The Loan Process

It is our goal to educate our customers and simplify the loan process. That's why we have outlined the steps you will encounter during the process and the order in which they happen. From start to finish, we provide no less than exceptional service - we are available and involved every step of the way.

1. Gather Necessary Documents
2. Pre-Qualification/ Pre-Approval
3. Compare Mortgage Options
4. Loan Application
5. Processing
6. Title, Appraisal and Credit
7. Closing

1.  Gather Necessary Documents—Borrower/Co-Borrower needs to provide:

• 1 month of pay stubs, 2 years W-2s, last 2 years of employment information (if you have not been at the same job for two years, we will need previous employment information going back two years). 
• If self-employed, provide tax returns for last 2 years along with year-to-date Profit and Loss statement. 
• 3 months of bank statements. 
• Most recent investment statements (stock, IRA, 401K, Life Insurance, etc.). Last 2 years primary residence addresses. If a purchase, sales contract, realtor information.
• If you receive Child Support or Alimony, you will need court ordered documents showing dates and proof of received payments for last 3 months.
• You may also qualify for no documentation, limited documentation or stated income loans, which may reduce the above mentioned items you will need to produce. Ask your mortgage advisor if this which would be best for you.
• If the loan is a Refinance, we will need a copy of deed and tax information for your home.

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2.  Pre-Qualification/ Pre-Approval-- When buying a house, you may get pre-qualified or pre-approved. A pre-qualification can be done in a few minutes over the phone while providing only limited information to your Mortgage Advisor.  A pre-qualification states the amount of the loan you are able to qualify for based on the information provided (essentially showing you what you can afford based on your income and debts).  A pre-qualification is not as beneficial as a pre-approval, which is a more rigorous process including verification of your credit, income, assets and liabilities. It is highly recommended that you get pre-approved before you start looking for a home. This will help you:  1. Find out the maximum house you can buy, so you don't waste time looking for properties you can not afford. 2. It puts you in a stronger position when you are negotiating with the seller, because the seller knows that your loan is already approved.  3. Helps you close quickly, since you know your loan will be approved once you identify a property.

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3.  Compare All Financing Options

Determine how long you plan to keep the loan. If you plan to sell the house in a few years you may want to consider an adjustable rate mortgage. On the other hand, if you plan to keep the house for a longer time, you may want to look at fixed loans.

Understand the relationship between rates and points. Points are considered to be prepaid interest and are tax deductible. Each point is equal to one percent of the loan. So for example: 1 point on a $150,000 loan is $1,500. The more points you pay, the lower the rate will be.  Points and rate are inversely related, as you pay more points, your rate goes down.  The fewer points you pay the higher your rate will be.  

• Once you determine how long you believe you will keep your loan and you understand the relationship between rates and points, you can make a better decision on exactly how many points you should pay.  Depending on the size of your loan it may take between 3 ½ to 5 years to recoup each point you pay.  For example, if you pay one point on a $150,000 loan = $1,500, and in doing that your rate is .25 % lower, and saves you $30/month by having a lower payment, it will take you 4 years and 2 months to breakeven.  Every payment after that 50th will save you $30/month.  So if you are going to be in your home longer than 4 years and 2 months, you will save money.

Compare different programs. Shopping for a loan can be difficult. With so many programs to choose from, each of which has different rates, points and fees, it's hard to determine which program is best for you. An experienced Mortgage Advisor from Sabre Financial group can help you make a decision that's best for you.  Our goal is to educate you on all of your options and help you determine the loan program best suited for your situation and long term financial goals. 

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4.  Loan Application--The loan application, also know as the 1003 (ten-oh-three), is the formal start of the loan process and can be completed in a face to face meeting with a Mortgage Advisor or over the phone in 20 to 30 minutes.  Your Mortgage Advisor will work around your schedule to do what is most convenient for you.  At the time of the loan application all required documentation will be collected as well. The various fees and closing cost estimates will have been discussed while examining the many Mortgage Programs and these costs will be verified by the Good Faith Estimate (GFE) and a Truth-In-Lending Statement (TIL) which the borrower will receive within three days of the submission of the application to the lender.  It is always recommended to ask any mortgage professional to put their quote in writing for you.

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5.  Processing-- Once the application has been submitted, the processing of the mortgage begins. The Processor orders the Credit Report (if it hasn’t already been completed), Appraisal and Title Report. All Income/Asset/Employment information on the application is verified. Anything derogatory on your report, such as late payments, collections and/or judgments require a written explanation.

• Title—Title insurance is required by all lenders when purchasing or refinancing a property in PA and this is typically provided by the closing agent .  The title company will perform a “title search” to make sure the property is clear of all liens, or the liens will most likely have to be satisfied at closing.  They will also contact local tax collectors to make sure all the taxes are current and then issue title commitment. 
• Appraisal--Completed by a licensed appraisal, who will determine the value for property.  The appraiser does not create value for the property, the appraiser interprets the market to arrive at a value estimate. As the appraiser compiles data pertinent to a report, consideration must be given to the site and amenities as well as the physical condition of the property. Considerable research and collection of data must be completed prior to the appraiser arriving at a final opinion of value.  This usually takes between 3-7 days to be completed. 
• Credit Reports--A Credit Report refers to a consumer credit file, which is made up of various consumer credit reporting agencies. It is a picture of how you paid back the companies you have borrowed money from, or how you have met other financial obligations. There are five categories of information on a credit profile: Identifying Information, Employment Information, Credit Information, Public Record Information, Inquiries.

Credit scoring is a statistical method of assessing the credit risk of a mortgage application. The score looks at the following items: past delinquencies, derogatory payment behavior, current debt levels, length of credit history, types of credit and number of inquires. The most common score, (now the most common terminology for credit scoring) is called the FICO score. This score was developed by Fair, Isaac & Company, Inc. for the three main credit Bureaus; Equifax, Experian, and TransUnion.

FICO scores are simply repository scores meaning they ONLY consider the information contained in a person’s credit file. They DO NOT consider a person's income, savings or down payment amount. Credit scores are based on five factors: 35% of the score is based on payment history, 30% on the amount owed, 15% on how long you’ve had credit, 10% percent on new credit being sought and 10% on the types of credit you have. The scores are useful in directing applications to specific loan programs and to set levels of underwriting. For a detailed explanation, speak with your Mortgage Advisor.

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6.  Obtain Loan Approval-- Once your loan application has been received we will start the loan approval process immediately. This involves verifying your:

• Credit history
• Employment history
• Assets including your bank accounts, stocks, mutual fund and retirement accounts
• Property value

Based on your specific situation, additional documents or verifications may be required. To improve your chances of getting a loan approval:

• Fill out the loan application completely.
• Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
• Do not make any major purchases. Do not buy a car, furniture or another house till your loan is closed. Anything that causes your debts to increase might have an adverse affect on your current application.
• Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us.
• Do not go out of town around the closing date. If you do plan to be out of town during the loan process, please let us know how we may contact you. 

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7.  Closing -- After your loan is approved, you will be required to sign the final loan documents. This will typically take place at the title company or with a lawyer present. Be prepared to:

• Bring a cashiers/certified check for your down payment and closing costs if required. Personal checks are normally not accepted for large amounts. 
• Bring two forms of valid ID
• Review the final loan documents. Make sure that the interest rate and loan terms are what you were promised. Also, verify that the name and address on the loan documents are accurate.

Your loan will normally close shortly after you have signed the loan documents. On refinance and home equity loan transactions federal law requires that you have 3 days to review the documents before your loan transaction can close.

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