The Mortgage Lending Process: Five Things to Remember

When you’re shopping for a home and preparing for a meeting with a mortgage lender, there are five important items to be aware of. Knowing them will make your borrowing experience smooth and painless.

1) Be Prepared.

It’s not just a Boy Scout motto, it’s a great suggestion. When you meet with a prospective mortgage lender you should have a good idea of the loan amount you need. Depending on the interest rate at the time, you can estimate your monthly payment — and include taxes and insurance. If you’re unclear as to the various mortgage programs available, be sure to ask your mortgage lender to recommend options that best fit your financial situation.

You should also have your proverbial “ducks in a row” when it comes to income verification (income tax returns for the previous two years,) down payment source, a list of assets and liabilities, etc. It’s also important for both you and your lender to know your credit score going into the application process. It may save time and aggravation in the future — especially if you have blemishes that are either incorrect or require explanation.

2) Ask Questions.

Remember, your loan professional is there to help you find the right financing and get you approved for the mortgage that will best suit your needs. Lending programs come and go — and evolve over time — so ask questions. If you’re curious about little or no down-payment mortgages, ask what’s available. Compare 15-year, 20-year or 30-year loan terms to see what you can best afford.

And, while nobody wants to think about problems in the application process, it’s a good idea to at least anticipate any snags that may come up. Issues like a borderline credit score, a lower appraisal amount and other surprises can best be handled if they are discussed up front with a plan to handle the unexpected.

3) Know Your Finances.

As mentioned above, the loan application process is the place and time where you should know — and share — your financial information. Don’t be coy. Share the entire picture of your financial situation with your mortgage lender, the good, the bad and the ugly. The more he or she knows in advance, the more likely they can best serve you. Be able to show where your down payment is coming from. Know your credit score and be ready to explain — in writing — any questions or blemishes that may show up on your credit report. You should, by the time of the loan application, have a pretty good idea of what the real estate taxes and homeowner’s insurance on your home will be each year.

 You should also take into consideration any additional money you may have to come up with over and above your down payment. Your lender will provide you an estimate of your loan closing costs. In addition, consider items that you may wish to improve when you purchase your home such as new furnishings or improvements like painting, new carpet, landscaping, etc.

4) Be Patient.

The mortgage lending process need not be a stressful experience, but it will take time. During the process, there is a variety of information that needs to be gathered including income and down payment verification, credit reporting, home appraisal, home inspection, etc. Depending on the volume of applications your lender has, you should allow for several weeks. Again, ask your lender questions and have him give you an estimate of when your loan will be approved, but be patient. Lenders need time to compile and assess the information before they can issue a decision.

5) Close on Time

As ironic as it sounds, many borrowers (and sellers) spend so much time worrying about the buying and mortgage lending process that they forget about the ultimate end result — the closing of the sale! Most real estate contracts have a projected closing date.  This date needs to be 30-45 days to avoid having to get an extension.  Often, there are complications that have to do with moving delays or situations where the borrower can’t close on the new home because the sale of their old home hasn’t closed yet. And while these delays can’t always be anticipated, just remember they can have a “domino effect” and can delay the closing process exponentially — especially if loan closing documents need to be changed, updated or redrawn. In addition, there are lending disclosures that have to be re-addressed in the event of closing delays.

If you can consider these and other issues prior to the mortgage lending process, we think it will make for a much more enjoyable and fulfilling experience.