What is the Mortgage Process?
The Mortgage Process
Buying your first home, purchasing a vacation home, or moving up to a more spacious residence, or investing in real estate properties, or looking to refinance, or desire reverse mortgage information, Direct Finance Corp. can help you better understand the mortgage process so that you’ll be able to make the best decisions to achieve your goals.
A first time home buyer or if you have obtained home financing many times, the lending guidelines have changed. It’s critical for you to have current and accurate information, and to understand how the mortgage process works.
Our mission is for you to obtain the best mortgage program for your particular situation. For purchase transactions, the first step to achieving your housing goal is to help you answer the two most important questions: What will be my monthly housing payment and how much cash do I need?
What is your desired monthly housing payment?
We’ll explain in detail what is included in your housing payment and how that amount is calculated. For example, you’ll understand how different interest rates and mortgage programs impact your monthly payment; when real estate taxes and homeowner’s insurance are required as part of your payment; what’s included in condominium fees; if flood insurance is necessary; and when mortgage insurance is mandatory and how it can be avoided.
What is the amount of cash you are planning to invest in your new home?
There is nothing worse than to be surprised about how much money you need the day of purchase. We want to make sure you understand that buying a home is not just about how much money you need to put down but also the other costs that can add up to a real number. We’ll explain clearly each cost and identify which ones are mandatory and optional. Just as importantly, we’ll explain who pays for them – you, the seller, the lender, or a combination.
What Can You Expect?
Here is a “play-by-play” of how a typical mortgage application and approval process works here at Direct Finance Corp.
#1 Initial Consultation
Meet with one of our Massachusetts, Rhode Island, New Hampshire, or Maine licensed experienced mortgage experts to discuss your best options.
We’ll gather information from you to begin the mortgage application process, and provide you with the proper disclosures required by law.
#3: Income & Asset Documentation
In addition to the application, you will need to provide supporting documentation about your income and assets that will be used to verify your ability to repay the loan.
#4: Credit Report
A credit report is obtained and we’ll go over it carefully with you to review its accuracy and note any derogatory items that need to be addressed.
#5: Loan Program Review
Once your credit analysis has been completed and all application documentation is received, Direct Finance Corp. will research the best loan options to meet your needs. We have many lenders and loan programs to choose from, with a variety of rates and terms. Once you decide on the loan program, we submit your “loan package” for processing.
Our processor will examine all the information we have collected and ask for any necessary clarification or verification.
#7: Title Search
We order a title search to make sure the ownership of the property is clear. A title search identifies any liens that have been recorded against the property, searches the records at the courthouse to make sure the seller of the property has sole ownership and the legal right to sell the property, and verifies that all title and deed conveyances are in order.
An appraisal is scheduled on the property. The appraiser’s job is to determine the fair market value of the home you are buying or refinancing. Appraisers do this by verifying the physical characteristics of the house and land. This will be done through a personal inspection of the property to verify its condition, square footage, room count, construction materials used (brick, siding, etc.), and acreage. The appraiser contacts the listing agent for a purchase or you if it is a refinance. The cost of an appraisal is usually in the range of $550 for a single family home.. This amount must be paid in advance, as appraisers are third party contractors and not part of Direct Finance Corp.
Because gathering all the data and reports involves many people (such as title companies, appraisers, Realtors) it can take several days or weeks. Direct Finance Corp. keeps you informed and up-to-date at every step. The key is for you to provide any requested documentation as soon as possible. This saves a lot of time on the back end of the process.
#10: Property Insurance
You’ll need to arrange homeowners insurance coverage in advance of the purchase and it is advisable to gather quotes at the beginning of the process. For refinancings, we’ll ask for the contact information of your current insurance agent or a copy of your property insurance binder page.
The underwriter is the person who examines your application and documentation to determine whether or not the loan meets the lender’s rules and guidelines. The underwriter analyzes a borrower’s finances to determine if he or she is an acceptable risk for the mortgage lender to guarantee the funds to purchase or refinance the home.
#12: Loan Approval
The underwriter will issue a conditional approval which will list the remaining items needed for the lender to issue funds to close the loan. Often the underwriter will have questions regarding the appraisal, title, or information provided by the borrower. We work closely with all parties to satisfy any conditions.
#13: Loan Denial
Though rare, if the underwriter determines an applicant does not meet the lending guidelines, they will issue a denial, and we may need to look at some alternative lending options. Why are loans denied? The most common reasons are low appraised value, income or assets are lower than what the applicant stated, additional debts payments such as child support or a purchase of a new car during the process that were not disclosed and the inability to source large deposits. The key is for you to be transparent with our loan officers to ensure that we have accurate information.
#14: "Clear to Close"
Once we have satisfied any remaining conditions, the underwriter will issue a “clear to close” which means we may then schedule your loan closing.
Once the underwriter has cleared your file and the title search and appraisal have been reviewed and accepted, a closing can be scheduled. A closing attorney (or closing agent) will conduct the closing process. The attorney will prepare all of the necessary documentation to complete the purchase or refinance. During the closing you are asked to read and sign many documents concerning the transaction. The closing attorney explains each document, but be sure to ask questions if there anything you do not understand. You will receive a copy of all the documents that you sign at the closing.
If you are refinancing, a federal law called the “Right of Rescission” dictates that a borrower refinancing his/her primary residence be given three business days after the closing date in which they may cancel the transaction. After these three days have elapsed, your funds will be dispersed to pay off your prior lender, if any. At this time, any funds due you will be released as well.
#16: The Most Important Step
Now that your loan has closed, we enter the next and most important part of the process. Our goal is to continue and build upon our trusted relationship with you. We’ll stay in touch and occasionally check-in to make sure all is ok. We also encourage you to contact us if you ever have any type of financing questions or are in need of any other business services. We have an extensive referral network and are always happy to refer other competent caring professionals.
And, of course, we are never too busy to help any of your friends and family members with their purchase, refinancing, or reverse mortgage needs. Just give us a call and we’ll take great care of them.
Direct Finance Corp. is a Massachusetts, New Hampshire, Maine, and Rhode Island mortgage broker that has completed thousands of home loan applications and closings. We find the key to a smooth and successful mortgage is organization and communication. We help each of our clients to be well prepared, to gather the necessary documentation, and to understand the mortgage application process.
Let us help you better understand the mortgage process. Call us today at 877-499-7283.