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After The Loan Application

Posted by  on Apr 16, 2009
 
Individuals who are going through the process of mortgage loan, then you have to go through the process of filling out loan applications. After you complete this mortgage loan application process, there are some other steps to go through. Within three business days after receiving your loan application, a mortgage lender must provide you with a Good Faith Estimate of the anticipated closing costs. It will show costs associated with the loan settlement, such as origination fees, mortgage insurance, title insurance, escrow reserves and hazard insurance.

Within the same three days, you will also receive a Truth-in-Lending Disclosure statement. This statement shows, among other things, the estimated monthly payment. The total cost of all finance charges on your loan is shown, stated as an Annual Percentage Rate (APR). The APR represents the dollar amount of finance charges you pay either up front or over the life of the loan, converted to an annual interest rate. Since the APR includes origination fees and other charges as well as interest on the mortgage loan, the APR is usually higher than the interest rate on the loan.

After the lender has approved the loan, you will usually receive an approval letter . If the loan does not close within the specified commitment period, the terms are subject to change. The approval may contain conditions you need to satisfy, so you should read it carefully.

In cases where closing is scheduled soon after approval, the lender may give you verbal approval instead of an approval letter. This is not unusual, but make sure you understand the terms of the approval.

Once the approval letter has been received, you are assured the financing you need to complete the purchase of your home and you need to turn your attention to completing the details required for settlement.

For many homebuyers, the period between submission of the loan application and approval is one of uncertainty and concern. Requests for additional information, unexpected delays and lack of communication all serve to increase the tension. Keep in mind the lender wants to make the loan. Loan underwriters are looking for ways to approve loans, not reject them. If you have come to the interview with the loan officer fully prepared and have provided good documentation, you have done a great deal to assure prompt processing of your application and approval of your loan.

You and the lender need to make sure that lines of communication are open. Your contact person may be the loan officer, but often it might be someone in the lender's loan processing department who can tell you the status of your application.

You should be accessible if the lender needs additional information or documents during processing. If you are from out of town, use your real estate agent as a contact, if necessary. Quick response to lender requests helps keep the process on schedule. In order to protect both you and the lender, mortgage loans require much more paperwork and legal documentation than an automobile or other installment loan, and lenders do not ask for more than is necessary.

Obtaining a mortgage loan does not need to be an ordeal that dampens the thrill of acquiring a new home. If you understand the lending process and are prepared to do your part, it simply becomes a key step in owning a home.

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