• The Loan Process

    Buying a home is an exciting experience, but it can be one of the most challenging if you don’t understand the mortgage process. Many families feel overwhelmed because of the amount of paperwork they must complete. Knowing what to expect, especially if you’re a first-time homebuyer, will help you make solid decisions about your home purchase. This guide was written to help you navigate through the mortgage process — from the people involved, to the costs and forms you’ll be asked to complete and how you can take steps to make sure you keep your home long term. Understanding the primary purpose and function of the documents in the mortgage process, as well as the role of the many professionals involved, will make the mortgage process much less intimidating.

    Apply for a Loan

    • Shop around. Always talk to several lenders to find the best mortgage loan you qualify for. A mortgage loan product or lending practice may seem reason- able until compared with a similar mortgage loan product offered by other lenders.
    • find out about prepayment penalties. Know if the mortgage loan offered to you includes a fee if you pay off your loan early. If it is a requirement of the mortgage loan, you may want to ask about other products that do not contain a penalty.
    • Make sure documents are correct. Beware of anyone offering to falsify your income information to qualify you for a mortgage loan. Never falsify information or sign documents that you know to be false.Make sure documents are complete.
    • Do not sign documents that have incorrect dates or blank fields. Be wary of promises that a professional will “fix it later” or “fill it in later” after you’ve signed.Ask about additional fees.
    • Make sure you understand all of the fees that are part of your mortgage process.
    • Question any items you didn’t request or know about prior to the time you are asked to sign the mortgage loan document. 
    • Understand the total package. Ask for written estimates that include all points and fees. Compare the annual percentage rate (APR), which combines a loan’s interest rate with other fees charged by the lender over the life of the loan.
    • Work with legitimate credit counselors. Beware of scam credit counseling and credit consolidation agencies. Get all the facts before deciding to combine credit card or other debts into a mortgage loan.
    • If you’re not sure, don’t sign! Get advice first from a reputable consumer credit counseling agency or housing.


    Understanding Your Costs Through Estimates, Disclosures and More.


    Once you have completed the mortgage loan application process, your loan officer will provide you with a variety of documents outlining the costs associated with your loan. The most important documents include the Good Faith Estimate, Truth-in-Lending Disclosure Statement, and HUD-1 Settlement Statement. All of these forms are required by law and are there for your protection. The Good Faith Estimate. Within three business days of completing the application, your loan officer must provide you with a Good Faith Estimate.

    The Good Faith Estimate- provides you with an estimate of your mortgage loan terms and settlement charges (also called closing charges, or costs to complete your mortgage transaction) if you are approved for a mortgage loan. With this information, you can evaluate your mortgage loan offer, and even explore a few other possibilities before accepting it. The Good Faith Estimate is a three-page form with summary information on the first page, details of your settlement charges on the second page, and optional tables on the third page, which allow you to compare rates and settlement charges from other lenders. As the legal mortgage terminology used in the Good Faith Estimate may seem confusing, the following definitions should help you understand some of the most important information on this form:

    Summary of Your Loan — This section defines the basic terms of your mortgage loan, including the initial loan amount, loan term, interest rate, and initial monthly payment. This section also includes important information indicating if your interest rate can
    rise, if your loan has a prepayment penalty, and more.

    Escrow Account- Information Most lenders require you to pay in advance for some items that will be due after closing. These prepaid items generally include homeowners insurance premiums and property taxes. An escrow account is usually enough to cover what it would take to make two or three mortgage payments. The front page of the Good Faith Estimate includes a section to indicate whether or not an escrow account is required.

    Summary of Your Settlement Charges- Your settlement charges are divided into two categories:
    Adjusted origination-  Charges are the sum of your lender’s origination charges and any credits or charges (points) for the specific interest rate on your mortgage loan. These charges are stated as a percentage of the face value of the loan and cannot change at settlement.
    Origination charges are fees charged by your lender for preparing and submitting your completed mortgage loan application.
    You also may have a credit or charge (point) for the specific interest rate on your mortgage loan, which will reduce or increase your origination charges. One point equals one percent of the mortgage amount. For instance, on a $100,000 mortgage loan, one point would be $1,000.

    Other settlement services- Include most of your settlement charges. Some common fees in this section are:

    Appraisal Fee- The fee paid to the professional appraiser who will assess the value of the home you want to buy. Since the home
    is the security or guarantee for the amount you are financing with your mortgage loan, your lender needs to know that the value of
    the property covers the loan amount. Most lenders will not provide you with a mortgage loan amount greater than what the appraiser determines is the property’s fair market value.

    Credit Report Fee- The cost of getting copies of your credit report to assess your mortgage loan application. Your credit score, included in your credit report, is one of the most important factors in determining the interest rate that will be offered to you.

    Title services fee and title insurance- The fee paid to a title company to search county records to make sure that the title to the property you wish to buy is clear and free of any complications like pending debts or liens on the property.

    Government recording charges- The fee required to register the property under your name.

    Homeowners insurance- This charge is for the insurance you must buy for the property to protect your property from a loss, such as fire, floods, and storm damage. In many cases, homeowners choose to let the lender pay the insurance from an escrow account the lender sets up for you.

    Initial deposit for your escrow account- This represents the money that you are required to pay in advance to establish your escrow account, so that this account can be used by the lender to pay for homeowners insurance, property taxes, and other charges if applicable. Read the Good Faith Estimate very carefully, and go over the list of fees with your loan officer to make sure that you have a clear understanding of what are you paying and why. Please keep in mind that the Good Faith Estimate is only an estimate, and the actual charges may differ. To assist you in understanding the estimated charges, the estimate also defines limits on how much certain fees can change between the estimate and the actual costs. At your closing, you will receive a HUD–1 Settlement Statement, a form that lists your actual costs. Compare the charges on the HUD-1 Settlement Statement with the charges on the Good Faith Estimate to ensure that they have not dramatically changed. If they have changed, be sure to get a clear explanation of why.