The mortgage loan process consists of completing a loan application;
determining which types of loans you qualify for based upon your income, income to debt
ratios, liquid reserves, employment history, and credit history and scoring; determining
your funding timetable; establishing an escrow and title insurance arrangement; ordering
an appraisal from a qualified appraiser; processing your loan application by gathering
supporting documentation and verifying certain loan application information;
researching
and selecting a loan program to meet your objectives; submitting your loan application to
a selected lender; and following up with everyone involved to ensure your loan application
is approved and funded as anticipated.
How will you determine all of the costs involved in obtaining a
mortgage loan? Your loan representative will provide you with a good faith estimate of the
costs of your anticipated mortgage loan. Your loan representative will also provide you
with various required disclosure forms that you will be asked to read and acknowledge.
It is important to understand what interest rate, interest rate lock
period, points, and costs you will incur prior to selecting a lender. Standard loan
origination and refinancing costs include lender and broker points, appraisal costs,
credit report charges, processing charges, escrow and title charges, and lender
underwriting and document charges, among others. These costs are usually significant so
don’t be afraid to ask what you will be charged for these costs. Many of the large
Internet lenders offering attractive interest rates with low points charge higher costs to
offset their reduced points.
What are "points"? Points are costs charged by a lender or
broker (a "point" is one percent of the face amount of the loan) and they vary
depending upon the interest rate and the interest rate lock period selected by a borrower.
The lower the interest rate you desire, the higher the points you will pay….the
longer the interest rate lock period you desire, the higher the points you will pay. Some
borrowers may prefer to pay a little higher interest rate in exchange for paying little or
no points while other borrowers may prefer to "buy down" their interest rate by
paying more points. Of course, it is also important to understand that points are in
addition to the other costs of obtaining a loan.
It is also important to understand the "lock period"
associated with an interest rate you are quoted. The lock period is important because if
the loan is not funded by the last day of the lock period, the "locked" interest
rate may be lost. It is also important to remember that funding will not occur until the
borrower completes a loan application and submits all required supporting documentation,
obtains an appraisal, establishes escrow and initiates the title process, obtains
underwriting approval, satisfies any lender conditions, signs loan documents and satisfies
the mandatory 3 day waiting period after signing final loan documents. If you lock your
loan, make sure the lock period is realistic or you may not end up with the interest rate
you anticipated.
What does all of the above information mean to you? It means that if
you understand the process you can ask the right questions when shopping for a loan to
ensure you are obtaining the best interest rate, interest rate lock period, points and
costs for your personal situation. Borrowers are not always advised they have options when
shopping for a loan.
APEX
REAL ESTATE BROKERAGE
