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Understanding
The Loan Application Process
Buying a home may be the most exciting, confusing and stressful financial
transaction you ever undertake. Even if you have done it several times you can still find
the process complicated and intimidating, particularly when it comes to getting a mortgage
loan. Countless loan documents, unfamiliar terminology and uncertainty serve to temper the
joy of buying a new home. As soon as the sales contract is signed, obtaining the financing
for the purchase becomes paramount for all but a very few buyers. If you understand the
steps required to qualify for a mortgage loan, however, much of the stress can be
avoided. The following explanation of the loan application process is intended to help you
through the complexities of obtaining a mortgage loan.
The
Loan Application Interview
North Atlantic's job
is to begin the collection of information the lender needs to approve the loan. We will
explain the types of mortgage loans available to you, the interest rates and fees for each
type and the qualification requirements. A North Atlantic loan officer will fill out the
loan application form or you can fill it out here on line. You can also print it and fax
it to us. Click here to view application.
The total cost of a mortgage loan consists of the interest rate on the loan, origination
fees, discount points, and miscellaneous other charges. One point is equal to one percent
of the amount of the loan and is usually collected at the loan closing, or settlement. The
interest rate affects the amount of the monthly payment, while points affect the amount of
cash you must have at closing. All costs can be worked into the loan so you wont have any
out of pocket expenses to close the loan.
North Atlantic offers a range of interest rate/point combinations to meet the borrower
needs. In general, the higher the interest rate, the lower the points. For example, if the
current market provides for an 8.5 percent interest rate with 2 points, a nine percent
rate may be offered at no points. If you are a first-time home buyer, the larger monthly
payments on the 9 percent loan may be easier to handle than the 2 points that will require
additional cash at settlement. If you are a corporate transferee, however, your company's
relocation policy may pay all or part of origination costs and the lower rate will have
more appeal. The loan officer is prepared to explain all of your options to you.
When discussing the terms of the loan, we will make sure you understand how and when the
rate and fees on the loan are going to be set. North Atlantic will quote a rate and fee at
the time the application is taken and then will guarantee, or "lock" the rate
quote for a specified length of time. A rate lock protects you from rising interest rates
while the loan is being processed, but it also typically commits you to close the loan at
the rate and the fee even if rates decline prior to closing. Lock periods may run from 10
to 60 days, with longer periods available in some cases at an additional fee. The lock
period must be long enough to get you through the estimated closing date. A 30-day lock
affords you no protection if closing is at least 60 days away. Send e-mail requesting
details.
You may have the option to let the rate "float," getting the final rate and fees
set nearer the settlement date. If you believe rates are declining and are willing to run
the risk that interest rates could rise during the processing of your loan, you may select
this alternative. Before you take a floating rate, make sure that the rise in interest
rates will not create a problem for you because you have insufficient income to cover the
higher mortgage payments. In either case, make sure you understand exactly the terms of
the lock-in agreement.
Completing
The Loan Application Form
The loan application
form asks for information on the property you are buying, terms of the purchase contract
and the employment and financial history of all loan applicants, including your spouse
and/or other co-borrowers. North Atlantic will verify or not to make the loan, so it is
very important to make sure that it is complete and accurate.
After
The Loan Application - What Next?
After loan is
approved, you will receive a commitment letter which sets out the terms of the loan and
the length of time for which those terms are offered. If the loan does not close within
the specified commitment period, the terms are subject to change. You accept the
commitment by returning a signed copy within five to ten days. The commitment may contain
conditions that you will still have to satisfy, so you should read it carefully.
In cases where closing is scheduled soon after approval, North Atlantic may give you
verbal approval instead of a commitment letter. This is not unusual, but make sure you
understand the terms of the approval.
Once the commitment letter or approval has been received, you are assured the financing
you need to complete the purchase of your home and you need to turn your attention to
completing the details required for settlement.
Reducing
The Anxiety of Waiting
For many home
buyers, the period of time between the submission of the loan application and receipt of
the commitment letter is one of uncertainty and concern. Requests for additional
information, unexpected delays and lack of communication all serve to increase the
tension. There are a number of things that both you and the North Atlantic can do to
reduce the stress.
Keep in mind that North Atlantic wants to make the loan. Loan underwriters are looking for
ways to approve loans, not reject them. If you have come to North Atlantic fully prepared
and have provided good documentation, you have done a great deal to assure prompt
processing of your application and approval of your loan.
You and North Atlantic need to make sure that lines of communication are kept open. Your
contact person may be the loan officer, but often it might be someone in North Atlantic's
loan processing department who can tell you the status of your application.
You should be accessible if North Atlantic needs additional information or documents
during processing. If you are from out of town, use your real estate agent as a contact if
necessary. Quick response to North Atlantic requests helps keep the process on schedule.
In order to protect both you and North Atlantic, mortgage loans require much more
paperwork and legal documentation than an automobile or other installment loan, and North
Atlantic does not ask for more than is absolutely necessary.
Obtaining a mortgage loan need not be an ordeal that dampens the thrill of acquiring a new
home. If you understand the lending process and are prepared to do your part, it simply
becomes a key step in owning a home.
Continue to the application
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