Shopping For Your Loan Part One
When shopping for your home, you will spend time and energy looking for one that meets your needs and that is affordable for your situation. Choosing the right loan should be approached with the same outlook. When you’re preparing to purchase your home, you need to shop for a lender in a very similar way. We will outline these steps in multi-part series.
What do I look for in a lender? Choosing a lender carefully is important. You want your lender to be financially stable. Your lender should want you, as their customer, to be satisfied with your experience. Being comfortable with your lender means that you will be able to ask questions and receive helpful advice. Ask yourself if it’s important to you that the lender knows home values and conditions in your area, if so, you will want to find a lender that has the authority to approve and process your loan locally. If you choose a local lender, it will be easier for you to monitor the status of your application. Ask family and friends for recommendations. You can talk to more than one lender, compare their rates and fees. Using the Good Faith Estimate (GFE) tool allows you to compare interest rates and settlement costs that are offered by different lenders and mortgage brokers.
What costs should you expect with the loan origination process? There are fees that you will need to pay to process your loan. Until you’ve received your Good Faith Estimate and have notified the loan originator that you’re planning to proceed with your loan, you’re not required to pay any fee other than the fee for your credit report. Once you’ve notified your lender that you’re planning to move forward, there may be additional fees to cover any additional charges. These fees are usually non-refundable so make sure that your lender is clear about what they are for.
What is my Good Faith Estimate? This is a three page document that is legally required. The lender will provide it to you when you apply for your mortgage loan. It contains information specific to the particular loan being offered to you. It should include all fees paid before closing and all of your closing costs. With this document, you should be able to easily compare different mortgage loans and settlement costs from different loan originators. It should make it easier for you to shop for the best loan for your situation. Like with any major purchase, it’s a good idea to interview at least three loan originators and compare their interest rates and fees. The loan originator is obligated to stand by the Good Faith Estimate. Some charges can change slightly while there are other costs that cannot increase more than 10 percent. A few of the charges that can change are your initial escrow deposit, daily interest charges, and your homeowner’s insurance premium.What do you need to do to secure your loan? Once you’ve agreed to use a particular lender, you will need to complete your loan application process. To do this, you will need your pay stubs for the past two to three months, w-2 forms for the past two years, information on any debts you have, your recent bank statements, tax returns for the past two years, proof of any other income and your sales contact. To complete the processing of your loan, sometimes referred to as underwriting, you may have to pay for a professional appraisal of the property you want to buy. The loan underwriting process can sometimes take up to 45 days.