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CONTACT Dennis Owens Preferred Financial Group 7373 S. Alton Way Ste 201 Centennial, CO 80112 Cell Phone: 720-297-6117 Sat/Sun: Dennis - Residence: 303-933-9469 USE THIS TO EMAIL ME 
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IMPORTANT! Please be sure to read and agree to the Legal Disclaimer pages before you email or call me for any financial advice or services. |
| The Loan Process |
Although I try to make it simple and easy for you, obtaining a mortgage loan is not always a trivial process.
Here I will explain the ins and outs, the paths and pitfalls of the process. You may see very little of these goings-on but understanding them can't hurt.
The Traditional Loan Process
To be complete, and to take the mystery out of mortgages, I have described the traditional path here. Most of these things will be going on behind the scenes while you relax and think about your savings realized from your new loan or perhaps what you will be doing with the cash from your refinance.
Analysis
Your loan application is submitted through me as your loan officer, where I become your professional representative in the loan process. It is to my advantage to get you your loan, since the my compensation is based upon loans that are successfully completed. I assemble the documents in your file, and review your file with two things in mind: Do you indeed qualify for the type of loan you want, and will it pass smoothly through the underwriting process. Essentially, as the loan officer I must "pre-underwrite" the loan myself and determine if it will most likely pass the particular loan's requirements. I sometimes encounter unexpected surprises such as an unknown title glitch, lien etc. There are many items to get processed and approved throughout the loan process. And avoiding delays and complications is always the goal.
Packaging
As your loan officer I put all the collected documentation in order, try to anticipate any unusual circumstances that may affect your loan approval, and write a cover letter to the lender that emphasizes your strong points and "sell" you as a borrower.
Once your loan package is put together with all appropriate notes, it goes to a loan processor, who will order any additional information the lender may need. This may include, for instance, verification of your bank balances, employment, and mortgage or rental payment history. However, there are also special types of loans loans that do not require such things employment, income verification etc., often called LOW DOC, NO DOC, STATED INCOME etc., I use these types of specialized loans to serve my clients who have special circumstances.
Anyway, typically these loan package items often take about a week to gather, after which your loan is ready to submit to a lender. As your loan officer I will then reconfirm your original intentions about your loan program. If you and I have not already locked in your loan, I will review the direction of interest rates with you, and, if rates are rising, I may suggest you lock in your loan now.
Submission and Underwriting
Now, your loan is submitted to a lender. The lender sends it to the underwriting department, which reviews the file for compliance with the guidelines specific to the program you have selected, and assesses whether or not you are a good credit risk. The underwriter is the first, but most important, gate through which you must pass to loan approval.
One of four things can happen here:
- If you are not qualified for the program, you are declined. This is a rare occurrence, but it happens sometimes even when the loan package we supplied seems to be in perfect order.
- Your loan is put in "suspension." It is not approvable in its current form because there are some important questions about the interpretation of your loan package. However, we are given a chance to address those questions, and the implication is that the loan will be approved if the questions are addressed in a satisfactory manner.
- You are approved and ready to go, with no further conditions or questions. This is rare, too, as each underwriter focuses on different areas, and though they want to make as many good loans as possible, it is their job to question your file.
- By far the most common outcome is that you are conditionally approved subject to meeting certain well-described conditions.
- In some cases, the loan cannot be approved at the targeted rate we initially applied for. And in some of these situations we are then given the option from the said lender to accept a higher interest rate. The other option is for me to notify you of the complications and resubmit your loan to a different lender for the same or a different loan and or rate. In such situations, you and I would discuss and decide our next move depending upon the type of complications we encountered and our updated feelings as to the strength of your loan application package.
Response and Action
If your loan has been declined, I as your loan officer will review the package to determine if it can be modified - repackaged - to get an approval somewhere else.
If your loan is suspended, I as your loan officer along with my processor will help you gather the documentation or information needed, and submit that to the lender to get approval.
If your loan is approved without conditions, it's time to lock your loan, send documents to the title company, and go sign papers!
If your loan is approved with conditions, I as your loan officer along with the loan processor will work with you to gather those items needed to satisfy the conditions sited. For example, if you need to provide additional information we will assist you, while the processor will gather any such items needed having to do with title conditions or in which you do not need to get involved.
Responses to conditions are submitted back to the lender. The underwriter reviews each response to see if it satisfies the condition, and "signs off" on the conditions one by one. When all the conditions are satisfied, your loan is fully approved and the lender is committed.
Sign-Off
At approval, a title company company becomes heavily involved. The title company is a neutral third party that, for a fee, holds all the documents and funds in escrow, and ensures that all parties get what they say they want, or points out where differences lie so the parties can resolve them.
I as the loan officer check with you to find out when you would like to sign the loan papers. Documents are then ordered from the lender to be submitted to the title company, giving the title company at least 24 hours to review the documents, comply with the lender's instructions, and draw up the papers for your signature. Please exercise your wrists and forearms during this period; you will need strength for signing.
Funding
Once you have signed the papers, the title company sends the completed papers back to the lender for funding approval. In this process, the lender confirms that all its instructions to the title company were followed, and approves disbursement of the funds.
If this is a purchase transaction, funds are wired to the title company.
If this is a refinance transaction, you have a three-day right of recission. Yes, that's right, you have three working days (Saturdays included) to say "Oops, I didn't want that!" Once that period is up, you are assumed to want the loan, and the lender sends the funds to the title company.
Recording and Close of Escrow
The title company, once funds are received, reviews the file one last time to verify that all instructions are clear and consistent, and that all parties are in agreement.
The title company then disburses funds strictly per written instructions. The next day, they record all the legal documents that have been executed, and record a reconveyance on all old liens. Once the new loans (and the grant deed in the case of a purchase) have been recorded, the loan and the escrow are considered closed.
General Information About Loan And Rate Shopping
Mortgages and Mortgage Rates
How valuable is rate-shopping?
Some consumers are under the impression that "rate shopping" is a critical part of choosing a mortgage lender. Rate shopping, however, is just a small part of the picture.
All mortgage rates are based on the prime rate plus a mark-up. Depending on the company, the mark-up could be overhead, operating efficiency, etc. Rates will also vary between the various mortgage plans available. Mortgage rates on fixed term mortgage products change daily. Thus, a telephone quote from a stranger whose motive is to grab your business is suspect.
The lowest rate is worthless if the loan doesn't close. One should never choose a mortgage lender based on rate alone. The point you save (or think you save) is meaningless if your mortgage doesn't close. If you can't "lock" the rate, move on--the rate was fiction. Even more crucial-why would you want to send a deposit and lock into a company you really don't know?
How do I select where to apply for a mortgage?
Banks and mortgage bankers usually write loans themselves. A mortgage banker is like an insurance agent who represents only one company (Aetna, Prudential, etc). Brokers are the "independent agents" of the industry, working with various lenders.
Mortgage bankers are the secure, "plain vanilla" of the industry. Whether your loan is from a bank or a mortgage banker, you can usually be assured of reasonable rates (though not necessarily the lowest) and quality service. These bankers generally tend to reject "marginal" loans, while brokers tend to be more flexible.
Brokers usually don't finance the loans they write. Instead, they work with a variety of lenders (mortgage bankers) around the country. Many lenders have unique programs designed to meet specific borrower needs. If the borrower has problematic credit, they'll try to place the loan with a more lenient lender. Brokers are usually far more flexible when it comes to loan products, rates and loan guidelines.
How do you select a mortgage company?
The best approach is not the rate approach, but the company review approach. Look at the business record of the company and "interview" its loan officer(s) for competency and compatibility.
A Simple Procedure for Selecting A Mortgage Company:
1. Survey the companies in your area that offer the type of mortgages you are looking for. Don't contact anyone yet.
2. Select about 2-3 candidates for your business, then check the Better Business Bureau (BBB) or similar organization for unresolved complaints filed against them. Drop those with too many complaints.
3. Ask the target companies how their mortgage process works, about rates, etc. By actually talking to them, you'll be able to tell an experienced loan officer from a green one. Based on your observations, you can judge who has the best processing system, mortgage officer(s) and which loan product is best for you. Narrow the field to two choices.
4. Now you can rate shop. Realize that the rates quoted are not cast in concrete. You may still be 30+ days from actually closing the loan.
Note: Those who rate shop need to have good credit, otherwise the exercise is meaningless. Rate quotes are based on clean credit.
Can I pay ahead on my mortgage?
Yes, but do it carefully and keep records.
Paying ahead on a mortgage is usually a good idea. It will save considerable money in interest, build equity in your home and shorten your loan term. There are even some banks and mortgage companies that allow you to pay half your mortgage payment twice a month, instead of one full payment monthly.
Half-payment programs can be problematic. They work, but not as well or as economically as making 13 payments a year (instead of twelve). If you want to make the extra "full" payment, write your normal payment, then make a separate check for another full payment. Mark it clearly "Principal Only". Keep a copy and mail the original with your regular payment. If you do this faithfully on a 30-year mortgage, it will be paid off in about 23 years. A 15-year mortgage will be paid off in about 12 years.
Extra payments are strictly on a "volunteer" basis. If you need the extra money, you're not locked in to the extra mortgage payments. On half -pay or other programs, the payments are locked in and your credit may suffer if you miss one.
Which party does the real estate sales person/agent represent?
The real estate sales agent represents the seller of the property, not the buyer. They are required by law to tell you this, even if it's just in the contract fine print. Most importantly, don't expect the agent to effectively negotiate the price for you. The higher the price of the property, the more commission the agent earns.
When does shopping for the best rate help?
After you narrow the field to two or three candidates, rate shopping makes a bit more sense. The best rate in the world is useless if the loan doesn't close in a timely manner.
Low-balling, that is, quoting a lower than actual rate to get your business, is unfortunately a common practice in the mortgage industry. Don't rely on a quoted rate unless the lender is willing to lock it in. Certain rates, unless instantly locked, change daily. If you get a 7% quote on the phone today, you just can't "take it to the bank." You may still be 30+ days from actually closing the loan because of the required processing. Rate quotes are based on clean credit. Prime rates go to prime applicants.
Finally, remember that a locked rate is not a mortgage commitment. It simply reserves an interest rate for a set period of time.
You've gone through the procedure for selection, you're happy with the company, the loan officer and you've locked the loan rate...what's the next step?
Have your loan officer outline the processing steps and the estimated time frame of each stage. Make sure you provide him with everything he needs in a timely fashion and follow the loan process to keep the application moving forward. (If the loan doesn't close before the rate lock expires-usually 30 days days - your rate will revert to the market rate, which is likely to be higher.)
How long will the process take?
The whole procedure, if everything goes smoothly, should take from 2-3+ weeks. If the process takes longer, credit reports, appraisals and other documents will expire and need to be renewed before the loan can close. Most likely this will be at your expense. The longer a loan process takes, the more likely things can go wrong.
If I have a problem with a mortgage lender, where can I turn?
There are a number of state and federal agencies concerned with regulating real estate sales, transactions and mortgages:
State Agencies
Contact your state consumer protection offices, the Better Business Bureau and offices of the attorney general. There is also usually a state agency directly responsible for complaints against mortgage companies.
Federal Agencies
Mortgage Companies:
The Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
601 Pennsylvania Avenue, NW
Washington, DC 20580
Phone: 202-326-3224
Federally insured savings and loan institutions and federally chartered banks:
Office of Thrift Supervisions
1700 G Street, NW
Washington, DC 20552
Phone: 202-906-6000
State member banks of the Federal Reserve System:
Division of Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th and Constitution Avenue
Washington, DC 20551
Phone: 202-452-3946
Personalmortgagebroker.com
Of Colorado
Call:
Dennis Owens
720-297-6117