Lender Evaluates Mortgage Loan Application:
Like anything else, the more knowledge you have in the home buying process, the more power you have to make savvy decisions. Most new home buyers find the process very confusing. HomeTraq is here to simplify your journey while you find your new home. An area of concern among most new home buyers is the loan approval process - not anymore!
The following four Cs are examined in underwriting a loan application:
- Collateral. Requires property appraisal. Determines whether the loan amount is supported by property value.
- Capacity. Ability to repay the mortgage along with other debts.
- Credit. Credit history shows your willingness to repay.
- Capital. Down payment and closing or settlement costs demonstrate your ability to save.
Credit Union Disclosures
Under the Consumer Financial Protection Bureau's (CFPB) new "Know Before You Owe Rules," you are considered to have completed a loan application when you provide your credit union with the following six pieces of information:1) Your name. 2) Your income. 3) Your Social Security Number. 4) Your property address. 5) Estimate of property value. 6) Loan amount.
Once you've submitted these six pieces of information, your credit union is required to send you the following disclosures within three business days:
- The Loan Estimate, which lists the charges you are likely to pay at settlement and helps you understand the full cost of the mortgage, including fees and interest. This form shows the amount being borrowed, the interest rate being assigned to the loan and whether there are prepayment penalties. This form has been in use since October 1, 2015, and replaced the older Truth in Lending Statement and the Good Faith Estimate.
- A special information booklet called the “Home Loan Toolkit,” published by the CFPB, which informs consumers of the steps they need to take to get the best mortgage for their individual situation, explains their closing costs and what it takes to buy a home. It also offers tips on how to be a successful homeowner.
Communication from your lender: The final decision will be forwarded to you:
- Loan application may be approved with conditions that must be met prior to.
- Loan application may be declines. With a denial, you may consider immediate steps or longer-term strategies.
Contingencies: Meet any contingencies spelled out in the sales contract for the home:
- Home inspection and other inspections, such as pest or termite.