What type of loans are available and what are the advantages of each?

The following is a complete list of all items an underwriter could request in a loan transaction. Most loans today are processed with automated underwriting which reduces the amount of documentation required to approve a loan. Please do not be overwhelmed.

1. Current paycheck stub/s covering a one month period.
2. W-2’s for the last two years.
3. Your most recent three months of bank statements. Including retirement and investments (all pages of every statement).
4. The last two years of your rental or mortgage history. Rental or landlord name and phone number, mortgage coupon or statement with address and account #s’ for payoff must be included.
5. If You Are:
   
   • Self-Employed – complete last 2 years 1040’s.
   • Corporations – complete 2 years 1120 tax returns if you hold 25% or more stock in the company.
   • Partnerships – complete 2 years 1065 tax returns if 25% or more ownership in the company. K-1’s must be provided if there is a partnership or corporation.
   • Tax extensions filed must be submitted.
   • 1099 income – Complete last 2 years of 1040’s.
   • Proof of self-employment with a no-income verification loan. I.E. Business license, sales tax license, or CPA letter certifying minimum 2 years self-employment.
6. Divorce decree and separation agreement.
7. Bankruptcy papers (complete filing plus discharge papers).
8. Current rental leases on all income properties, complete two year 1040’s.
9. Copy of signed purchase contract with earnest money check. Realtor’s names and phone numbers.
10. Old title work, surveys and/or appraisals are very helpful in expediting the process (refinance only).
11. Copy of note on first mortgage (second mortgages only).
12. Homeowners Association dues, condos/townhomes-property manager & phone numbers.
13. Listing agreement/copy of contract for house being sold for down payment and a copy of the signed settlement statement, proof it is sold (purchase only).
14. DD214 (required on VA loan only).
15. Subordinating second mortgage - (refi-not paying off 2nd mortgage). Second mortgage company’s phone #, contact person, and loan #.
16. 12 mo. Cancelled checks on alimony/child support income or 12 months bank statements evidencing monthly deposits that match the income exactly.
17. Gift Letter (should state relationship, amount gifted by each donor, no repayment) cashier’s check or money with remitter/receiver referenced. Include name, address and phone # of donor. Specify (will gift/have gifted as of date).
18. A copy of your valid identification (any one of the following current ID’s):
    • State ID Card
    • Passport
    • Driver’s License

CREDIT REPORTING COMPANIES

Experian       888-524-3666   http://www.experian.com

Equifax         800-685-1111   http://www.equifax.com

Trans Union  800-916-8800   http://www.transunion.com/index.jsp

• Income and debt
• Credit report
• Determination of the best loan program based on your information
• Prequalification, pre-approval and/or conditional approvals

• Prequalification is an informal way to see how much you may be eligible to borrow. You can be 'prequalified' over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.
  
  
• Pre-approval is a lender's actual commitment to lend to you. It involves assembling your financial records and performing a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

• Quote includes a specific program, term, rate, origination/discount points paid, estimate of loan closing costs and prepaid items.

• Loan closing costs- non recurring closing costs- appraisals, credit fees, underwriting, doc prep, title insurance, recording fees, courier, etc.
• Prepaid items- prepaid interest, hazard or flood insurance, property taxes, mortgage insurance, etc.

• Lock commitment- A loan that has been committed to a specific program, rate, and origination/discount fees for a specific amount of time.  A loan that is floating is not locked and is fluctuating with market rates until locked.

• Good Faith Estimate -Explains in detail total settlement charges associated with the loan, monthly mortgage payment, estimated funds to/from the borrower at closing. 
• Good Faith Estimate Provider Relationship- Disclosure that requires specific use of a company that is affiliated, associated, related, business relationship with your lender.
• Truth in Lending - Explains total interest paid, total payments made, APR, discloses if there are prepayment penalties, late charges, assumption, etc.
• Application -Detailed information about the borrower including income, assets, liabilities, employment and housing information, etc.
• Service Disclosure- Provides information about the lender- How many loans they service (receive mortgage payments) vs. sold to another company for servicing.
• Equal Credit -Prohibits discrimination against credit applicants based on age, sex, race, color, religion, national origin or martial status.
• Credit Authorization -The borrower authorizes a lender to verify employment, assets and credit.
• Mortgage Loan Origination Agreement -Required for mortgage brokers- defines the relationship between the lender, mortgage broker and the borrower.  It also explains how a mortgage broker can be compensated.
• Other Related Mortgage Disclosures -Right to receive an appraisal, occupancy statement, 4506 audit form, ARM or Balloon disclosures, PMI disclosure.

• This is required for the appraisal and credit report order to take place.

• All other loan documents are ordered- appraisal, title, credit report, hazard insurance, flood certification, employment verification, asset verification, computer automated underwriting.

• Written approval of the loan including all closing requirements.

• Final detailed explanation of all fees, purchase price /loan payoff(s), money received or owed at closing.

• Deed of Trust -Filed with the county showing loan amount, vesting, loan number, mortgage terms used, property information, legal information, borrowers rights, lenders rights, notifications, mortgage insurance, etc.
• Promissory Note - loan amount, type of loan, term, payment, late charges, etc.
• 1^st Payment Coupon
• Error Correction Agreement -Borrower agrees to resign a document if it was omitted or mistyped.
• W-9 Tax Interest Reporting Form -Mortgage interest earned on the loan reported on your social security number.
• Truth in Lending - Explains total interest paid, total payments made, APR, discloses if there are prepayment penalties, late charges, assumption, etc.
• Escrow Disclosure - Calendar that shows how taxes, hazard, flood, mortgage insurance are collected and disbursed out of an escrow account.
• Servicing Disclosure - Provides information about the lender - How many loans they service (receive mortgage payments) vs. sold to another company for servicing.
• Other Closing Documents - audit forms, title documents, lien affidavits, right of rescission, etc.

• A federal 3-day Right of Rescission Law applies to refinances of primary residences before funding. After rescission period has ended funds will be disbursed to you.

• Not all loans require an appraisal and survey. 

• You are now a home owner!!

What type of loans are available and what are the advantages of each?

Types:

• 10,15,20,30 Year
• Balloon Mortgage

Advantages:

• Predictable - housing cost remains unaffected by interest rates changes and inflation
• Balloon Morgage offers a very low fixed rate for an initial period of time (usually 5,7, and 10 years); when the time has elapsed the balance is due or refinanced(but not automatically)

Adjustable Rate Mortgage (ARMS);   Payments increase or decrease on a regular schedule with changes in interest rates.  Increase are subject to limits.

Types:

• Two-Step Mortgage - your interest rate adjusts only once and remains the same for the life of the loan.
• ARMS linked to a specific index or margin

Advantages:

• Generally offer lower initial interest rates.
• Monthly payments can be lower.
• May allow borrower to qualify for a larger loan amount

Other Type of Loans

• Less-Than-Perfect Credit Financing
• Private Party Financing
• FHA Adjustable Rate Program
• FHA Fixed Rate Program
• VA Fixed Rate Program
• Interst Only Loans
• No Income Verification Loans
• No Asset Verification Loans
• No Document Loans

• In the first 23 years of the loan, more interest is paid off than principal, meaning larger tax deductions.
• As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.

15_Year

• The loan usually is made at a lower interest rate.
• Equity is built faster because early payments pay more principal.

The "closing" is when you sign the finalized loan documents and the mortgage funds are paid out. Once your loan is approved and cleared for closing, you and the seller will set a date to officially transfer ownership of the home to you.

The closing meeting is typically attended by the buyer, seller or building developer, attorneys, real estate agent(s), a representative of the lender and a closing agent.

Do these things ahead of time and you will ensure a successful closing:

• Fulfill any conditions specified at the time of your loan approval.
• Obtain homeowner's insurance – this insurance protects you from loss or damage due to theft, fire or certain weather-related hazards. It may also be necessary to obtain flood insurance in your area.
• Resolve any title questions – if your title search turned up additional liens on the property, these must be resolved before closing can occur.
• Do a final home walk-through to ensure that agreed upon repairs have been completed by the seller.
• Review the final estimates of your closing costs.
• Have a certified check or money order prepared to cover your down payment and closing costs. No personal checks! Make sure you can meet the conditions of your mortgage commitment.

You'll receive and review some very important documents at the closing. Ask questions about the paperwork if you are unsure of anything! If you spot an error, say so - and don't sign the document until the issue is resolved.

Here are some documents you'll receive or review at your closing:

• HUD-1 Settlement Statement: An itemization of all funds and costs paid by the buyer and seller either at or prior to closing. You have a right to review the HUD-1 a day in advance of closing.
• Truth-In-Lending (TIL) Disclosure: This document provides key information about your loan, including the APR, finance charges, amount financed, total of payments, and payment schedule.
• Deed of Trust or Mortgage: This document states that your lender receives a lien on your property as security for your loan.
• The Note: The note is a binding legal agreement to make payments to your lender according to the terms of your mortgage.
• The Keys: You own a home. No go and enjoy!