The Loan Process

Below is a standard guideline of how processing your mortgage loan will work. Each mortgage is a case by case scenario and other actions may apply to your transaction.

 

1. Preparation

Where do you begin to secure finances for purchasing a new home, refinancing an existing home, or obtaining a real estate equity line of credit? Loan acquisition can get confusing, but you can simplify the process and avoid a lot of potential headaches by getting off to a good start. Here are a couple of ways to do so:

Build your green file.
Organizing and compiling all pertinent financial documents into a green file is an absolute must for any potential borrower. Think of the green file as a resume or profile that will give lenders an idea of what kind of debtor you might be. The typical green file should contain:

Recent Statements for:

  • Financial statements
  • Bank account(s)
  • Investments
  • Credit card
  • Auto loans
  • Recent pay stubs
  • Tax returns for two years

Consider your credit rating.
Another means by which lenders gauge your trustworthiness as a borrower is through your credit rating. This indicates your credit history, which includes such crucial information as the number of your open loans and the punctuality of your past payments.

  • Treat your credit like gold. 


Credit ratings are important because they often determine whether or not you will be approved for a loan and what your interest rate will be. Thus, you cannot take your credit seriously enough! We suggest checking your credit reports at least once a year or before making any major purchase to ensure the accuracy of the information contained there.

  • What the scores mean. 


Ratings usually vary between 400 and 800. You may qualify for a Fixed Rate loan if your credit score is above 620.

  • Determine your credit rating. 


You can do this by contacting a credit reporting agency such as Equifax, Experian or Trans Union. Above all, don't hesitate to consult with your lender if you need to improve your rating.

Prioritize your costs and savings.

Buying real estate wisely is all about choosing what to spend for first.

  • Prioritize your costs. 


Down payments, closing costs and additional expenses (such as inspections) should be at the top of your list. On the other hand, be sure to pay down on your current revolving and high-interest rate debts, such as credit cards.

  • Remember: lenders like stability. 


Instill confidence in your potential lender by avoiding any big, sudden moves both in your career and your finances. If that job change or big budget purchase absolutely cannot be postponed, check with your lender first and consider the consequences.

2. Selection

Choose a Lender

Securing finances requires a decision that you may have to live with for thirty years, so spend time comparing different lenders before making your choice. There a number of ways to find one, whether through traditional print ads, Realtor referrals or Internet sources. There are also several considerations to keep in mind when shopping for the right lender and program:

  •  Price. 


Consider the competitiveness of a lender’s prices with that of others, especially for mortgage rates, interest rates, and additional costs. 

  • Diversity of products. 


Price is important, but by no means should it be your only determining factor. How extensive is the lender’s range of offered loan programs? Check the availability of the program most appropriate to your credit profile and property.

  • Rapport


You aren't looking for just a guide but a partner, someone you can work with and trust every step of the way.

  • Connections. 


Check whether the lender has access to local loan approval committees that understand your goals as a borrower.

Choose a Loan
Though there are many different kinds of loans available today, these two are the most commonly used:

  • Fixed loan


This fixed rate option requires monthly payments that will remain the same throughout the duration of the loan, which may vary from ten to thirty years.

 

  • Adjustable rate mortgage (ARM). 


This program can adjust over the life of the loan in intervals. We have several Adjustable Rate programs that could fit you needs.
 
Consult with your lender to assess which loan type and program would best correspond with your resources and needs.

3. Figures

Don't be intimidated by the jargon used in financing. Here are a number of key terms you will see frequently in your process.

  • Credit report. 


Request your lender to order one from a third party credit agency such as Equifax, Experian, or Trans Union. A credit report should contain information on all your outstanding loans and repayment history, and will typically cost under fifty dollars. 

 

 

  • Application/processing fee. 


This is the lender’s fee for the assessment of your capacity for repayment as a borrower and will usually be charged upon closing of the loan. Expect a price tag of a couple of hundred dollars.

 

  • Annual percentage rate (APR). 


The APR expresses the sum total of all your borrowing costs as a percentage interest rate charged on the loan balance.

For Example:  After fees, the original interest rate quote of 5.875% might work out to a 6% APR loan, where the interest costs about $6,000 per year for every $100,000 borrowed, and the principal payments are calculated based on the length of the loan term (for example 15, 20, or 30 years).

 

  • Points

When mortgage companies are competing by offering lower interest rates, they may charge you a “point,” a one-time pre-paid interest fee, calculated as a percentage of the loan. Points are considered part of the cost of credit to the borrower, and part of the investment return to the lender. They may range from 0.25% to 2% of the loan balance, and are usually paid up front. 

 

 

  • Appraisal cost. 

This is the fee given to an independent appraiser who may be hired by your lender to evaluate the property’s market value, condition and size in relation to similar recent neighborhood sales.

 

  •  Miscellaneous fees. 

Various costs will be incurred during the processing of your loan request, such as notary, courier, and county recording fees.
 

  • 4. Pre-Qualification 

    Pre-Qualification
    This is an assessment by the lender, based on certain basic information given by the borrower (e.g. employment, income, asset information, current monthly debt, and credit worthiness). Based on this quick evaluation the lender makes a tentative decision to pre-qualify the borrower for a certain loan amount. This does not commit the lender at all to the applicant, being only an opinion of the lender.
     

  • 5. Application and Processing
     
  • Loan application forms: where to find them

Our Mortgage Application can be completed on the City National Bank Mortgage website. Fill out all forms accurately and completely, and contact your lender for any questions or clarifications.

Documentation: keeping your papers in order
It’s highly recommended to keep an organized dossier containing both originals and copies of all documents accumulated throughout the entire application process. These will include:

 

  • 2 years of W-2 forms from the employer, or 2 years of tax returns for those who are self-employed

 

  • 2 Recent pay stubs 

 

  • 2 months of bank and money market statements 

 

  • Brokerage, mutual fund and retirement account statements

 

  • Proof of other income sources (alimony, trusts, rental income, etc.) 

 

  •  Credit card statements

 

  •  Auto /boat / student / miscellaneous loans 

 

  • Drivers’ license or form of ID           

 

  •  Copies of visa or green card (for non-US citizens)  

 

Under the Loan Process header, our Application Checklist is available as a guideline.


Underwriting: Keeping in touch
Underwriters, hired by lenders, are analysts who examine all the data from a borrower’s property and transaction, and ultimately determine whether or not mortgages should be issued to the applicant. Loan approval committees will use underwriter's reports during their deliberations to evaluate the property and the applicants’ creditworthiness. Your broker may contact you frequently in the course of this process, so prompt communication is necessary to keep the process running smoothly.

  • 6. Funds

    Signing

    Here comes the best part. Once your lender has agreed to close or fund your loan, the signing can begin. Before this happens, however, be sure to verify and finalize all the documents, and to supply any additional requirements (such as photo IDs or cashiers’ checks). The final loan documents are usually signed in the presence of an escrow officer or a notary.

    Wiring funds
    Your payment is either automatically deducted or wired—in the latter case, the money is electronically transferred between financial companies. Make sure that the wiring instructions, as well as all important numbers, are clarified and checked for accuracy by both parties.

 

         Give yourself a pat on the back. Your loan is now funded!