Mortgage Lending Process
Getting a mortgage loan is a complicated process. It doesn’t have to be overwhelming, though, especially with guidance from our Bethpage mortgage experts, but it does require organization and planning.
Home buyers generally start by deciding whether to get pre-qualified or pre-approved for a loan. The two processes are different, but either can be helpful in locking down a house at offer time. Next comes applying for a mortgage and providing the necessary documentation, before lenders can do their job — verifying income, checking the home buyer’s credit and making sure the home’s value is enough to support the loan.
The mortgage approval timeline is hard to predict. It depends on whether everything goes smoothly or if some challenges or just questions pop up along the way. However short or long a time it takes, closing day will eventually arrive, along with piles of paperwork to be signed.
So just take it one step at a time. Feel free to contact our professionals at any point if you have questions or need help. We've successfully guided many members through the experience of obtaining a mortgage.
It’s important for home buyers to start by doing their research. Shop around and compare mortgage rates. Home buyers will find a general range of interest rates in the marketplace, but some lenders will be lower or higher than others. Borrowers need to also be aware that rates aren’t the entire story. They need to include discount points, if any, and other fees an institution charges, like loan origination fees or closing costs, in their comparison.
It’s also worthwhile to compare mortgage options. Some buyers are better off with a fixed-rate loan, while others may find that an adjustable-rate loan better serves their purpose. Anyone who is eligible for an FHA or VA loan should also consider these government insured or guaranteed options.
Prospective buyers can get a pre-qualification letter from a lender to help prove to prospective sellers that they can afford to purchase the home. Pre-qualification is a lender’s estimate of how much mortgage a borrower can afford, based solely on the information on their application. It’s helpful to have this letter, but it does not make the purchase a done deal.
Applying for a Mortgage
There are several ways to apply for a mortgage. Prospective borrowers can fill in an application in person at a Bethpage branch. However, the easiest way to apply may be online at home, with no time pressure and all documents close at hand.
A standard loan application requires home buyers to provide the following information for review:
Borrower Information: These are the basics about the applicants, including current address, marital status and dependents, social security number, date of birth, and whether they currently own a home.
Property Information: This includes the address of the home the borrowers would like to buy, a legal description of the property, year built, and details about their intended use of the home. For example, will this residence serve as a primary residence, vacation home, or investment property?
Assets: Applications require a list of assets, so lenders can determine the source of the down payment and closing costs.
Liabilities: Outstanding debts must be listed, including how much borrowers owe and to whom. A lender will cross-check this section with a credit report, and home buyers will have an opportunity to review the information from their credit report and make any corrections, if necessary.
Declarations: In this section, prospective home buyers address additional questions about their financial history, including bankruptcy, judgments, and other matters.
If you’re ready to apply for your mortgage, you only need to answer a few questions to get your Bethpage application started quickly.
Mortgage Loan Credit Risk
Lenders order credit reports to verify the information home buyers put on their loan application and to check their history of repaying credit in the past. A history of timely payments tells lenders that home buyers are likely to repay their mortgage without issues as well. In some cases, credit approval is immediate. In others, it may take a few days.
Inquiries from lenders do signal that home buyers are thinking of taking on new debt and can cause a slight dip in credit scores. Dips from multiple inquiries could add up, but the most recent FICO scoring model has a remedy for that. It gives consumers 45 days to shop for mortgages. Multiple credit checks from lenders within that time frame should be recorded as a single inquiry on credit reports, according to the Consumer Financial Protection Bureau.
Note: Sometimes credit reports contain errors that can affect loan approval. Home owners should look over their credit reports carefully even before applying for a loan to avoid problems. But whether errors are found before or during the process, there are procedures to correct them. Credit reporting agencies are required to respond to all written notification of mistakes in a credit report and to remove any information they can’t verify. At Bethpage, our experts can guide you through the process of contesting and clarifying those errors to improve your chances of obtaining a mortgage.
Mortgage Loan Application Processing
When a mortgage loan is processed, the information provided on the application is verified. In addition to checking on the applicants’ financial status, lenders review the home that will be used as collateral for the loan. They do this by ordering:
- an appraisal to establish the home’s value as evaluated by a professional
- a title search to ensure that the seller has the right to transfer ownership; also to uncover any liens, claims, assessments, or other restrictions on the property
- flood certification, to discover if there are flooding risks to the property that call for flood insurance
Commonly, there are a number of fees associated with mortgage processing. Bethpage collects non-refundable application and appraisal fees up front.
Mortgage Loan Approval
Now it’s time for underwriting. Underwriting is the mortgage lender’s process of determining whether or not a home buyer will be able to pay back the home loan, whether the property has enough value to be adequate collateral, and finally approving or rejecting the application.
Underwriting can sometimes take as little as two to three days, although that is uncommon. The mortgage approval timeline can be quick when underwriters have all the paperwork they need, but if more documents are needed — which happens in most loans, even for people with great credit scores — it can take a week or more for the underwriter to issue an approval, disapproval, or an approval with “conditions.”
Examples of mortgage conditions include:
- Additional documents to verify income, assets, or debts
- Payment of some portion of outstanding debt
- Proof of homeowners’ insurance
- Proof of mortgage insurance
- A termite inspection
- Updated bank statements
- Explanation of certain money withdrawals, transfers or deposits
- Employment verification
- Copy of business license
When a loan is conditionally approved, the underwriter is mostly satisfied and a mortgage commitment letter will be sent to the borrower at this point. Unlike a pre-approval or pre-qualification, which only outlines what a lender may be willing to loan, the commitment letter indicates that home buyers have passed the underwriting guidelines. The commitment letter also is important because it contains all the terms of the loan — including the type of mortgage, length of the loan, interest rate, etc.— that a lender is willing to provide.
However, a loan can be reviewed multiple times for outstanding conditions after a commitment letter has been issued. Only when a loan is completely cleared, with final mortgage approval, are closing documents prepared.
Borrowers will receive their Closing Disclosure three days before their scheduled loan closing and should use this time to carefully review this important document. It contains the locked-in costs of the loan, whether there are any special features such as prepayment penalties or balloon payments, the specific amount they will need to pay at closing, and the full monthly payment including principal, interest, taxes and insurance.
Mortgage Loan Closing and Disbursement
All of the final documents are then prepared and sent to an escrow company that arranges the closing.
There is a great deal of paperwork to be signed at a closing. Some of the most important documents are the deed, affidavit of title, transfer tax declaration, promissory note and mortgage, closing disclosure, proof of homeowners’ insurance and title insurance.
Once all signed documents are received, the lender will transfer the mortgage money to the escrow company, which will disburse the loan and record the documents. Home owners should keep these documents for at least a few years — for their own information or in the event they wish to file a legal claim against the seller or any other involved parties.
The lender will also establish an escrow account at closing. Part of each of the home buyer’s future payments will be put into this account each month. The lender will use this money to pay recurring costs like property taxes, homeowner's insurance, flood insurance, and more.
Congratulations, the mortgage application process is now complete. The next 10-30 years, or until the home buyer decides to sell, are dedicated to making repayments to the mortgage company for the loan and building home equity.
Applying for a Mortgage with Bethpage Federal Credit Union
When you’re ready to purchase your home, Bethpage is ready to help you through the process. We have professionals to guide and advise you on all the choices you’ll need to make from your type of loan to its term length. Our mortgage options include fixed and adjustable-rate loans, VA and FHA mortgages, jumbo mortgages, and our 10-year fixed-rate Debt Buster loan.
And don’t worry, we’ll keep you informed throughout the loan process so you know what you need to do next.
Ready to take that first step?
Apply For a Mortgage »