Start and Finish Loan Process on a High Note
The key to avoiding stress and steering clear of rip-offs starts with
your home loan approval and ends with the loan closing.
Obtaining a home loan can be a gut-wrenching and nerve-wracking experience,
especially for the first-time homebuyer, but it need not be. Getting off to
the right start, and anticipating what the lender will want from you to
process your loan, is a good way to head off headaches. Knowing your rights
at the end of the process, the loan closing, will help to avoid finishing on
a sour note with your lender.
Remember that when you apply for a loan, you're going to pay a fee of $300 to
$400, so if you're still not sure you've picked the right loan or found the
best rate, now is the time to reconsider. That fee is nonrefundable and
covers the cost of a home appraisal and your credit check. The credit check
will reveal any past financial problems, so if there are any skeletons in
your closet, you need to discuss them with your lender. Now is the time to
inquire about the lender's policy on credit problems, if you have any, to see
if they're willing to be flexible.
Try to be patient during the application process, and relax, your lender
isn't out to rake you over the coals. One way to speed things up is to make
sure you have all the documentation you need, which includes, among other
things: W-2 forms or your profit-and-loss statements if self-employed; pay
stubs (usually one month's worth); bank statements (three months' worth),
including checking, savings, and other assets; and, your past two years' tax
Don't be bashful. Make sure you get all your questions answered. The
application interview could take place in the lender's office, in the real
estate agent's office or even in your home. Afterwards, don't be surprised if
your lender calls you back and asks for more documentation. Just provide it,
understanding that the loan officer has to comply with underwriting
guidelines that are pretty strict. If all goes well, you should survive the
loan application process and get along with your lender.
Once your loan is approved, get a written loan agreement. This binds the
lender to the payment terms and spells out the interest rate, fees, and other
details, including the terms of your interest rate lock-in agreement, if
any. This agreement is key to avoiding nasty surprises at the closing when
you sign the final agreement. The closing is the moment of truth for both
the homebuyer and seller. Lenders know that they have enormous leverage at
closing. It's the most difficult time to resolve any issues with your
lender, and any dispute could jeopardize the sale.
As a result, you could be faced with disputing terms with your lender while
your seller squirms across the table from you. You don't want any room for
mischief or misunderstandings, i.e., a higher interest rate or bigger monthly
payments than you expected. As a general rule, get everything in writing,
and be suspicious of lenders who resist confirming the terms on paper. Be
sure to get receipts for any application fees, too. Another way to avoid
problems is to request your final loan papers several days before the
closing. You'll have the luxury of reviewing the fine print well ahead of
time, which increases your comfort and betters your chances of finding
discrepancies and resolving them with your lender.
Sources used to create this article include the Orange County Register.