Intimidated by the loan process? We understand, and we have your back. Here is a brief run-through on what to expect when getting a mortgage loan. Keep in mind each loan is unique, just like every person is unique, and because of this, the loan process may need to adapt to the individual we are working with. This is a general idea of the loan process.
This is the very first step! When a new potential borrower is ready to see what they can qualify for, it is time to take the guesswork out of the way and fill out an application. Be as detailed as possible. Your Loan Officer will call with questions once they receive your application. This is normal and allows you to share details they need to understand your financial situation. Learn more about what not to do before and during the loan process.
Upon receipt of the application, your Loan Officer will “pull” credit. We pull all three bureaus, which include TransUnion, Equifax, and Experian. Once we have the credit score, now the Loan Officer can start figuring out what Program (FHA, USDA, VA, or Conventional) is the best option for you. Once they have it narrowed down, they will get with the consumer to go through the potential options and terms. At this point, a Prequalification letter can be issued. This Prequal letter will be used to show the Realtor, Seller, or other interested party that you have applied for a loan and we have determined you do qualify.
House hunting can be fun! It can also be exhausting, but once you find the home you love, it is time for the contract to be written. Hopefully, you have a Realtor to help you with this. If there are not any Realtors involved, then we suggest having a Real Estate Attorney to assist you. If you are writing the contract yourself, there is nothing wrong with this. Representing yourself is more than acceptable; remember, this is a legal and binding contract. Once both parties have accepted the terms of the contract, this needs to get to your Loan Officer.
This sounds unpleasant, but it really is not. It will be a lot of reading on the borrower’s part. Using an electronic delivery service, we will send out a packet of disclosures that will identify the terms of the loan you are applying for, along with the estimate of the closing costs. There are many disclosures included that cover mortgage insurance, homeowner’s insurance, fees, and other program-specific details. Your Loan Officer will be available to answer any questions you have. Do not hesitate to ask your questions. We want you to understand and gain knowledge about the loan you will be getting. If you are more comfortable signing the disclosures in person, your Loan Officer can accommodate this if you are located in their branch area.
This is our term for the list of documentation we need from a borrower. By this point, you may already have provided several documents to your Loan Officer as part of the prequalification request. Unfortunately, most documents do expire according to our underwriting guidelines and must be updated every 30 days or so. Your Loan Officer will give you a list at this time for any documents needed with the goal of getting your loan into underwriting within 2 – 3 days from the time you sign your loan disclosures. This can only happen with your assistance. When you are presented with a Needs List, please get the items on the list back to your Loan Officer as soon as you can. Within 48 hours is ideal to keep the loan moving to meet closing deadlines. Delays in getting documentation from our borrowers have the potential to cause us to miss closing date deadlines.
Now that Initial Disclosures are signed and the items requested on the Needs List are coming in, the file is sent to our Processing Team. Our Processing Team will order an appraisal, title commitment, verification of employment, and complete a bunch of other tasks needed by underwriting. This step is when all the information contained in the application is validated and confirmed. Questions may arise at this step, and if this happens, your Loan Officer or their Loan Officer Assistant will reach out to you for information. It is also possible that the Processor determines further documentation is needed based on the reports they pull or information that is updated as the file progress. Please provide the information we need as soon as you can to keep it moving forward.
This is the step that the Loan Officer and Processor have prepared the file for! The underwriter is the final decision maker on the loan application. They will review the file once the processor has it ready to send to them and determine if the file will be approved, suspended, or denied. We rarely see denials at this point, but it does happen on occasion. Approved with conditions is the normal outcome of the underwriting review the first time they see the file. A suspended file only happens when the underwriter cannot calculate income, and that is usually due to a piece of documentation missing to help them understand the income clearly.
This means the underwriter found your file to meet the program guidelines but needed more information to clarify or document circumstances regarding your application information. Your Loan Officer or LOA (Loan Officer Assistant) will provide you with a new “Needs List’ outlining what is needed from the borrower to meet the conditions. Again, timeliness is important! The faster we get the needed information, the faster we can get the file back into underwriting!
The underwriter will review the file with the new information provided and determine if the information clarified the points they needed or if it presented new information that triggered additional conditions needed. If all are satisfied, the next step will be final approval. It normally takes 2 – 3 times back in front of the underwriter to clear all conditions. The borrower may not know the different times the underwriter touches the file as we may be working on appraisal or title conditions!
Just before the loan is sent back to underwriting for final approval, the ICD or Initial Closing Disclosure will be prepared and sent to the borrower for review. The ICD is step 1 of 2 of the Closing Disclosures the borrower will review. This initial one will contain the closing figures that we have gathered through invoices and statements to show the preliminary final figures as we know them. Usually, we are very close to what the final CD figure will be for cash to close. This form will need to be signed by the borrower(s) and returned to the Loan Officer before we can schedule any closings. This will be sent out via electronic delivery unless the borrower has a different preference.
Also known as the Clear to Close, this is one step closer to closing the loan. This means that the Underwriter has cleared all outstanding conditions and provided final approval. Your Loan Officer is now ready to wrap this up and will start notifying all parties to coordinate the closing date and time.
This step will all happen internally. We will set up the closing with our Closing Department and the title company and start the process between these two for preparation of the Final Closing Disclosure. During this stage, the closing instructions and documents will be sent to the Title Company in advance of the actual closing.
Congratulations! You have become a homeowner! Make sure you take your Driver’s License to the closing along with a cashier’s check for any funds your Loan Officer told you would be required. Prepare for about 30 – 40 minutes of reviewing documents and signing papers. As part of this process, our Funding team will review a specific list of documents to make sure they were signed and dated correctly. You will be asked to wait while we do this, as we don’t want you to have to come back in to sign a document if we can help it. Overall, the closing process should take about an hour to an hour and a half, depending on questions that may be asked and the discussion that occurs at the closing table. Again…ask questions! We want you to understand your loan!
Your first payment will be due anywhere from 30 – 60 days from the day you closed. In your packet from the title company will be a “Payment Letter to Borrower.” Make sure you find this and put it with your bills to pay. It will identify where to send the payment and the due date.
We hope the process was painless and educational. With all the rules and regulations, the process can be very frustrating for consumers. We understand and recognize this fact. We will try to keep it as very simple as possible as well as explain the steps so you don’t feel lost. Although we must ask for documentation throughout the loan process, please know that we will only ask for what we must have to complete the loan process. It is very helpful if borrowers forward their pay stubs and bank statements as they become available, as the underwriter will always want the most updated versions of these documents.
At Flanagan State Bank Mortgage Division, our lenders often field questions from customers like What is a mortgage pre-qualification? How do I get prequalified for a mortgage? and Do I need to be prequalified to make an offer on a home?
Pre-qualifications are an integral part of the home purchasing process. They might seem confusing or complicated to first-time homebuyers. But they are usually quite necessary and are an important step in preparing to buy a home. That’s why we are dedicating this post to addressing these important questions and helping our customers navigate the often-complex path of becoming homeowners.
Curious about pre-qualifications and how you can get one? Keep reading to learn more!
A mortgage prequalification is an initial step in the home-buying process. A lender provides an estimate of how much you can borrow based on information you provide about your finances, including your income, assets, and debts. This process doesn’t require a deep dive into your financial situation or a thorough credit check, which means it doesn’t affect your credit score.
Prequalification gives you an idea of your borrowing power and can help you determine your budget for buying a home. It’s important to note that prequalification is not a guarantee of approval for a mortgage. It’s an informal assessment that can be done quickly, often online or over the phone, to give you a ballpark figure of what you might be able to afford.
For mortgage prequalification, lenders typically request a few basic financial documents and information to give them an idea of your financial status. However, since prequalification is a less formal and preliminary step than preapproval, the documentation required is minimal. Here are the common types of information and documents you might need for prequalification:
Once you are ready to apply for a mortgage, here are some important pieces of information to keep in mind:
You’ll need to meet certain debt-to-income requirements. Most lenders will not approve of a home loan if your mortgage payment brings your debt-to-income ratio above 45%. Calculating your DTI is fairly straightforward. Simply add up your monthly debt payments and divide them by your gross (before tax) income.
Let’s say your monthly income is $6,000, and your current monthly debt payments are $900. Your DTI would be $900 divided by $6,000, or 15%. This leaves you with a remaining 30% (or $1,800), before reaching that 45% DTI cap. Use our mortgage calculator to help calculate your potential monthly payment.
If your score is below 620 or your DTI with a mortgage payment will be above 45%, that doesn’t necessarily mean you won’t be able to qualify for a home loan. Certain loans, like FHA loans, are available to individuals with scores below 620. They may also provide more leeway on other qualifying requirements. Your lender can let you know if an FHA or other loan product is a better fit for your financial circumstances.
Checking your credit report is free, and relatively easy. Simply visit the official website, www.AnnualCreditReport.com and follow the instructions. At AnnualCreditReport.com, you can obtain a free credit report from each of the three major credit reporting agencies (Equifax, Experian, and TransUnion) once a year.
Getting your official credit score, on the other hand, is not free. You can pay a nominal fee for your credit score from the above credit reporting agencies. However, some credit cards and financial services offer free credit score access to their customers. The Consumer Financial Protection Bureau details a few ways to obtain your credit score for free.
After applying for a mortgage, it’s important to recognize that your loan is not actually finalized until your mortgage is underwritten by your lender. That’s why you don’t want to make any sudden changes to your financial or credit situation before the closing of your loan.
We all hope the mortgage application process is smooth, easy, and successful. But sometimes, a pre-qualification doesn’t pan out. What do you do if this happens?First, you’ll want to find out why you were declined. There are two main reasons why you might not get an approval:
If your credit score is impacting the decision, request a copy of the credit report the lender used, and ask your lender what you can do to improve your chances next time. This could include:
If your DTI is too high, then you either need to increase your income or decrease your monthly debt load. To decrease debt, you could:
Your lender may also be able to provide advice on how to best tackle your debt or achieve a more favorable DTI. Alternatively, you may be able to simply get an approval for a lower loan amount.
At Flanagan State Bank Mortgage Division, we work hard to give our customers the tools and the assistance they need to prepare for buying a home—from mortgage calculators and online resources to one-on-one help in navigating the mortgage pre-approval process.
Ready to get started? Explore our home mortgages to see what loans may be available to you, or reach out to your local branch in Flanagan, El Paso, Benson, Bloomington, Le Roy, Gridley, or Pontiac to connect with an experienced loan officer to discuss your options.
Are you familiar with the concept of a reverse mortgage loan? A reverse mortgage loan is essentially a type of home equity loan that allows homeowners, particularly those aged 62 or older, to convert a portion of their home’s equity into cash, all while retaining ownership of their home. It’s like a traditional mortgage but, as the name suggests, works in reverse.
The Concept of a Reverse Mortgage Loan
While a traditional mortgage requires you to make regular payments to the lender, a reverse mortgage loan turns the tables. Instead, the lender makes payments to you, drawn from the equity in your home. The best part? In most cases, you aren’t required to repay the principal, interest, or servicing fees for as long as you live in your home.
It’s crucial to remember, however, that as the homeowner, you are still responsible for the upkeep of your property. You must continue paying property taxes, homeowners’ insurance, and any maintenance costs to avoid possible foreclosure.
Why Consider a Reverse Mortgage Loan?
The primary advantage of a reverse mortgage is its potential to enhance your income during retirement. Suppose you’re in a situation where a significant portion of your wealth is tied up in your home, leaving you strapped for cash to cover day-to-day expenses. In that case, a reverse mortgage loan can convert your home equity into a stream of income. This income can be used to cover your living expenses, medical bills, or home improvements.
The Bottom Line
Reverse mortgage loans, like any financial product, have both pros and cons. They can offer a lifeline for cash-strapped homeowners in their golden years, providing an additional income source without requiring the homeowner to leave their house. However, the homeowner must be diligent about paying property taxes, insurance, and maintenance costs to prevent foreclosure.
Explore the unique benefits of a reverse mortgage loan and let us help you leverage your home’s equity for a comfortable, worry-free retirement. Contact us today to start your journey toward financial security with a reverse mortgage loan!
When it comes to managing your finances, taking care of your mortgage is as crucial as maintaining your health. Just like regular health check-ups, a mortgage check-up is essential to ensure your financial well-being and adapt to life’s changes. Here’s why and how a mortgage check-up can be a game-changer for your financial health.
Maintaining a healthy mortgage isn’t a “set it and forget it” deal—it’s more like keeping up with a healthy lifestyle. Just as you wouldn’t ignore your physical health, your mortgage needs regular check-ups to stay in shape. But why bother with a mortgage check-up, and what does it really involve? Let’s break it down.
First off, life changes—maybe you got a raise, had a kid, or the economy took a wild turn. Your mortgage, once a perfect fit, might not suit your new situation. A mortgage check-up helps you adapt, ensuring your mortgage still works for you, not against you.
Think of it this way: your financial health can shift over time, just like your physical health. Regular check-ups can catch issues or opportunities early, like rising payments on an adjustable-rate mortgage (ARM) or reducing your payment by consolidating debts.
A healthy mortgage means you’re not overpaying or under-protected. It’s about ensuring you have the best terms for your current life stage and financial goals. Are you paying too much interest? Could you be saving money by refinancing? A mortgage check-up can answer these kinds of questions.
In essence, a mortgage check-up is about making proactive choices to keep your financial health in top condition, just as you’d maintain your physical health. By staying informed and adjusting as needed, you can ensure your mortgage continues to be a beneficial part of your financial plan.
We’ve compiled a few of the most important check-ups for maintaining a healthy mortgage. These include:
An ARM can offer lower initial rates, but these adjust over time, affecting your monthly payments. During a mortgage check-up, you’ll delve into when and how your rate might change. This foresight allows you to strategize, whether it’s locking in a fixed rate before increases occur or planning for the potential financial impact. Understanding these adjustments is crucial for budgeting and long-term financial planning.
Mortgage consolidation is an attractive option for many, especially if you have multiple loans with varying interest rates. By consolidating, you can streamline your payments into one, often with a lower overall interest rate. This process not only simplifies your financial management but can also free up cash each month. A check-up will help evaluate the potential benefits, considering factors like current market rates and your home equity.
Owning different types of properties (primary residences, vacation homes, or investment properties) requires tailored financing strategies. Each property type has unique lending criteria, tax implications, and investment potential. During your mortgage check-up, you’ll review the terms and conditions of your existing loans and explore new financing options that might offer better terms or rates that align with your investment goals and lifestyle needs.
Your home equity is a powerful financial tool. It can provide funding for significant expenditures, such as home improvements, education, or consolidating high-interest debts. In your mortgage check-up, you’ll discuss how much equity you’ve accumulated and the best ways to utilize it, ensuring that you maintain financial health and stability. This conversation will include weighing the benefits against potential risks, like increased debt load or extended loan terms.
High-interest debts, like credit card balances, can be financially draining. Consolidating these debts into your mortgage could significantly reduce your interest payments and monthly outgoings. A mortgage check-up will help you assess this option, comparing the long-term costs and savings to determine if this approach aligns with your financial objectives.
PMI is often required if your down payment is less than 20%, but it can be removed once you’ve gained sufficient equity. Eliminating PMI through a mortgage check-up can reduce your monthly expenses, allowing you to allocate funds to other financial goals. This part of the check-up will consider your current home value, equity, and the requirements to drop PMI, potentially saving you thousands over the life of your loan.
Beyond regular mortgage check-ups, there are a few additional factors to keep on your radar so your mortgage remains a positive force in your financial landscape
Regularly tracking your home’s market value and the equity you’ve built is crucial for financial leverage. As your home’s value increases, you might gain access to better refinancing options, potentially with lower interest rates or better terms. Additionally, growing equity could allow you to eliminate Private Mortgage Insurance (PMI) sooner or tap into home equity loans for significant expenses, investing back into your property or covering major life costs.
Making extra payments towards your mortgage principal can have a profound impact on your financial future. These additional payments decrease the total interest you’ll pay over the life of your loan and can shorten your mortgage term. Even sporadic extra payments can lead to substantial savings and earlier loan payoff, granting you financial freedom sooner than expected.
Life’s milestones, like expanding your family, changing careers, or approaching retirement, can significantly affect your financial landscape. Regularly evaluating your mortgage in the context of these life changes ensures that your home financing remains aligned with your evolving needs and goals. This proactive approach allows you to adjust your mortgage plan to better suit your long-term objectives.
Understanding the tax implications of your mortgage payments, interest, and property taxes is vital. Certain aspects of your mortgage can be tax-deductible, potentially saving you money during tax season. Staying informed about these benefits can lead to more strategic financial planning and tax savings, maximizing the advantages of homeownership.
Property taxes and homeowners’ insurance premiums can fluctuate, impacting your monthly mortgage payment. Anticipating and planning for these changes can prevent budget surprises. Keeping a close eye on these costs will help you adjust your financial planning accordingly and ensure you’re always prepared for the annual adjustments.
Whether you plan to sell your home, pay off your mortgage early, or are considering loan term adjustments, having a clear exit strategy is essential. It guides your financial decisions and can help you achieve your financial goals more effectively. Understanding the implications of these decisions on your overall financial health will allow you to navigate the future with confidence, knowing you have a plan in place to maximize your investment.
Flanagan State Bank Mortgage Division is committed to helping you secure the best mortgage for your needs and keeping you informed about important post-mortgage considerations. Our lenders are always available to discuss any of the factors in your mortgage check-up. Explore our locations to find an office near you and start a conversation with a lender today!
Refinancing your mortgage could be one of the most financially beneficial decisions you make. Whether it’s about saving money, consolidating debt, or tapping into equity, refinancing offers multiple pathways to achieve your financial goals. Here’s why you might consider it:
Save Money with Reduced Interest Rates
The primary reason most homeowners refinance is to take advantage of lower interest rates. By securing a lower rate, you can reduce your monthly payments, which in turn allows you to save money and build home equity faster. A minor decrease in interest rates can translate into significant savings over the life of your loan.
Shorten Your Loan Term
Refinancing also gives you an opportunity to reduce the term of your loan. By transitioning from a 30-year loan to a 15-year term, for instance, you can pay off your loan faster. This accelerated payoff schedule not only helps you to own your home outright sooner but also reduces the total interest paid over the life of the loan, resulting in significant long-term savings.
Convert from an Adjustable-Rate to a Fixed-Rate
If you initially opted for an Adjustable-Rate Mortgage (ARM) to take advantage of low introductory rates, you might now be facing higher monthly payments as interest rates rise. Refinancing to a fixed-rate mortgage could be a wise move in this scenario, providing the predictability of a stable monthly payment and shielding you from future interest rate increases.
Tap into Equity and Consolidate Debt
Refinancing can also be an effective tool for managing high-interest debts or covering large expenses. If you’ve built up substantial home equity, a cash-out refinance allows you to tap into it for purposes like home remodeling, paying for college education, or consolidating high-interest credit cards and loans. By rolling these higher-interest debts into your lower-interest mortgage, you can streamline your finances, potentially lower your overall monthly payments, and reduce the total interest paid over time.
Choosing to refinance your mortgage is a significant financial decision that should be based on your current financial situation, long-term goals, and the potential benefits. Each homeowner’s circumstances are unique, so it’s essential to carefully weigh your options. Reach out to our team of experts today, and let’s explore whether refinancing is the right move for you. We’re here to provide insights, answer your questions, and guide you through every step of the refinancing process. Your financial future starts now – let us help you shape it.
Don’t let potential savings slip away! Take the first step towards understanding how refinancing can benefit you. Contact us today for a personalized consultation. Our experienced team is ready to answer all your questions and guide you toward a financially secure future. Act now and make the most of your mortgage with a refinance. Let’s unlock your financial potential together!
If you’re in the market for a new home, you may be considering different loan options available to you. FHA, VA, and USDA loans are popular choices for homebuyers, but it’s important to understand the Minimum Property Requirements (MPRs) that must be met in order to use these loans for purchasing or refinancing a home.
GFI Outlets in Bathrooms and Kitchen Areas
Ground Fault Circuit Interrupter (GFCI) outlets are required in all areas where water is present to help prevent electrocution. This includes bathrooms, kitchens, and outdoor areas.
Roof with At Least 2 Years of Remaining Life
The roof must have at least 2 years of remaining life according to an inspection report. This ensures that the roof will not need to be replaced in the near future, which can be a significant expense.
No Chipped or Peeling Paint In or Out
Chipped or peeling paint can indicate lead-based paint, which is a health hazard, especially for children. To qualify for these loan programs, the home must be free of chipped or peeling paint inside and out.
Outbuildings Must Not Have Chipped or Peeling Paint
Outbuildings, such as sheds or garages, must also be free of chipped or peeling paint.
Stairs Must Have Railings and Porches Must Have Guard Rails if Higher Than 3 Steps
Stairs with more than three steps must have a sturdy handrail for safety. Porches that are higher than 30 inches above ground level must have guardrails to prevent falls.
No Holes in Walls, Floors in Good Condition
Walls and floors must be in good condition, without holes or other damage that could compromise the safety and stability of the home.
It’s important to understand that these are just some of the MPRs required for these loan programs. An appraisal by an FHA Rostered Appraiser is required to identify all MPRs are met if using this type of loan. It’s essential to work with a qualified loan officer who can guide you through the MPR requirements and ensure your loan application meets all the necessary guidelines. Contact one of our experienced loan officers today to learn more about our loan programs and get started on your journey towards homeownership. We’re here to help make your homebuying dreams a reality!
As prospective homeowners, we all want to make the most informed decisions when it comes to securing a mortgage loan that fits our unique financial circumstances. One of the programs that stands out for many borrowers is the Federal Housing Administration (FHA) loans.
FHA loans are an attractive option for many reasons. They are especially beneficial for borrowers who have a smaller down payment or need a higher debt-to-income ratio. Furthermore, these loans often provide lower interest rates than conventional loans, making them an ideal choice for a wide range of borrowers. But are FHA loans only for first-time homebuyers or individuals with less-than-perfect credit? Let’s debunk this myth.
While FHA loans are a fantastic option for first-time homebuyers due to their lower down-payment requirements and greater flexibility with credit scores, they are by no means exclusive to this group. FHA loans offer excellent rates and low down payment requirements, making them a suitable fit for any borrower, regardless of their home-buying experience or credit history. In short, these loans are not just for first-time buyers or those with credit issues; they are designed to support a variety of borrowers’ needs.
However, like any financial program, FHA loans do come with their unique considerations. One such factor is the Mortgage Insurance Premium (MIP). Any loan with a small down payment, including FHA loans, carries some form of mortgage insurance. FHA’s mortgage insurance is twofold, with a part of it financed into the loan amount and the rest included in the monthly payment. How does it stack up against the Private Mortgage Insurance (PMI) of conventional loans? The answer to that depends on the individual borrower’s circumstances at the time of application.
Still, do you find yourself with more questions? Our expert team is here to help! Don’t hesitate to reach out for personalized advice on FHA loans or any other mortgage loan programs. Let us assist you in making the most beneficial financial decisions on your home buying journey. Contact us today!