The Mortgage Process

Applying for your loan is the first step in the mortgage financing process. This starts with completing a mortgage loan application. You can provide this information to your Mortgage Consultant in a variety of ways: in person, by fax or even apply on-line.

Your Mortgage Consultant will use this information to determine the type and amount of loan you qualify for. This will help you select a loan program and rate that meets your needs.

Things to know about choosing a loan program

Do you want a fixed rate or adjustable/ARM loan? ARM loans offer lower rates but the monthly payments will move with interest rates. Your Mortgage Consultant and our “Which is Better: Fixed or Adjustable” calculator can help you decide.

Are you eligible for a government loan program such as FHA or VA? Read our report, “Am I Eligible for an FHA or VA Loan?”. If not, you will be doing a conventional loan.

What is the amount you want to put down as down payment? On conventional loans, if you put less than 20% of the purchase price of the home down as down payment, you may need private mortgage insurance. You may be able to put down less than 20% and still avoid PMI by obtaining a 2^nd Mortgage Loan. Your Mortgage Consultant and our mortgage calculator can help you decide which is best for you.

How much are you comfortable paying each month on your mortgage? You can use our powerful Mortgage Calculators (click on the link at the bottom of this page) to estimate the maximum you can qualify for and what the payments would be. Ultimately, you need to decide what the right amount is for you.

Contrary to popular belief, the lowest rate is not always the best for all buyers. The best rate is defined by your unique situation. Here are some things to think about:

Discount Points or Points are fees paid up front that allow you to lower the interest rate. They are expressed as a percentage of the loan balance. Thus, 1 point on $100,000 loan equals $1,000. Instead of paying higher interest every month, you almost pre-pay it in the form of points.

Points often make sense for buyers who are going to stay in the house for a period of time. If you know you won't stay in the house very long, then you may want to take a higher rate and avoid points. Mortgage Consultants can help you with this process or use the, “Should I pay points to lower the rate?” Mortgage Calculator is a handy tool you can look at right now.

Mortgage interest is tax-deductible. Thus, some borrowers don't mind a slightly higher rate because it shelters their income. To learn more about this go to our “How much can I save in taxes?” Mortgage Calculator.

Loan Processing and Underwriting

One of the first steps in this phase involves providing you with the necessary disclosures as required by law. You will receive disclosures within 3 business days after your application is received.

Disclosures you will receive include:

Good Faith Estimate: An estimate of all the fees associated with getting your loan.

Truth-in-Lending: A detailed description of the loan you have chosen.

Many mortgage companies, including Long Mortgage use Freddie Mac's automated underwriting system, *Loan Prospector, on most of its loans. Loan Prospector allows your Mortgage Consultant to take your application data and generate loan approvals within 24 hours. These approvals are called "conditional" because they will ask for documentation to support the information on your application. For example, one of the conditions could be to provide your last two months bank statements, so these funds can be verified. Processing your loan is taking this documentation and checking to make sure they support the numbers originally completed on the application.

Your loan will next be accepted by an underwriter. An underwriter reviews the automated underwriting feedback, your submitted documentation on income and assets and your credit reports along with an appraisal of the property. Common jargon used by underwriters include: LTV, ratios, reserves, and PITI. Our Glossary of Financial Terms can help you better understand all of these.

During this process, a title search will be ordered to determine if there are any liens (claims) against the property that need to be repaid. (Both you and the lender will be taking out title insurance to ensure good title to the property when the loan closes.)

Once the above steps are successfully completed, you will receive a final loan decision.

* Loan Prospector is a registered trademark of Freddie Mac

Closing your Loan

Closing your loan is the final step in getting your mortgage. In the industry, it is often called “Settlement” or “Close of Escrow (COE)”. Closing is a little different depending on the state and whether your loan is a refinance or a purchase. In Arizona, the closing agent is a title company. (Typically, this is the same company that did the title search and issued title insurance.) In other states it may be an attorney.

Purchase Transactions:

Your "cash to close" will include your down payment and all other closing costs.

The Title Company will pay the sellers' mortgage lender the remaining balance, any fees and then disburse the remaining amount to the Seller.

Typically, the Seller and Buyer close at different times.

Refinance Transactions:

If the loan is a "cash-out" refinance, then you will get money back from the transaction. There is a three-day waiting period, or "right of rescission" before your funds are available on any refinance.

Closing is more than just money changing hands; it is where you will sign all your final loan documents, including the Mortgage Note and Deed of Trust.