At this point in the process, you have submitted your mortgage loan application to be reviewed by the mortgage loan officer. In processing your loan application the lender will be primarily interested in two things:
- The property that you plan to buy (since it serves as collateral for the loan).
- Your financial situation and your credit history (since they will determine your ability and your willingness to repay the loan).
While you are waiting for an answer
The lender will order a credit report on you, and your spouse or any other co-purchasers. The credit bureau report will show the lender how you have handled past debt and credit accounts such as car loans, charge accounts with stores, and any purchases made on credit. If you have recently obtained and reviewed a copy of your credit report, there should be no surprises during the application process. Similarly, you should be in good shape if you provide the lender with a documentation that demonstrates good bill-paying habits with your non-traditional credit history (for example, canceled checks or receipts of your rent and utility payments).
The lender will verify the information you have provided on the loan application as to your income, employment history, assets (checking and savings accounts), and your rent payment history.
The lender will arrange to have the property appraised, a service which will be charged to you. A professional appraiser will estimate the fair market value of the house, not the taxable value that you would find on the Pinellas Property Appraiser's website. The market value information is required because the lender will loan you no more than a given percentage (often 95-percent) of the value of the property (what lenders call the loan-to-value ratio). If the appraised value is less than the purchase price that you have agreed upon, the amount of your mortgage may be smaller than you anticipate, and you will have to come up with a larger down payment. However, if you have included an appraisal contingency in your contract, you may be able to renegotiate the purchase price in the event of an unexpected low appraisal.
Approval of mortgage insurer
If mortgage insurance is required by the lender, the loan will also have to meet the underwriting standards of the mortgage insurer. If you are obtaining an FHA, VA, or RHS loan, the loan must also meet those standards.
More often than not, the bank or lender will have questions about certain items on the mortgage application. While many of these questions are routine, the lender will ask them with the intention to verify the information you have presented. As discussed here, the lender is going to assess your entire financial history, and not just the most recent items. They may, however, ask for additional documentation of things they have found in your past both favorable and unfavorable that were not asked about on the application. They will expect a quick response, and they will also pay attention to the spoken answers they receive from you.
The right words
The role of the mortgage broker is to give help you answer truthfully all the things asked of a lender. More often than not, a mortgage broker not only helps you find the best mortgage for your needs, but also ensures that you become approved for that mortgage. Many times, a bank who has an established working relationship with a mortgage broker will accept the explanation, or voucher, of that mortgage broker who speaks on your behalf. While you will still have to provide written documentation of the item that is requested by the lender, a mortgage broker will be your advocate during the loan application process.
Moving things along
Often, your mortgage application will find it's way into a waiting stack on the desk of an underwriter who is working diligently to process the loans she has before her. A mortgage broker with a good working relationship with a bank or lender can provide regular communication with the underwriter, to "check on the status" of your loan. The underwriter whose phone extension number may be in the Rolodex of your mortgage broker, is generally not available for conversation with the loan applicant.
When your loan is approved, the lender will send you a commitment letter. This is the formal loan offer. It will state the loan amount (the purchase price less the down payment), the term of the loan (number of years you have to repay the loan), the loan origination fee (a percentage of the loan amount), the points, the annual percentage rate or APR (the actual finance charge taking into account the interest rate and origination fees), and the monthly charges (principle and interest, taxes, and insurance — or PITI).
The commitment letter will give you a set amount of time to accept the loan and close the purchase transaction. Go over the commitment letter before you sign it, and be certain that you understand — and are able to comply with — any conditions set by the lender. By signing the commitment letter, you accept the terms and conditions of the loan offer.