12800 Long Beach Blvd. Beach Haven Terrace, NJ
Licensed Realtor - The Van Dyk Group
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requested paperwork to your lender for review. This paperwork will determine which loan programs are available, and which loan program would be the best fit for you. Variables such as your credit history, current credit score, income, expenses and intended use for the home will all factor into the underwriting process.
Application and Underwriting: The application is the next step of the loan process. In order to move the process forward you will need to make application with the lender. Once the mortgage company’s processors have put together a complete package with all verifications and documentation, the file is sent to an underwriter. An underwriter is responsible for determining whether all of the details of the loan submission meets the minimum guidelines as set forth by whatever agency has set the guidelines for the loan type applied. Fannie Mae & Freddie Mac, the two government sponsored entities that oversee conventional loan markets set the underwriting guidelines for conventional loans. The federal government's Department of Housing and Urban Development sets the underwriting guidelines for FHA loan. The federal government's Department of Veteran Affairs sets the guidelines for VA loans and so on with all loan types.
Current income, past income, and the likelihood of continuing income is considered. Income sources are verified to determine if they meet approved sources. Assets are verified for down payments and financial reserves. The sources of the funds are verified to determine if they came from sources accepted by the underwriting guidelines. Individual deposits are verified or "sourced." Past credit history is analyzed to determine the risk that is being taken in lending the money. Consumers with a history of not paying their monthly bills on-time or who have collections for unpaid financial obligations are considered by the underwriter to determine the risk factor. Credit reports are analyzed to determine how much credit a consumer has available vs. how much credit that consumer is using to determine the debt load the consumer is carrying and how that is likely to affect their ability to pay. These and literally hundreds of other details are verified to see if they meet the underwriting guidelines.
The Appraisal: An appraisal is an estimate of value made by a professional appraiser. The appraiser's job is to impartially determine the value of a house and deliver a written report detailing why he / she believes the value is what they have determined and why. An appraiser must use one of the three following approaches:
1.) The Cost Approach. This method derives what it would cost to replace the existing improvements as of the date of the appraisal, less any physical deterioration, functional obsolescence, and economic obsolescence.
2.) The Comparison Approach: This method uses other comparable properties "comps" similar in size, location and characteristics of the subject property that have recently sold.
3.) The Income Approach: This approach is generally used in the appraisal of investment properties. This approach provides an objective estimate of what a prudent investor would pay based on the probable net income from renting the property at market value.
The method of ordering appraisals is mandated by the federal government. In response to what had been determined to be significant appraisal fraud perpetrated on the housing markets in the years following the economic collapse in 2008, the federal government put restrictions on how appraisals must be ordered. Gone are the days when a loan originator could call up his trusted professional appraiser and request an appraisal directly. Now appraisals must be ordered through an independent third-party appraisal management company who will randomly assign the appraisal to one of the licensed appraisers contracted to do appraisals for the company. Appraisals take 7-10 days to complete.
Conditional Approval: Once the underwriter has reviewed the application and documents submitted they will either decline the file, or issue a conditional approval. A conditional approval is exactly what it sounds like, an approval based on the documents provided, with additional conditions that if met, will result in a successful loan transaction. The conditions on the approval will be additionally requested documents, clarification of previously submitted information and other tasks that must be accomplished prior to the underwriter issuing a final approval.
Final Submission - Clear to Close: Once the Loan Originator has gathered all of the conditions on the conditional approval, and all of the tasks required by the underwriter have been accomplished, the conditions are submitted along with the appraisal, the underwriter will go over all of the documents, appraisal, and verifications so they can issue their final approval. At this point the federally required (CD) Closing Disclosure is sent out.
Closing Documentation: Once you acknowledge the CD (Closing Disclosure) the Closing Department prepares the final loan documents for signature. Please see the notes below in regards to the laws (TRID) pertaining to the Closing Disclosure. There are specific timeframes required by law that may impact your closing date.
Closing: Your lender will forward the loan docs to the escrow/title company handling the closing. The escrow/title company will finalize the title documents that will need to be signed with the loan documents. After you sign the documents and the closing funds transferred, the escrow/title company will release the file for recording (which generally takes place the following day). Once the new deed has been recorded by the county recorder's office, legal title will have officially changed hands and the loan will be completed.
Pre-Qualification & Pre-Approval: The pre-approval process begins you submit the
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