There is a lot that happens between finding your dream home and actually moving in. But to the home buyer, much of that activity happens behind the scenes. It can be a little nerve wracking to have so much at stake, especially when you do not know what is happening with your loan.
In the mortgage industry, there are some common terms for the mortgage process. You may find these terms unfamiliar. Rather than just wondering what these terms mean, and more importantly, what they entail, we will help you negotiate the mortgage process through its lifecycle.
The first step of the process is the Application. In this phase there are several things that happen. The mortgage consultant takes basic information needed for granting a loan from you. The consultant also works with you to find the appropriate loan program. In this phase, you will receive all the details of the mortgage program including the costs and expenses. This is referred to as a Good Faith Estimate. During this phase, many consultants will run a cursory credit check to see your ability to repay the loan, this process is called pre-qualification.
The next step in the process is Loan Processing. With loan processing, the lender collects and verifies the information from the borrower and also the real estate property. This step involves checking your credit history, verifying your employment history, verifying banking information and details about the property. During this stage, you will provide the mortgage consultant with lots of paperwork; copies of your pay stubs, bank records, etc.
During this stage, the mortgage company verifies all the information, performs ratio analysis, appraisals of the property, etc. In the loan processing phase, the consultant gets the file in order with all the necessary paperwork. The loan file will be passed on next to underwriting.
In the next phase, Underwriting, the mortgage application is scrutinized to see if the loan would be a good risk to the lender. The loan application is reviewed in terms of the borrower, the property, and any conditions attached to the property. All must be consistent with the lender, and the specific mortgage programs, standards. It is in this stage that the decision to approve the mortgage is made and in this stage an approval and commitment letter is issued.
You are almost at the end of the mortgage process. The next to last stage is Loan Closing. In this stage the loan closer contacts the title company to make sure the property can be sold as is. At this phase, you will have to provide proof of proper insurance. All the files are double checked for accuracy, and any disclosures are provided to you. At this point, you sign off on all the documents (and there are a lot) and the loan is disbursed to you (you are responsible for repayment) and the money is transferred to the seller to complete the legal conditions of the sale. The mortgage is officially recorded in the public record. The loan will generally be reviewed as part of an auditing process to make sure the loan is complete, but as of now, you own the home.
The final stage is called Loan Servicing. This refers to the management of repayment of your loan. The company that services your loan sends you repayment coupons, tax statements, manages your escrow account, and collects and releases funds for taxes and insurance. The company or lender that services the loan is who you call if you have any questions or concerns.
Seven Reasons To Invest In Real Estate
10.March, 2008
Real estate investment is one of the most popular business strategies to realize additional income.
Done with care, planning and foresight, real estate investments can yield huge returns that are not normally achievable through other types of investments.
(there is a free ebook: 101 Tips For Selling Your House,for you to download, from a link at the bottom of this page).
The real estate market is not governed by the same parameters and variables of the stock market. The correct pricing mechanism is a decision that is mostly left between the buyer and the seller. This is the very reason real estate investment offers a great opportunity for investors who possess a sharp eye and skill for good deals and remarkable negotiation skills.
Real estate markets are generally insulated local markets. The drop in home values in one location does not generally affect property values in another location. If you can have a geographically diversified real estate holdings, the more protected your investment is against localized and temporary deflation of property values.
You can generally borrow money to buy real estate but you can not borrow money to buy shares of stocks. Unlike the stock market, you can control a large dollar value of real estate with only a small amount of your own money and by using loans and mortgages.
The real estate market is more stable and less subject to volatility.
The tax advantages of real estate holdings are fantastic! Factoring in depreciation for almost 30 years as a deductible (27.5 years to be exact) after deducting interest payments during the loan term basically gives real estate owners a generation’s worth of additional tax breaks!
Investor controlled value adjustment is another advantage of real estate investment. As an investor, you can choose to increase the built-in value of your property by adding modifications/improvements which is not the case for other types of investment. In the case of your home, you can do this simply by adding a swimming pool, a patio, a garage, renovating the kitchen, etc.
Best of all, you can purchase a property for 60 to 70 percent of it’s market value while at the same time benefit from the national appreciation average of 5% increase of property values.
With proper planning and research, real estate is one of the most profitable investments you could make. Keep yourself up to date with the market conditions and developments; as soon as you find a good deal, go ahead and jump in.