A mortgage loan, simply put, is to pledge a property to a creditor as security against the debt repayment. In other words, if a borrower is unable to repay the loan in the stipulated amount of time, then the house owned by him can be taken away by the creditor. Moreover, the loan repayment not only includes the principal amount, but the fees and interest as well. If you are looking to apply for such a loan, the following steps will help you get a better understanding of the process.
Find a Federal Housing Association (FHA) authorized lender through the FHA website. Then, analyze and determine the amount you can borrow and pay back, and submit your application to the loan officer.
After submitting the application, typically, there would be a face-to-face meeting with the officer. He would assign a specific case number to your application, keep that number confidential, as it is needed for the overall process of the application.
This step consists of mortgage loan processing, where a 'needs letter' will be provided to you. It will outline the requisite documents for your loan to qualify for underwriting.
The underwriter will then scrutinize your application, and decide whether the loan package proposed by the loan processor is acceptable. The four C's―your collateral, capacity, capital, and character, are closely studied during this step, and it is then determined whether you would be receiving the loan.
The last step is approval or rejection of the application. If your application is approved, it will then be directed to the closing department. This department will provide you with the closing documents. The closing funds will then be exchanged through cashier's check, draft, or wire. Then the documents are closed and signed by both parties (you and the bank), and the process is completed.
In the final step, it is important to work out the market value and final approval terms with the officer. This process can also be followed for refinancing.
Here are some tips you should follow:
- Read the loan agreement thoroughly, as it is extremely important.
- There should be clarity regarding which property needs to be financed/refinanced.
- Start the due diligence early.
- For pre-approved mortgage, speak to a number of brokers and find the most suitable scheme for you.
- If all this seems too much of a hassle, then do not hesitate to seek professional advice.
Finally, always inform the financier or the creditor of any changes that you might want to make in your application process, in advance. This is significant, because on the closing day, you may have to certify that there are no major changes in the loan application.