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| LOAN PROCESS |
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Approval |
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What does a mortgage lender consider when making a loan decision? |
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What supporting documentation will I be required to provide? |
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How quickly will my loan be approved? |
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Can I change the loan amount, down payment or program after I received my loan approval? |
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When can I lock my interest rate? |
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How do I lock my interest rate? |
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When is the best time to lock a purchase transaction? |
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When is the best time to lock a refinance transaction? |
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If rates fall after I've locked, while my loan is still in process, will you lower my rate? |
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What happens if my loan process takes longer than my lock period? |
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What happens if I switch loan programs or rate and point combinations after I have chosen a program and locked my rate? |
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Can I redraw my loan documents if needed? |
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How are interest rates determined? |
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Two Key Factors in Qualifying for a Mortgage |
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What does a mortgage lender consider when making a loan decision? |
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A mortgage lender generally looks at three areas:
- Income and Assets: To determine your ability to repay the loan.
- Debt and Credit History: To evaluate your buying habits and your history of repaying other financial obligations.
- Property Information: An appraiser compares the home you are buying to similar homes in your area to make sure the property provides sufficient collateral for your loan.
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What supporting documentation will I be required to provide? |
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You will generally be asked to support your income with a recent pay stub and the prior year's W-2 Form.
Self-employed individuals must support their income with the prior two years' tax returns.
Funds needed to close the transaction are supported with a copy of a recent bank statement or other liquid financial instruments.
If proceeds from the sale of another property are being used for the down payment, an estimated closing statement on that transaction will be required to support the necessary funds to close.
Some transactions may require additional documentation.
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How quickly will my loan be approved? |
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Your loan application will generally be approved within 24 hours of receipt of your supporting documentation.
The approval will be subject to our receipt and review of your appraisal, preliminary title report, and any other prior to approval conditions which normally are received within 10 days of your application date.
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Can I change the loan amount, down payment or program after I received my loan approval? |
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Yes.
As long as you meet the criteria for the new loan amount or new program you've selected.
Your loan advisor can help you determine if you meet the requirements.
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When can I lock my interest rate? |
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As soon as we receive your application and the loan is approved (1-2 days).
For purchase transactions, you must have an accepted offer on a property before you can lock a rate.
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How do I lock my interest rate? |
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First, you must apply and contact one of our loan advisors.
After speaking to a loan advisor, we will confirm the loan program, loan amount, rate, points and fees, giving you a record of the terms you locked in.
If your loan does not meet the guidelines for a particular program, we will e-mail you with a notification of such.
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When is the best time to lock a purchase transaction? |
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In times of stable interest rates, most of our customers lock between 15 and 30 days before their scheduled close of escrow.
Locking for a period longer than 30 days increases the cost of the loan slightly but is sometimes a good idea if rates are volatile.
For a 45 day lock there is a .25-point add-on to the points and for a 60-day lock there is a .5-point add-on to the points.
Shearson Mortgage does not accept rate locks longer than 60 days.
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When is the best time to lock a refinance transaction? |
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If the savings you will achieve with new lower rate will recapture the closing costs of the loan in a relatively short period of time, you should probably go ahead and lock your rate and close your loan. Trying to time the bottom of an interest rate cycle is tricky and each month you delay, costs you in the form of carrying a higher interest rate on your old loan.
If rates fall further, you can always refinance again.
Our Refinance Interest Savings calculator will help you with this decision.
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If rates fall after I've locked, while my loan is still in process, will you lower my rate? |
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Once Shearson Mortgage accepts your lock, the rate and fees are not negotiable. You will be expected to close at the rate and fees you locked, regardless of current rates.
This policy is necessary because of commitments we make to our investors.
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What happens if my loan process takes longer than my lock period? |
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If Shearson Mortgage causes the delay, we will extend the lock at no cost.
However, if the delay is caused by you because of incorrect information on the application, not supplying supporting documentation in a timely manner, or other actions that delay the timely processing and funding of your loan, you will be subject to repricing when your lock expires.
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What happens if I switch loan programs or rate and point combinations after I have chosen a program and locked my rate? |
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You will receive worse case pricing from the day you locked in and the day you switched programs or rate and point combinations.
In addition, you will be charged an additional .125 of a point.
Therefore, it is important that you carefully consider the different programs and rate and point combinations before locking in a program and interest rate.
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Can I redraw my loan documents if needed? |
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Document draws can be accommodated at a cost of $150.
However, they should not be necessary because before drawing your loan documents initially, your loan processor will fax or e-mail you an Estimated Closing Statement.
Please review the Estimated Closing Statement carefully and make any changes needed so that our documents are drawn right the first time and you can avoid any delays or added costs.
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How are interest rates determined? |
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Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
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Two Key Factors in Qualifying for a Mortgage |
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In attempting to approve homebuyers for the type and amount of mortgage they want, mortgage companies basically look at two key factors: the borrower's ability and willingness to repay the loan. Ability to repay the mortgage is verified by your current employment and total income. Generally speaking, mortgage companies prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years.
The borrower's willingness to repay is determined by examining how the property will be used. For instance, will you be living there or just renting it out? Willingness is also closely related to how you have fulfilled previous financial commitments, thus the emphasis on the credit report or rent and utility bills.
It is important to remember that there are no rules carved in stone. Each applicant is handled on a case-by-case basis. So even if you come up a little short in one area, perhaps one of your stronger points will make up for the weak one. Everyone involved in real estate is in the business of selling homes, in one way or another. Therefore, if the loan makes sense, mortgage companies and insurers will do their best to see that you qualify.
By its very nature, mortgage insurance is an aid to affordability, because it allows families to purchase homes with less cash on hand. The industry plays a central role in helping low- and moderate-income families become homeowners.
More and more borrowers are taking advantage of low down payment mortgages and becoming homeowners with as little as 5 percent down. For more information on how you can take advantage of the benefits of a low down payment home loan with mortgage insurance, contact your local mortgage professional or real estate agent.
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