You likely have other concerns to address with the move, such as preparing for improvements prior to your move and selling a current home.

This is why I am here: to make your loan a smooth and stress-free process.

Determine how much to borrow - Calculate Loan Amount

The first thing to do prior to purchasing a home or refinancing is to determine how much you can truly afford. You may be able to qualify for more than you thought possible, however you may not want to borrow an amount leaving you financially strapped. Determine your own budget prior to meeting with a mortgage counselor to know what you can afford. Factor in taxes, homeowners insurance, possible HOA fees and mortgage insurance to your monthly principal and interest payment.

Pre-Qualification/Pre-Approval

Now you are ready to be pre-qualified. You will need to supply confidential information, such as (but not limited to) about your employment, income, assets, liabilities, and housing history. You will also be asked for permission to pull your credit report to review your credit history and scores issued by the credit reporting agencies. This is why it is extremely important that you trust the individual lender with whom you are working

A lender wants to have as much information as possible so that they can determine the borrower's ability and willingness to repay the loan.

Once the lender has reviewed all the necessary information, they will determine the max amount that you may qualify for. You will then be issued a LSR (Loan Status Report) to give to your Realtor. An LSR is an important report to provide to your Realtor as it shows that you are serious about buying a home and the amount for which you qualify. It also sends a message to the seller that you are in position to purchase their home. If a seller has two contract offers at the same price and one has an LSR attached to it and the other does not then they will without a doubt accept the offer with the LSR.

Program, Rate, Points and APR

When choosing the best program for you, the most important consideration is how long you intend to keep your home. An ARM or Balloon loan often meets short-term needs while a fixed loan may be better suited for long term needs. Rates will differ based on the program you choose. A good mortgage professional can present several applicable choices for you needs.

You may also have the option of paying points. Paying points is determined on how long you intend to stay in your home. For instance, if you borrow $200,000 and the rate is 7%, you may want to consider paying 1 point or 1% of the loan up front. A 1% point up front is equal to $2,000. For this example, it may bring your rate down to 6.5%. Your monthly principal and interest on a 30-yr fixed rate loan would be $1,330.60 at the 7% rate and $1,264.14 at the 6.5% rate. You enjoy a monthly savings of $66.46. You need to keep the loan 30 months or 2½ years ($2,000 ÷ $66.46) to break even or recoup the $2,000 paid up front. If you keep the loan any longer than 2½ years then it is definitely in your best interest.

The APR (Annual Percentage Rate) can be a very confusing rate. It is the standardized formula for calculating the cost of a mortgage. Expressed as a yearly interest rate, it includes the interest, certain points or credit costs, mortgage insurance, and other fees associated with the loan.

Disclosure of the APR is required by the federal Truth-in-Lending Act and allows borrowers to compare the costs of different mortgage loans. While the APR is designed to compare different loans, all lenders may not take the same fees into consideration, making it very difficult to compare apples to apples. When comparing the APR on the Truth-in-Lending statement it is also important to look at the Good Faith Estimate as it should show which items are being calculated in the APR.

Application

The loan process moves forward here. The borrower is required to complete a form 1003 Uniform Residential Loan Application and submit all the supporting documentation to the lender.

Once the lender has received your loan application, within three days you will receive a GFE (Good Faith Estimate) and TIL (Truth-in-Lending) statement. Be cautious when calling around for rates. Some lender may offer a low rate to get you in the door only to give you an excuse down the road as to why you do not qualify for that rate. Make sure you have a GFE and TIL in hand prior to deciding on which loan to accept.

Once you have received your GFE and TIL and chosen the loan program, it is time to gather all the required documents and sign all the additional disclosure required by the lender. At this time you will decide to either lock in the rate or float it until a later date. Locking in the rate will keep you from getting a higher rate, while floating it could go up or down depending on the market. While this seems like a long process this can all take place simultaneously, especially if you come prepared with your required documents. See the Application Checklist for a list of items to come with.

Processing and Underwriting

Your mortgage professional will package your loan together and submit it to his or her processor for review. The processor orders additional documentation that may be required for underwriting. Additional documentation may include verification of employment, verification of deposits, verification of mortgage, payoffs, and so on. The loan package is then submitted to underwriting for review. The underwriter reviews the file to see if it is complete and acceptable loan. If additional information is required then the file is suspended until it is completed. If the file is acceptable it is put into an approved status and submitted to have docs drawn.

Closing and Funding

The process is almost complete. Once the docs have been drawn then they are submitted to the Title Company for review and, if everything is in order, the Title Company will have the borrower come in for the final signing of all the loan documentation. Once the loan is closed and signed, the loan is returned to the lender for funding.