Hearing the words, “Your loan is ready to close,” is something that everybody wants when they have chosen their dream home and are waiting so they can sign on the dotted line and move in.
If you’re new to the world of home mortgages, then you’ve probably got a few questions, such as what is the process to get a mortgage? How do we get to the finish line, and what does a mortgage lender look for to get there?
Today, we’ll take a look at the things a lender needs to see in order to close a loan, as well as additional regulations related to closing a home loan, such as title insurance. These regulations protect not only the lender, but also you as a borrower when purchasing a home.
What Is An Underwriter And Why Are They Important?
You’ve probably heard this word a thousand times, but you may be unsure exactly what an underwriter does.
Simply put, an underwriter is a person who, based on guidelines, will approve your home loan for closing. It is the underwriter’s job not only to ensure that you as the borrower meet certain standards, but also that the seller has met their obligations and the process conforms to all government mortgage regulations regarding the purchase of a home.
The underwriter will examine your income, credit history, down payment, and the home’s appraisal. Many people believe that if they don’t meet one of the requirements, such as income or credit history, purchasing a home is impossible. This could not be further from the truth. It is the underwriter’s job to examine the situation and evaluate what can be done to satisfy the requirements.
For example, let’s say that your debt-to-income ratio (how much your mortgage payment and other debt payments will be vs. how much money you make before taxes) is higher than the 36% requirement. There’s still no need to panic, as the underwriter may simply request that you make a larger down payment, or work to reduce your payments on other things such as car loans. Furthermore, they may request a cosigner to increase the income amount.
There are many opportunities throughout the process to improve your chances of approval, so don’t sweat the individual issues that may arise throughout the process. Loan approval is a balancing act and coming up short in one area can be balanced by exceeding requirements in other areas.
What Is A Title Company And How Do They Assist?
It is the job of a title company to ensure that a home is ready to be sold and ownership transferred from one person to another. We aren’t talking about making sure the paint colors match and the leaky faucet is fixed. The title company will examine municipal records related to the property line by line and page by page to make sure there is nothing that has been missed.
They will ensure that the seller has paid all of their property taxes that may be outstanding. They will also make sure there are no judgments that must be paid out of the seller’s proceeds prior to loan closing.
This may be because the seller had previous financial issues and a lien has been placed on the property. A lien is a debt judgment against a home that must be paid before or as part of the home sale, this is the seller’s responsibility to take care of before, or when the home is sold and is not the borrower’s responsibility in the slightest.
Furthermore, the title company will make sure that you are recorded as the new owner of the house with the relevant city, county, and state authorities as dictated by the laws in your area.
The title company will also act as the escrow agent to assist in paying your property taxes and insurance on an annual basis. For those who are unaware, escrow, in this case, is an additional amount paid as part of your monthly payment to the lender that is set aside to pay for taxes and homeowners insurance automatically to ensure they are never behind or that the insurance coverage has not lapsed.
Finally, when the loan is ready for closing, the actual closing process will take place at the title company so that it can be immediately recorded with the relevant authorities.
But Really, How Long Does This Take?
Typically the entire loan process from the time you submit your documents to loan closing is anywhere from 15 to 45 days (OVM Financial aims for 20 days or less from contract to close). While some things such as issues on the seller side are the seller’s responsibility and outside of your control, most of the paperwork required will be from your side as the borrower, and the quicker the documents can be obtained, the faster the loan can close.
Here at OVM Financial, we’ve setup a series of internal processes to streamline your closing experience. We aim to move every loan file from contract to close in 20 days or less. This is known as our 20-Day Clear!
Our loan officers are standing by to answer any questions you may have like, “does having a loan affect your mortgage application?” They will provide you with checklists of documentation in advance so that you can have everything you need ready and you’re not waiting around for the next step, only to find you need additional paperwork. It is our goal to make the process as painless as possible and to assist in any way that we can so that you can begin your journey of moving into your new home!