Mortgage loans are probably the most popular while it comes to the myriad options of home loans available. Several states have certain rules and regulations applicable, but there’s a patent rule that is followed throughout. Read the following post to know more about the process of mortgage loan lending
What is a Mortgage Loan?
A loan that is secured by real property through the use of mortgage notes is referred to as a mortgage loan. The mortgage note stands as evidence of the existence of the loan and most importantly it is the mortgage that secures the loan. However, the word mortgage is usually used to mean a mortgage loan.
Mortgage loans have a crucial role to play in the home hunting process; from searching for the best option available in the market to complete the rounds of paperwork. So, how does one go about applying for the same, and what are the documents that you need to produce to avail of the mortgage loan?
Borrowing a Mortgage Loan
Getting pre-qualified for a mortgage loan is quite simple. Here’s what you would require:
- Applicant’s name
- Address proof for each applicant
- Social Security Numbers
- Authorization to request each applicant’s credit report
- A credit card number and its date of expiry to charge you the exact cost of your credit report
Now, remember that pre-approval is always a better choice. With this process, you end up filling up all the loan paperwork as if you already have a residential property in mind. After determining this, the lender follows the procedure to get you approved a specific sum of money. However, do remember that the pre-approval is good for a short span of time, normally a month (30 months), before you will have to go through the entire process all over again.
The advantage of acquiring a pre-approved is that it permits, you to close on a house as soon as possible. If there are several bidders on any one property and also being pre-approved can make the difference for the seller on who to choose. However, remember that the process is long, time-consuming, and involves a great amount of paperwork. So, you must take this matter seriously and complete it with every meticulous step that is required.
A credit check is one of the first things that your lender will do. They do not usually waste time in the process if you do not qualify for your credit score. Even if your scores do not spontaneously disqualify you, it might harm your chances to secure a major rate of interest. You will have the chance to explain to the lender and explain your situation as to why do you have a lower score. It is always good to mention your situation beforehand to your lender.
It goes without saying that, the process of a mortgage loan requires a lot of paperwork. As an applicant, you need to make available your W2 from the previous two years. That should be accompanied by the documents related to tax returns of those two years. You will also need to submit proof about any secondary income that you have. Evidence of credit and bills that you owe will also be taken into consideration. This might include auto loans or personal loans. Also if you have made investments you need to provide evidence for the same as well.
Though the requirement for the paperwork might differ, you can save time if you have all your documents ready.
The lender might ask for an appraisal to ascertain the value of the residential property. This will give them a chance to them to figure out how much you would like to borrow if your home loan is approved and also how much can they offer you as a down payment. It will enable you with the information that if the asking price exceeds the value of the residential property.
Most moneylenders or financial institutions will most likely ask for proof to determine the value of the house. Once it has been determined, it will permit them to know how much they can offer you in amount and what you will have to pay as a down payment.
This might sound a little off-beat; it is the order of the law to provide the borrower with good faith and that also within three days after you have applied for the actual mortgage loan. This estimate will inform you what exactly to expect as a sum of money at closing.
These fees serve a dual purpose; they partially deal with the loan application process and also partially for the costs that are related to the entire mortgage home loan process. Some of the fees that you might expect to be included in the list:
- Appraisal of Property
- Credit Report Fee
- Lender’s Inspection
- Mortgage Insurance Application
- Loan Processing Fee
- Loan Application Fee
- Underwriting Fee
- Title Search or Abstract
- Preparation of Documents
- Mortgage Insurance
The expenses of these normally range between three and five percent of the price of the house and may be required to be paid in cash rather than any other form.
Mortgage Secrets Exposed
This is a quick explanation of mortgage loan rip-off for those uninformed. Despite different mortgage loan rip-off methods available in the market, the standard of mortgage with the deceiving types generally consists of bogus factors, costs, and provisions stuck to the customer – you.
Mortgage loan rip-off happens mainly in the sub-prime mortgage market, exactly where most borrowers are qualified mainly through the collateral of their houses for debt consolidation or other customer credit purposes. Due to this, numerous borrowers could be manipulated into a mortgage that fools them that the mortgage will have a huge benefit for them.
In some instances, customers can obtain a sub-prime mortgage through “steering” by which creditors will ignore your great credit and “steer” you to a sub-prime edition with all of the “bells and whistles”. Higher interest rate, higher prepayment penalty, the works – all to generate a more lucrative commission.
Additionally, a rising amount of greedy and aggressive creditors hock their wares to customers who are in a financial dilemma – those who are behind their mortgage payments or having difficulty getting money. Instead of considering a long-term view, which signifies assisting the customer and becoming rewarded with referrals, these mortgage companies take the “quick buck” route and ask the customer to pay for a higher rate, more costly mortgage to support their personal short-term objectives.
Mortgage Suggestions – Points to remember
The dishonest activity through the mortgage businesses has resulted in 9.1 billion dollars homeowners lost due to predatory lending and mortgage loan rip-off. You see, when the mortgage organization catches you sleeping, you risk the possibility of becoming overcharged in your mortgage loan with a higher than the deserved interest rate, coupled with higher than regular expenses, and stringent problems.
On top of that, nearly one-quarter of American families who get sub-prime loans discover they crammed with terms for example prepayment penalties, restricted earnings documentation, and no escrow for property taxes and hazard insurance.
Keeping the above details in mind, do not make a move till you get the best guidance for the mortgage requirements. Your right assortment of the mortgage loan should not be a costly hit-and-miss proposition.