The Loan Process Start to Finish

As a loan officer I have never forgotten the first loan I ever received. It was an FHA adjustable rate mortgage. I put 3% down and I received a $5000 credit from the seller. I was scared half to death. The payment exceeded my current rental payment by $400.00. My interest rate was 8%... and it could go higher! My stress and anxiety was not helped by my loan officer. Where I was looking for stability and experience he exhibited none of it by shifting to a new company in the middle of the process and giving almost no insight into my loan options! I was flying blind. In hindsight, and for only a slightly higher payment I may have chosen a home in a nicer neighborhood if I new I could afford it or the difference in payment. The FHA loan WAS my best option, but not knowing or being counseled on what to expect from an adjustable rate left me restless and uneasy with my financing.

When I entered the business I vowed to do things differently. My clients were going to be completely comfortable with their loan. They would understand what constituted their borrowing ability and they would feel comfortable that the product they were receiving would be a financial tool they understood and were happy with. After 8 years in the business I can humbly say my goals remain the same. The lending process can at times be difficult and you as the borrower play an integral role in helping the process along.

Step 1. (Prequalify with your Loan Officer)

Your first and most critical step is setting up an appointment to meet your loan officer. Whether your appt. is with a broker or a representative from a direct lender, meeting your loan officer in person will at the very least give you an opportunity to assess his/her integrity and experience in person. At best it will create a lifetime relationship with a valuable professional you will be proud to call a friend. Your meeting should consist of answering and or confirming the following questions: Confirmation of qualifying income, credit score and debts, debt-to-income ratios, down payment capacity and last but not least, BUDGET! Regardless of what your scenario is on paper, the capacity to borrow money does not always equate to an ability to re-pay that money. Every borrower has a lifestyle that a home purchase will most likely have a dramatic impact on. Take this into account when determining your budget. These terms you want to be familiar with!

Step 2. (Confirm/lock rate)

At this stage you have been pre-qualified by your loan officer and his file already includes your income and asset documentation collected in step 1. At this stage you have selected a property to purchase and your offer has been accepted. Now is the time to lock down your pricing and finalize your loan terms. Signatures for the application and disclosure should be signed at this time. The purchase price, interest rate and payment are now finalized. All the components of a loan including the interest rate, origination fee, points, and other miscellaneous fees are hard to sort through. Your lender will help you compare and contrast rates with regard to paying points and zero points. Zero point would be great, but keep in mind nothing is free. A zero point loan will result in a higher interest rate than if you pay points. Your loan officer will help you determine the long term savings vs. the upfront costs of paying points on a loan.

Step 3. (Processing and Submission)

The Loan process works in tandem with various 3rd parties who are handling your purchase transaction. Included with your Real Estate Agent are Escrow, Title, Pest Inspectors, Property Inspectors and Appraisers. Each of these parties provides information to your loan officer that is vital to your loan approval. Before we submit your file to the bank for a �conditional� approval we must confirm through the parties I mentioned above the following: Purchase price, loan amount, appraised value, clear title, sourced funds-to-close, credit and income. Once the file is complete we submit the package to the bank.

Step 4. (Conditional Approval)

At this stage we have submitted a complete package to the bank giving the underwriter all the information to approve you as a borrower as well as approve the property as collateral they are willing to lend on. Once the file is approved we are issued a �conditional approval�. �Conditional� means that the transaction is fully approved once some additional information is submitted. This could include letters to explain past credit delinquencies, current paystubs, bank statements, etc.

Step 5. (Final Approval)

Final approval is issued by the lender once the conditions mentioned in step 4 are received. The bank is confident the buyer is a good risk and we are approved to order loan documents. At this time your loan officer will submit final fees and loan terms to the lender. Loan documents are drawn at this time.

Step 6. (Funding and Closing)

Once the sellers and buyers have gone to closing and signed all the papers, including the Settlement Statement showing all the fees and loan amounts, this paperwork is submitted back to the lender. The lender will then double check everything was signed properly and give a final funding figure. This figure allows the funds from the lender to be released and the property is funded! The process is complete� ALMOST. You now own a loan but not a home. In most California counties title receives the money from the lender via a wire transfer. The following day the executed Grant Deed and Deed of Trust are recorded at the County Recorders Office. It is with this recording that you now officially own a home. The process is complete and you can now enjoy your home!!

And remember...
"Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, and managed with reasonable care, it is about the safest investment in the world." President Franklin D. Roosevelt (1882-1945)

Andy Boron
Augusta Financial
Managing Loan Officer
661-291-2242 - direct
661-803-7100 - cell
661-902-6798 - fax