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 apply
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.
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.
Click here
to apply