loan process. Speak to your Mortgage Consultant if you have difficulty locating particular documents. Some alternative options may be afforded.
Processing the Loan File
Your file is assigned to a Mortgage Consultant after an application is received. That Consultant will work with you to gather all the supporting documentation required before your loan is reviewed for final approval. This step is most often referred to as "processing" your loan application. A copy of your credit report will be ordered, as well as verifying your employment, assets, liabilities, mortgage payoffs, rent or mortgage payments, title reports, etc.
During the processing stage, your loan information will be submitted to an automated underwriting application, such as Fannie Mae's Desktop Underwriter or Freddie Mac's Loan Prospector. The use of these software applications has become an industry standard. The review and processing of your loan becomes much more uniform and faster because of the software. Paperwork required to qualify for loan approval is significantly reduced, making the process less time consuming for the borrower.
Note: When applying for a USDA 100% LTV Rural Development or RD loan, a manual underwriting process is necessary. Allow a little more time for underwriting when scheduling your closing date!
An appraisal of your property is ordered during processing. This is a compulsory step to determine the value of the home you are purchasing or refinancing. The appraisal is completed by an independent fee appraiser that has been approved by the underwriting lender. The appraiser will contact you or your real estate agent for access to the property soon after an appraisal is ordered.
The lender must provide you with a Good Faith Estimate of Closing Costs and a Truth in Lending Disclosure. These documents are mandated by the Real Estate Settlement Procedures Act (RESPA), to be presented within three business days of receipt of the application by a lender. They should outline the expected costs within a few dollars. During this time, the lender's processing team should have determined if there are unique mortgage or recording fees that will be charged by a local municipality. These fees should be stated on the Good Faith Estimate (GFE) and the Truth in Lending (TIL) documents. However, at this early processing stage, the processor may not have accurate payoff amounts for your current mortgage or taxes and insurance escrows. These important disclosure documents are required by the Federal Government to help you review the estimated costs a pending loan transaction may incur. Be sure to review all documents carefully and ask your Mortgage Consultant about anything you do not understand.
Note: The original loan documents, Good Faith Estimate and the Truth in Lending Disclosure will need to be signed by all loan applicants and faxed or mailed back as soon as possible! You can see a sample set of the documents by clicking on our Disclosure Documents section.
Underwriting the File
This next phase, underwriting, occurs after all necessary documentation has been received. The information file is reviewed during underwriting to make certain it meets the guidelines of your specific loan program. It is within the underwriting process that a loan will be approved, denied or suspended. The underwriter may also request more information for further consideration. The following criteria are used for underwriter reviews:
Credit – how you are currently paying your bills, and how you've paid your debts in the past.
Capacity - your actual ability to repay the loan based on your provable income and other debts you are paying.
Collateral - the value of the property you are buying or refinancing and are pledging as "collateral" to minimize the lender's risk factor.
Do not panic if your loan is denied or suspended for lack of personal information. Talk with your Loan Consultant about the specific reasons the loan was held up. If you receive a complete turn down, other options may still be available through a lender with more flexible underwriting guidelines. You may wish to contact us by clicking here. Perhaps we can review your situation with another lender to see if they can assist with your loan request.
The Loan Closing
If the loan is approved, you are ready to move to the final stage of the process. This is called “closing”, or in some states “close of escrow.” Your Loan Consultant will work with their Closing Department to ensure that the final stage goes smoothly. The lender's Closing Department interacts with your closing attorney to prepare the documents required to close and fund the loan. All parties on the mortgage application are considered borrowers and must be present at the closing for the signing of necessary legal documents.
These signed documents authorize your lender to disburse loan proceeds as necessary. Your Mortgage Consultant should have already provided you a preliminary HUD-1 Statement and discussed the transaction with you in detail. There should be no surprises! If there is a clerical error on any of your closing documents, simply address them with the title agent closing the transaction. If the title agent cannot remedy the error, contact your Mortgage Consultant from the closing and they will coordinate with all parties to remedy the situation and allow the closing to proceed. If the error cannot be immediately remedied, closing will be postponed until the issue is resolved.
Certified Funds to Close: You may be required to bring a down payment and other expense monies to the closing table. The Mortgage Consultant or title agent will pre-inform you as to the amount needed for closing. Certified funds should be brought to closing in the form of a cashier's check or bank draft.
Reminder…You should receive a complete copy package of all documents you sign at a loan closing!
Post Closing - Closing completes the loan process. Shortly after closing you should receive information about where to send your monthly mortgage payment. Some lenders offer direct bank drafting of your payment and others may offer bi-weekly payment options. The lender will mail you an explanation of your options Within 45 days. Please call your Mortgage Consultant if you do not receive this information. It is wise to make your first payment at the time it is due, even if you have not received billing information. You will, however, receive a First Payment Letter at the closing which lists the correct payment amount and the address to which the payment should be sent.
If you have further questions about the loan process or any other matter, feel free to contact one of the professional affiliate lending consultants displayed on the Virtual Loan Shopper.
