Updated: Oct 15, 2017
Comprehensive Overview of the Mortgage Process
Let’s make your home hunting more enjoyable! It takes some homework, and gets the paperwork out of the way upfront. The following details are provided by Derek Prickett of Supreme Lending, and these are items needed for a mortgage common to most lenders. It may appear overwhelming at first glance - call Derek for help if you need any assistance. Derek is licensed to lend in North Carolina, South Carolina, Tennessee, Georgia and Florida. There’s no obligation to use Derek as your lender, however he can get you set up with the full Pre approval you will benefit from before you start viewing homes.
Derek Prickett, NMLS ID# 118546 Call 828 273 8071
Request an appointment to speak on the phone or in person, email Derek.Prickett@SupremeLending.com, or text Derek at 828 273 8071
AllstarCertified Agents @ Keller Williams are highly-trained Realtors®, who know how to get you fully prepared to find, negotiate for, and win the home of your choice.
It’s imperative to get a full loan pre-approval in most markets before looking at homes. This preparation will:
Make it MUCH more likely that your offer will succeed. In a market with low inventory (when not many homes are available) there are often multiple offers placed on a home for sale. This is a very high probability below average price point for the area you are purchasing in. Average price points have been rising in most markets.
Get the paperwork out of the way upfront - and allows you to focus on the ‘fun’ part knowing that if you happen upon that perfect home, it will much more likely be yours!
Make the sellers more likely to view an offer and even allow a showing, many sellers exclude showings to potential buyers without the preapproval or prequalification in place
While a pre qualification takes a few minutes, and is not seen as something very concrete. Pre Approval takes a little longer, however, it gets the ‘work’ out of the way that is necessary anyway, and prevents any surprises!
Before viewing homes, please send the following:
Drivers’ License, Passport or other Gov’t ID
30 days’ worth of consecutive paystubs (make sure it is a full 30 or more days). This needs to be an actual paystub including the name of the Employer, Year-to-date totals, etc.
2 years’ personal tax returns with all schedules (state tax returns are not necessary)
We need a copy of your current filed returns or proof of extension if closing after April 15th.
If you were required to pay, please send proof of payment to the IRS.
Most recent past 2 years or W-2s, 1099s, and/or K-1s (need current W-2 and 1099 for loans closing after February 15th)
Bank Statements-Need full statements for last 60 days, all numbered pages even if blank.
please send full statements, not a transaction history printed from the computer. You can “print to PDF” from your banking site online or you are welcome to stop by and we can help you print full statements, if that is easier. Otherwise, we find that names, account numbers, and/or balances are missing and the underwriter will still need to see a statement.
Please note that if there are any large deposits on your statements (totaling more than 50% of your monthly income and not direct deposit items), we will need to “source” those deposits. If there are any, send any deposit slips and or check copies you have. If you do not have these, the bank can provide copies. Also, please remember to make copies of any large deposits you make until after closing.
Once under contract please send the following:
Copy of cleared Earnest Money and/or Due Diligence checks along with statement or transactions history showing balance after clearing. Transaction history will need to have a date range from date cleared back through date of last statement we have to show a running balance. We need to show that this has cleared in order to give you credit towards the purchase price
Homeowner’s insurance, please let us know the contact information for your insurance agent as soon as you can. Once you have chosen a policy that works for you, they will need some information from us to get the binder completed. You do not have to pay for it now, but we need to know what the premium will be and have the declarations page for the underwriter to review.
Please send any of the following if it applies to your specific situation:
Pension-Will need letter from Pension Administrator stating monthly amount and how long it will continue.
Social Security-need current year statement showing what you will receive in the current year. If you do not have a copy, this can be accessed at the following link, https://www.ssa.gov/myaccount/
VA disability-need letter from VA stating current amount received. If you do not have this, it can be accessed at this link, https://www.ebenefits.va.gov/ebenefits/homepage
Reserve Assets-If you are using 401K or IRA for reserve assets, we will need the Terms of Withdrawal to show that you will have access to the funds if needed and what any potential penalty and tax consequences will be.
Down Payment from account other than checking/Savings (needs to be available 2 weeks before closing):
if gift, need gift letter (we will provide) copy of cleared gift check or wire transfer confirmation, deposit slip and statement or transaction history showing funds in your account
If from IRA, 401K, or other tax-deferred account, will need statement from originating account showing funds being transferred or debited, and the statement showing the liquidated funds being credited into an account for closing (checking, savings, or Money Market account) or confirmation of wire to closing attorney office. We will also need terms of withdrawal for the account.
If from investment account: will need statement from originating account showing funds being transferred or debited, and the statement showing the liquidated funds being credited into an account for closing (checking, savings, or Money Market account) or confirmation of wire to closing attorney office.
Down payment from pending sale of real estate:
Need copy of contract, Need attorney contact for that transaction (so we can request Preliminary Closing Disclosure),
Joint bank accounts with person not on mortgage loan: need a letter from them stating you have full access to all funds in the joint account(s)
Additional Real Estate Owned-Statements for Mortgage, Taxes, Insurance and HOA, if applicable. Each needs to show the property address and annual or monthly fee. Copy of lease and security deposit, if converting existing home to a rental home.
Divorce-If you pay or receive alimony, need documentation stating how much and length of time
If currently separated, we will need a copy of the separation agreement or a “Free-Trader” agreement
Child Support- If you pay or receive Child Support, need documentation stating how much you receive or pay and length of time.
Self-employed: 2 years’ tax returns showing SE income. If business is incorporated or and LLC, we K-1s, if you own 25%or more of the business, we need 2 years’ business tax returns. We will need a “year to date Profit & Loss statement” so that the underwriter can see if the income is looking like it is increasing or decreasing. I have a simplified format if you need one and can help you fill it out. If any down payment funds are from business bank accounts, we will need 60 days’ worth of full statements
Bankruptcy, Foreclosure, or Short Sale-Need Bankruptcy discharge papers or Foreclosure Deed or Short Sale Settlement Statement. If you do not have a copy and cannot get one, we will need to know where the case was filed or so that we can try and help you get copies. We will also need a letter explaining circumstances that led to bankruptcy, Foreclosure, or short sale.
VA loan Application: Please send your DD214 and the contact information your nearest living relative.
Student Loans: Provide statements for any student loans that are in deferment or are currently on an income-based repayment plan. The underwriter will need to confirm the terms you are currently paying and when those terms will end.
Living Rent Free letter: If you are living rent free and are using a government loan, please have the person you are living with sign a short letter stating that this is the case.
Frequently asked questions about mortgages, from Supreme Lending:
Do not rely on these notes to determine your mortgage - things change frequently. Always discuss with your loan officer before proceeding.
Q: How is my interest rate determined? Two challenging questions that surround every loan are - How does a lender determine my interest rate? What can I do to ensure I get the best possible rate? To answer these questions, we must consider three criteria on which a lender bases their decision. Credit Rating - The credit score is the most important point in mortgage lending. The credit score is not the only aspect considered in lending, however in most cases it is the most crucial. Lenders will also look for multiple late payment occurrences over the last two years. Ratios - Secondly, the borrower's monthly obligations (this does not include utilities, phone, or items generally not reported on a credit report) are calculated and reviewed by lenders. Two ratios are determined, frontend and backend. For most lenders, a "grade A" conventional loan is one in which a borrower has a front-end ratio less than 28% and a back-end ratio less than 36%. For example, a borrower has a gross monthly income of $4,000, a car payment of $350, a credit card payment of $55, and a new house payment of $1,000. The calculations are as follows: $4,000/1,000 = 25% Front-end Ratio $4,000/1,405 = 35% Back-end Ratio Down Payment - Thirdly, the lender factors in the amount of a borrower's initial down payment. The less money spent on the down payment means a higher interest rate charged by the lender. Simply stated, more risk for the lender equals a higher rate for the borrower. Even if a borrower has perfect credit and wants to put 0% down, their rate will generally be about ½% higher than a person who puts 10% down. Ask Supreme Lending for details on lenders who accept 0% down payment loans. After a lender has considered the three points described above, the borrower's application must pass the specifications set by an underwriting department for the loan to be approved. Q: What are discount points? Lenders generally charge discount points for the following purposes. 1 discount point equals 1 percent of the loan amount. Discount points are used to lower the interest rate. The discount fee is normally charged as a line item on your HUD or settlement statement at the time of closing. Q: How much should my closing costs be? Your closing costs depend on the type of loan you decide is best for you. Depending on your home state, you normally pay the following amounts. - Origination Fee: 1% of the loan amount - cost of establishing a loan - Discount Points: Used to lower the interest rate (refer to Discount Points section above) - Appraisal Fee: Dependent on the house size - Credit Report Fee: Charge for pulling your credit report from the credit bureaus (Refer to Credit Report question in this FAQS section) - Underwriting Fee: Payment to the end investor for services provided - Processing Fee: Payment to the lender for services provided - Flood Certification Fee: Certification that your property is not in the 100 yr. flood zone - Title Charge: Payment to the title company for closing your loan - Title Policy: 1% of purchase price depending on the state (the seller normally pays) - Recording Fee: Payment for filing fees depending on the state Many of these costs are third party charges and cannot be negotiated by you or the lender.
ATTORNEY - $800-1200 Q: What is the purpose of a credit report? An important key point a loan officer considers when helping you decide which lender/program is best for you is to view your credit. The purpose of this report is to pull your credit history from each of the three major credit-reporting agencies: Equifax, Experian, and Transunion. Your lender is required to use outside companies to acquire your credit report, as they are impartial to the findings on your credit report. Your account balances and account history on your report are verified. You will be provided with a "credit score”. Q: What is the difference between Conventional and FHA loans? There are many differences between conventional and FHA loans. In this portion we will outline some of the major differences for you. On FHA loans, the minimum down payment is 3.5%. On a conventional loan, the down payment must be at least 5%. Additionally, the money on a conventional loan must be "seasoned" (60 days in the bank) prior to purchasing the home or be proceeds from the sale of your existing home. A FHA loan requires an upfront Mortgage Insurance payment; a Conventional loan does not. Both do require monthly Mortgage Insurance premiums based on the LTV. The taxes will be the same on either type of loan. A common mistake is that people believe is their taxes will vary depending on the loan they choose. The title company that closes the loan submits the taxes directly to the lender. If you reside in an attorney state, your representation is the one who orders the tax certificate from the appraisal district. Taxes reported to the lender will be included in your monthly loan payment. There is no markup or service charge over and above the actual tax amount. Homeowner's insurance works the same as taxes. You pay the lender for your policy amount on a monthly basis. The lender will escrow this amount and send it to your insurance company at the end of the year when renewal is due. Interest rate differences will vary depending on the lender you choose. Most importantly, ALWAYS ask for the lowest rate for the type of loan you are obtaining. The principal and interest portion of the payment is calculated by configuring the loan amount (MIP rolled into the balance on FHA) and term into an amortization schedule to calculate the payment amount. Ask your Supreme Lending representative for additional information on conventional and FHA loans.
Different Type of Loan Programs