The Mortgage Process

Pre-Approval – We suggest that all clients get pre-approved prior to looking at homes with a realtor. This process will show how much house you can qualify for, what the approximate monthly payment will be, and how much down payment will be needed. When the client provide a complete bank statements for the past two months, the most current 30 days of paycheck stubs, and the last two years of W-2’s. In the case of self-employed the last two years of complete tax returns. All of this information is needed to give a more complete pre-approval.

Real Estate Contract - Once you find your dream home, contact us with the address of the house prior to making a written offer. At that time we can get you an estimate of the properties specific property taxes and give you an estimate of the total monthly payment amount. If you decide to proceed, we will work with your realtor and advise them how to structure the contract to meet your financing goals. The amount you offer along with any extra conditions will be handled by you and the realtor.

Earnest Money – To make the contract legal, money is required to exchange hands. The title company you choose will hold the funds until your closing date, at which time it will be credited towards your purchase. The realtor will take the fully executed (signed) contract with all the signatures and the earnest money check (made out to the Title Company) to the title company. The realtor will inform you how an option period is structured. If appropriate, you will write a check made payable to the seller of the home. After your option period expires, you will be given a credit at closing for the check you wrote to the seller. The realtor will discuss with you the specific amounts of the checks.

Inspection Option Period – If you choose an option period to allow for inspection of the property, you are responsible for ordering your own inspections. We do not recommend or indorse any specific inspection company. You will need to schedule these inspections and pay the provider directly at the time of service. Most inspections run between $300 and $500. We will advise you if the lender we are using requires any inspections.

Loan Application – During the inspection option period you need to schedule a time with us to come in and sign your loan application package. At this meeting we will discuss interest rates, notify you of any other documents we need, and sign your loan package. During this meeting we will also collect a check to cover the cost of the appraisal and credit report. The appraisal fee is typically $425 and the credit report fee is usually $25 to $35.

Ordering of Services – Once the option period has passed we will order the appraisal and title insurance policy. Once the title company finishes the preliminary title search, you will receive the title policy in the mail at your current address. Read over the policy but no action is required on your part. Please note that we never order the appraisal until after the option period has ended and/or the client gives us permission. Since the fees you paid for the appraisal and credit report are non-refundable, we want to make sure that the purchase will go forward before we allocate your money.

Homeowners Insurance – This is the point when you need to contact an insurance agent of your choice for a quote. Homeowners insurance, also referred to as Hazard Insurance, provides protection which would repair/replace the property in the event of a covered loss, such as fire. Remember that most insurance companies will pull your credit when they give you a quote so limit your requests to a couple of top choices. Your insurer will determine if your home is in a flood zone. If your home is in a flood zone then the lender will require you to purchase flood insurance. Typically a flood policy will cost between $300 and $600 per year. Considering we live so close to the Gulf, this is something you may want to purchase even if the lender does not require it. When you decide which insurance company you are going to use, call us and give us the company’s name, telephone number, and contact person. We will fax them a form called a “binder request” which they will fill out and fax back to us. Typically, the only coverage that you will pay directly to the insurer is the Flood Coverage. The annual cost of the Hazard Insurance will be collected at the closing by the title company.

Underwriting – This is what we call the process where we ship your complete file to the lender for final approval. The lender may request additional information from you and it is critical that you get us any requested documents as quickly as possible. The progress of your file will totally stop while the underwriters wait to receive the requested documentation. We will also forward the appraisal for review and approval. Once the appraisal has been approved, we will then order the survey if one is needed. The survey is never ordered until after the appraisal has been approved by the lender.

Clear to Close / Documents – When the underwriter approves the entire file they will issue a Clear to Close. This means the file may proceed to the lenders closing department who will prepare your loan documents. The lender will then email the documents directly to the title company where you will close. Typically the documents are sent the day before you close.

Closing – When the title company receives these documents they will review them and prepare your settlement statement (also called the HUD 1). The settlement statement shows all of the fees that you will be paying at closing, gives you credits for your loan amounts, and shows the balance due that must be brought to the closing. If the amount you need to pay at closing is over $1000, you must pay with a cashiers check made payable to the title company. If the amount is under the $1000 then you can write a personal check. Always bring your checkbook to the closing because if the statement changes at the last minute, you will be allowed to write a check for any difference above the cashiers check amount. If your cashiers check is too much, then the title company will write you a check for the refund when the loan funds. Be sure you bring your VALID drivers license to the closing along with any additional documents requested by your loan officer or the title company.

Funding / Possession – You do not own the home until the loan “funds.” Funding takes place after both parties sign the closing documents, the title company has the cashiers check, and the lender has reviewed the entire package. The lender will send the title company a wire for your loan proceeds to fund the transaction. Typically funding takes place the same day as closing unless one of the parties signs late in the day. In this situation funding can take place the morning of the next day. Funding is also a term that describes when the title company issues the checks to the seller and other parties involved. The realtor will not give out keys to the property until funding is complete.

Disclaimer: This information is provided to give the buyer a general overview of the loan process. It is not intended to represent any specific transaction as every transaction will be different requiring various documentation, steps, and approvals. Address specific processing questions directly to your loan officer.