Pre-Approval: Shopping For and Buying a Home With Confidence
A pre-approval letter is a powerful tool in your search for a new home. It shows the sellers that you're serious. Many buyers find that they have increased negotiating clout if they are pre-approved before they conduct their home search. Plus, if you're pre-qualified, it's a snap to apply for full approval once you've found your dream home - or want to begin building one.
While a pre-qualification is an estimate of what you can afford based on the information you provided, a pre-approval indicates that a lender has taken a detailed look into your financial background and examined your credit. In addition, a pre-approval means the lender has committed to lending you a specific amount of money, pending certain property details.
The advantages of securing a pre-approval, rather than waiting to apply for a loan once youíve found a home, include being able to shop for a home knowing exactly what you can afford and finding out about possible qualification problems early in the home buying process. You are also able to present a much more solid offer to sellers, because it includes a guarantee that you can afford the home.
To secure a pre-approval, contact Mortgage Loans Online and one of our loan advisors will work with you to gather and submit your financial information. We'll then review your documentation and your credit report. Once you qualify, we'll provide you with a written pre-approval for a loan up to a certain loan amount, down payment and interest rate, subject to the terms of the pre-approval letter. Once you've found a home and are ready to make an offer, your pre-approval letter from Mortgage Loans Online will assure the seller you are a qualified buyer, and will be able afford the home of your dreams.
How to Begin
To begin the process, contact us online at www.online-mortgage-loans.com or call 1-800-708-3155. A friendly and knowledgeable Mortgage Loans Online loan advisor will be there to answer all of your questions M-F 5am - 7pm and Sat 7am - 2pm, Pacific Standard Time.
To apply for pre-approval, you'll need the following information:
- Names, current addresses, and Social Security Numbers for all borrowers
- Previous addresses for the last two years
- Pay stubs for the last two years
- Two cycle's worth of bank statements for all assets
- W-2 forms for the last two years
- Tax forms for the last two years
We'll review your application, documentation and check your credit report. After we've determined that you're able to repay the loan, and subject to a full underwriting review, your Mortgage Loans Online loan advisor will send you a letter of pre-approval. At Mortgage Loans Online, we make the home loan process easy.
Closing Your Loan
The closing (or settlement) is the actual transfer of ownership from the seller to the buyer. At the closing, you will sign the paperwork, pay the final closing costs and finally take ownership of your new home. Your Mortgage Loans Online loan advisor will work with you to schedule a closing date, which is indicated on your purchase agreement. Although the closing process varies by state, many activities are standard. Click here to learn about what closing costs you might expect and things to consider before closing. For the closing costs, you'll need to obtain a certified or cashier's check, as the title or escrow company does not usually accept personal checks.
What Happens at Closing
Closing costs and practices vary depending where you live, the type of property you're buying (house, condo or co-op) and individual circumstances. In some states, a neutral third party, usually an escrow company that is mutually chosen by the buyer and seller, transacts the entire closing process. In others, title companies customarily oversee the process. In the remainder, attorneys are engaged. Your Mortgage Loans Online loan advisor can tell you what to expect.
The closing, typically held at a title and trust company, is the final hurdle to calling the house your home. In many cases, all parties involved will attend, including you, the seller, the real estate agents, the lawyers, the lender and any other interested parties.
The steps below explain what usually happens during and after closing:
- The closing agent reviews the settlement sheet with you. Both you and the seller sign the settlement sheet.
- Signatures are collected for loan documents, such as the mortgage or deed, note and Truth-in-Lending statement. Evidence of the required insurance and inspections is presented.
- If everyone agrees that the papers are in order, you submit a certified or cashier's check to cover your down payment and closing costs. (Or, in some proceedings, it is drawn from an escrow account established for your home purchase.)
- The lender provides check funds covering the home loan amount to the closing agent.
- If your monthly payments are to include property taxes and insurance, a new escrow account ("impound" or reserve) is established.
- You receive the keys to your new home!
Key Closing Documents You'll Receive
HUD-1 Settlement Sheet
This itemizes the services provided and the charges to the buyer and the seller. You should be allowed to review this form shortly before your closing meeting so you know your closing costs in advance.
Truth-in-Lending (TIL)
Disclosure You should be mailed your initial TIL disclosure within three business days of applying for a home loan. It outlines the costs of your loan and discloses the annual percentage rate (APR) and other terms of the loan, including the finance charge, the amount financed, the payment amount and the total payments required. Since it's possible that the APR calculated at the time of your loan application will change a little before closing, your lender is required to give you the final version of your TIL disclosure at or prior to the closing meeting.
Deed of Trust or Mortgage (also known as the Security Instrument)
This document conveys a lien in your property as security for repayment of your home loan. (This means that if you default on your loan, your lender has the right to foreclose your ownership interest and take possession of the property).
The Note
The mortgage (or promissory) note represents your promise to pay the lender according to the agreed terms. It includes the dates on which your home loan payments must be made and the location to which the payments must be sent.
We want your mortgage process to be as stress-free as possible. By following this checklist, it will guide you in your preparations. Use it in combination with the background information on this site. Give us a call at 1-800-708-3155 with all your questions, and with the guidance your Mortgage Loans Online loan advisor provides, you should feel knowledgeable and comfortable.
In many states, it is necessary to obtain a lawyer. Also, if you haven't already done so, choose a notary (this is sometimes prearranged by the title company, so it's good to ask in advance). Arrange for the signed purchase offer to be delivered to him or her as soon as possible. Review the fees and disbursements, anticipated adjustments, property transfer tax, mortgage deductions and other closing costs. Talk to your real estate agent or attorney about how you plan to be registered on title.
Satisfy any outstanding conditions, such as financing or a home inspection, within the time frame set by the offer. Be sure you fully understand how to keep the contract alive, and how to cancel it if the conditions can't be satisfied.
Once your mortgage application has been approved, have the mortgage commitment sent to your agent and/or attorney.
Any tenants must either cancel their leases or sublease their current premises, if permitted. How much prior written notice is needed will vary, so check it out with your landlord and/or attorney.
Arrange insurance coverage to take effect on closing. Be sure the insurance agent provides your agent and/or attorney with written confirmation before closing, showing the name of the insuring company, the amount of coverage, its expiration date and the name of any lenders in the loss payable clause. Coverage should be for the full insurable value of the building only (not the land), on a replacement cost basis.
Normally it will be you (or your lawyer) who contacts the water, electric and gas utilities to have the meters read on closing, new accounts set up in your name and final bills sent to the seller. Many buyers do a "double-check" a few days before closing, just to be sure. Contacting the telephone and cable TV companies is also your responsibility.
Plan to meet your agent and/or attorney a day or two before closing to review and sign all closing documents. Don't wait for the actual closing date, when so many other things must be done. At that time you should deliver the money needed for closing, in certified funds, payable to your escrow company or attorney in trust. Be sure to get information about any payments due right after closing - the mortgage, property taxes or condominium maintenance.
