Real Estate Financing
The loan process always begins with a loan application. Completing the application promptly, and answering all questions as accurately as possible, will expedite the entire loan process. And remember, we are here for you if you need any help or advice along the way.
Once your application has been received by our lending team, you will be sent two documents. The "Initial Truth in Lending Disclosure Statement" provides an estimate of your loan's annual percentage rage, or APR. The "Good Faith Estimate" contains one estimate of the total closing costs in the transaction. These documents provide you with valuable information regarding the cost of your loan.
From the time your application is received, our lending team begins gathering information on your financial history. A regular part of this process is verifying income levels, bank assets, and credit records. You may be asked for additional information if there are any discrepancies. It's also important not to make significant purchases (for example, leasing a new car) or major changes to your financial status (for example, leaving a salary-based job for a commission-based job).
An appraisal of the property you are purchasing is also required. Either an independent appraiser or a government agency designated appraiser (for VA and FHA loans) will evaluate the property and submit the information back to our lending team.
Once all the required information has been gathered, it is organized and reviewed by experienced underwriters.
Closing the Loan
"Closing escrow" is the last step and begins once your financing has been approved. It involves an independent third party, called an escrow company, which is responsible for handling the closing documents and transferring funds.
Upon loan approval, you will be contracted by the appropriate escrow company to sign certain documents. Among these are the Promissory Note, the Deed of Trust, and the Final Truth in Lending Statement. At this time, you will also need to bring a cashier's check for the down payment (less deposit) and closing costs.
The escrow company will return the signed documents to our lending team. When our lending team verifies that your home is ready, they will release the appropriate funds to the escrow company. The escrow company then sends a Grant Deed, Deed of Trust, and other required documents to the County Recorder's office. The deeds are recorded, and you can begin celebrating - you are the proud owner of a new home!
Types of loans available
- A. Fixed-rate financing in 15 or 30-year loan terms. The advantage to this loan type is that your monthly payments remain fixed throughout the life of the loan.
- B. Adjustable-rate financing, some with convertible options. These loans give you more buying power by allowing you to qualify at a lower interest rate.
- FHA-insured and VA-guaranteed loans. These are popular programs due to the low FHA or zero VA down payment required.
- Fixed-rate financing sponsored by state or local municipalities. These loans are generally offered at lower than market interest rates to first-time home buyers.
The Language of Loans
- Adjustable Rate Mortgage (ARM):
- An adjustable mortgage has an interest rate tied to a moving index figure such as the T-Bill rate. The interest rate can move up or down periodically, which can cause your payments to move accordingly. Adjustable loans are an excellent way to help first-time buyers get a lower payment and become homeowners.
- Annual Percentage Rate (APR):
- The interest cost for your loan (including your closing cost) calculated over a one year period.
- Closing Costs:
- A sum paid by borrowers and sellers to complete the closing of a mortgage loan. Costs may include the loan origination fee, discount points, title insurance, escrow fees, document recordings fees, and prepaid escrow payment.
- Conventional Loan:
- A mortgage loan that is not insured by a federal agency.
- Deed of Trust:
- The document that pledges the subject property as collateral for the repayment of the loan.
- Opened at the beginning of the transaction, all participants in the contract entrust their funds and property with a neutral third party, usually a title company, for safekeeping. When all of the funds and property have been dispersed and the escrow account is empty, escrow is closed.
- Fixed-Rate Mortgage:
- A mortgage with an interest rate that remains the same for the life of the loan.
- Impound Account:
- An account established by a lender to collect a borrower's property tax and insurance payments. Impound accounts are required on mortgages with down payments of 10 percent or less. Most lending institutions add this amount to your monthly mortgage payment for a total monthly payment figure.
- Loan-to-Value (LTV) Ratio:
- The ratio of the amount of money owed on a home to the home's value. The difference between these two figures is the down payment.
- Principal, interest, taxes and insurance - the primary components of a monthly mortgage payment.
- Private Mortgage Insurance (PMI):
- Insurance issued by private companies which protects lenders against a loss if a borrower defaults on a mortgage with a low down payment (e.g., less than 20 percent).