What is the difference between a pre-qualification and a pre-approval? A pre-qualification determines what you may qualify for based on your income and a brief description of your debt. A pre-qualification does not take assets and credit into consideration. On the other hand, an underwriter does a pre-approval. The process determines what borrows are qualified to purchase based on the underwriting decision. The pre-approval takes assets, liabilities, and credit history into consideration. The dollar amount between a pre-approval and pre-qualification can be very different. Many sellers will require that the borrower have an approval prior to accepting a contract.
How long does the loan process take?
The loan process generally will take a few days from the time the borrower provides all documents to verify the information given in the loan application. These documents will typically include: 30 days pay stubs; 60 days bank statements for all checking, savings, and investment accounts; a signed and completed loan application; a signed copy of the good faith estimate and truth-in-lending disclosure; copy of accepted sales contract, and a copy of borrower’s driver’s licenses. Other items may be requested, for example, recorded divorce decree, certificate of eligibility (for VA loans), transfer orders (for VA loans), W-2’s, and tax returns. The transaction coordinator may call requesting such items. The more timely these documents are received, the more efficient the process. The entire mortgage loan process should be completed in no more than four weeks, but in most cases, the loan will be ready to close in only two to three weeks.
Who orders the appraisal and survey? Beach Community Mortgage will order the appraisal and the title agent will order the survey.
What happens if the appraisal comes in below the sales price? An appraisal lower than the sales price will affect the amount of money the lender is able to loan because the maximum lendable amount is based on the lesser of the sales price or the appraised value. Two common ways to remedy this issue is to negotiate with the seller for a lower sales price or provide a larger down payment for the difference.
What is “locking my interest rate?” A rate lock is a guaranteed rate for a specified period of time. For example, if the borrower has a 30-day lock, the rate is guaranteed for 30 days. Once there is a rate lock, it cannot go up or down in that specified period. If the market goes up, the borrower is protected from the increase. At the same time, if the market goes down, the locked rate cannot move down with it. A 30 day lock is an option at no cost, and locks of 45, 60, 90 days and longer are available with a fee. Keep in mind the borrower must close the loan within the period of the lock to get the guaranteed rate; if the loan closes after the lock has expired, the loan may be subject to the current market price.
What are discount points? Discount points are based on a percentage of the loan amount. The following is an example of how discount points are calculated. One point paid on a loan amount of $100,000, would cost the borrower $1000. $1,000 is paid to “buy” down the rate which means a lower interest rate on the loan.
Once I sign my application, am I obligated to borrow money? No. A borrower only signs an application to verify that the information provided was truthful and accurate.
How much will I have to bring to closing? Can I bring a personal check? Beach Community Mortgage will provide the most accurate estimate possible at the time of application in the form of a Good Faith Estimate. The title agent will have the exact amount needed for closing approximately 48 hours prior to closing. In most cases, certified funds in the form of a cashier’s check is the most likely method for payment at closing.
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