When your loan officer contacts you and lets you know your loan is approved this general means you have an underwritten conditional loan approval. To most borrowers it would seem like the hard part is over and they can relax and let the good times roll, because their loan is nearly ready to close. The truth is this, now you will need to provide your loan officer with documents supporting the conditions on your loan approval, hence conditional loan approval. Instead of relaxing, you will need to get your paperwork in order and send the loan officer some more required documents. Here are some of the most common underwritten conditions; an appraisal report to support the $ value, a verification of current employment, verification of previous employment if current employment is less than 5 years, proof of current residency, verification of mortgage or rent, a verification of funds to close and the sourcing of any large deposit documented with a paper trail, an explanation of all credit inquiries within the last 90 days, an explanation of any derogatory credit shown on the credit report, all pages of any divorce decree, child support or alimony documents, proof of bankruptcy discharge filings, proof paid of all tax liabilities. These are standard conditions on a conditional loan approval. Keep these in mind when your maneuvering though your loan process and you will get to your closing much faster.
Nearly every loan program available is going to require an appraisal report. This entails a third party licensed appraiser to inspect the property, complete a report and submit the report to an underwriter for review and approval . You can raise your chances of getting the underwriter to give you an “A+” on your appraisal report and signing off on that loan condition, by following these steps. First is the inspection, this takes a few days to schedule, so you should have ample time to get ready. Second, the important things you will need to be aware of for the inspection are, smoke detectors in all bedrooms, one carbon monoxide detector on each level of the home, all fixtures in the home should be orderly and in working condition, windows functioning properly. Third, a clean and tidy home will actually give the appraiser a good view of the marketability of the home and generally increase the value. If you are at the home during the inspection, the least you say the better. In my experience, appraisers will do a better job, determining fair market value, if they are left alone during the entire process. Now your ready for the appraiser to inspect. These steps give you considerable marketability, this is key to getting a higher value.
The appraiser uses the following parameters to come up with comparable properties: Property types have to match subject property type. One mile radius around the subject property. Square footage of comparable’s should be within 15% +/- of the actual square footage of subject property. Sold properties should be closed within 180 days. The most suitable model match, using these search parameters, will have the most weight in forming the appraisers opinion of the subject properties fair market value.
From start to finish the appraisal report will take between 4 to 14 days. There are several variables that will determine the exact time frames, but generally the completed reports will be ready for you to view, within 6 days from the date the mortgage broker ordered the appraisal.
There are numerous mortgage insurance premium companies. The biggest is FHA they carry two different type of premiums that are required no matter what the LTV of the loan. The first is the upfront fee, the premium is 1.75% of the total loan amount. The borrower can pay this fee out of pocket or finance the fee in the loan amount. The second is the monthly fee, this premium was recently lowered from 1.35% to 0.85%, the fee is calculated by multiplying the loan amount by 0.85%, then dividing the total by 12 months, giving you the monthly Mortgage Insurance Premium.
The second most used Mortgage Insurance Premium would be used on a conventional loan. These premiums require an additional underwriters approval. There are several MIP companies in the conventional realm, giving borrowers an array of different options and payment methods. The good news is if your loan is 80% LTV or less, you are not required to carry it. If your over the 80% threshold you will need MIP and there are so many variables it is impossible for me to give even an average monthly amount. The loan officer would need to calculate this for you or you can let me know the following info….
The days of easy money and quick closings are behind us! Today’s real estate transactions have numerous process’s that will take a qualified individual to walk you through, step by step. Most of us complete only a hand full of real estate transactions in our life times. I used to believe that agents and loan officers were not all that necessary..Now i am all for letting a professional guide a client through the process.
Today, the most important step in your transaction is the Mortgage Loan.
Before you start looking for your next home, get to know all you can about the mortgage, first. Check out bankrate.com or other sites that will allow you to see what your monthly payment would be, don’t forget about adding the property taxes and home owner insurance, depending on your financing you may need to add mortgage insurance, as well.
Once your comfortable with your monthly payment, you can get the pre-approval from a mortgage lender. Getting all the required documents to your loan officer is daunting, if you don’t have a scanner or fax machine. Fedex and UPS have scanners and fax machines, if you don’t.
Your loan officer is going to require the following documents to issue you a pre-approval letter: 30 days most recent pay stubs, two months most recent bank statements, showing funds to cover your down payment and closing costs, 2013 & 2014 Federal Tax returns with w-2’s and 1099’s, copies of your driver license and social security, your current credit report containing all three FICO scores.
With the pre approval in hand, you can now find the house of your dreams and get an offer submitted!