An Overview of the Loan Process
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Organize Your Documents
A properly documented loan application makes your loan process go smoothly. This checklist will help you gather your paperwork.
- Complete and sign the residential loan application, Form 1003, credit authorization and borrower certification forms. Page 5 of the application is a continuation page in case you need additional space for your assets or liabilities. If you make a mistake while filling out the application cross it out, and make a change. Do NOT use whiteout.
- If you are salaried: provide W-2's along with 2 years of Federal Tax Returns, as well as one month of paystubs for all borrowers. If you are self-employed, provide Federal Tax Returns (business and personal) for the previous two years, including all schedules, and a business YTD profit and loss statement. (Note: provide copies of all requested documents. Do not provide original documents unless specifically asked to do so)
- If self employed, provide proof of a two year history for the business. This can be accomplished by evidence of a business license or a letter from your CPA indicating they have provided business tax services for 2 years for this business.
- If you own rental property, provide recent rental or lease agreements and tax returns for the previous two years, including all schedules.
- Provide bank statements for the most recent two months, and recent quarterly statements for stock, mutual funds and IRA/401K accounts.
- If you are requesting a refinance, provide a letter explaining the purpose of the refinance. Also, provide a copy of your most recent mortgage statement.
- Provide a copy of your California driver's license and your social security card. If you do not have the original or copy of your SS card, your local Social Security office can assist you in getting a new one.
- If applicable, provide a copy of your divorce decree and settlement agreement.
- If you are NOT a US citizen, provide a copy of your green card (front & back). If you are NOT a permanent resident provide a copy of your H-1 or L-1 visa.
- If any borrower has filed bankruptcy, provide the Discharge Notice, Filing and Schedule of Creditors.
- For any refinance, provide all "NOTE" documents for loans that are secured by your property. (This will be with your closing loan documents from the prior loan transaction or you can secure a new one from your lender's customer service department)
- For any refinance, if your property is held in a family 'Trust', provide a copy of the trust.
Get Qualified
Getting qualified before you apply for a loan can help you understand how much you can borrow.
When buying a home, you may be pre-qualified or pre-approved. You can be pre-qualified over the phone or on the Internet in a few minutes. Pre-qualification is not as useful as pre-approval. Pre-approval requires a more rigorous process, including verification of your credit, income, assets and liabilities. It is highly recommended that you be pre-approved before you start looking for a home.
Being pre-approved will:
- Inform you of your maximum affordable home value, and save you from previewing properties outside your price range.
- Put you in a stronger negotiating position with the seller, because the seller will know your loan is pre-approved.
- Help you close quickly, since your loan is pre-approved.
Get Educated
What loan program is best for your situation? There are a wide variety of loan programs available but not all loans are good for all situations.
- Think about how long you plan to keep the loan. If you plan to sell your home in a few years, you may want to consider an adjustable rate or balloon loan. If you plan to keep your home for a longer time, you may want to consider a fixed rate loan.
- Understand the relationship between rates and points. Points are considered prepaid interest and may be tax deductible. Each point is equal to 1 percent of the loan. For example 1 point on a $150,000 loan is $1,500.
- Compare different loan programs. With so many programs to choose from, it's hard to figure out which program is best for you. It is imperative you find a trusted and competant advisor to assist you in determining the right type of loan for your needs. Synergy Capital provides you with educated mortgage professionals to assist not just in securing a loan approval, but in an approval for the loan that best meets your short and long term goals.
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 or allow any credit 'inquiries'. 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 insure you keep all depost and withdrawal receipts so a "paper trail" can be accomplished.
- Do not go out of town around the closing date. If you do plan to be out of town when your loan is expected to close, you may sign a power of attorney, to authorize another individual to sign on your behalf, however this can be very challenging and may disrupt your loan closing on time.
- Notify your loan officer before applying for any other credit, including credit cards, personal loans or even with another mortgage company. Some loan programs have strict guidelines regarding your credit score. Credit inquiries may lower your credit score and may have an adverse affect on your loan approval.
Close the Loan
After your loan is approved, you will be required to sign the final loan documents. This will normally take place in the presence of a notary public. Be prepared to:
- Bring a cashiers check for your down payment and closing costs if required. Personal checks are normally NOT accepted.
- Review the final loan documents. Make sure that the interest rate and loan terms are what you were promised. Also, verify the accuracy of the name and address on the loan documents.
- Sign the loan documents. The notary will require that you have your picture ID with you. Some lenders also require to see your original Social Security card.
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 three days to review the documents before your loan transaction can close. Purchase transactions do not have a three day rescission period.