FAQ's Loan Process
While the document requirements may vary depending on the type of loan and your credit score, for a typical loan application the lender may require personal documentation such as the most recent month's pay stubs or other proof of income, two years of W-2 forms, two years of tax returns and/or P&L statements for self-employed applicants, recent records of dividends and interest received, the past two or three months' bank and investment account statements, an itemized list of all current debts, a copy of divorce decrees, and a written explanation of any past credit problems and/or bankruptcy details. An experienced mortgage professional will help you determine the documentation requirements for your specific loan application.
The length of time between the submission of a loan application and the funding of the loan can vary depending on a variety of factors, such as your credit score, income and debt levels, the loan-to-value ratio, the completeness of your supporting personal documents, the findings of the home appraisal and inspection, and so on. Sales contracts are generally written with a closing date approximately 30 days out, and most purchase loans can be completed within 30 days. Refinance transactions can typically close more quickly than a purchase transaction because fewer parties are involved in the transaction.
Mortgage underwriting is the process a lender uses to determine if the risk of lending to a particular borrower is acceptable. Most of the risks and terms that underwriters evaluate are related to a borrower's credit, the borrower's ability to pay, and the value of the home or property that will be held as collateral for the loan.
The amount of money needed to close the loan is composed of your down payment and closing costs as well as prepaid items such as property tax and insurance. At the time of your loan application, your lender will provide you with a good-faith estimate of all settlement closing costs. Later, usually within 24 hours prior to your closing, your closing agent will provide you with the precise sum of money required for closing.
An escrow payment is the portion of a mortgage payment designed to pay for expenses such as real estate taxes, homeowners insurance and mortgage insurance. It is a monthly payment in addition to the principal and interest payment. It is generally calculated by taking the total of all anticipated real estate tax and insurance payments for the year and dividing that number by 12. Escrow accounts are designed to help make sure there is always enough money to cover certain recurring expenses as they become due.