Applying for a mortgage, especially for first-time buyers, can seem more than a little daunting. The whole process is littered with confusing, jargon-filled documents and legal and financial technicalities, not to mention the fact that it can sometimes be quite lengthy. But your anxiety and buyer headaches can be managed if you know what to expect and how the process works. To that end, here’s an overview of the process of applying for a mortgage in Los Angeles.
Applying for a Mortgage in Los Angeles – The Steps From Start to Finish
Any overwhelming and confusing process becomes more understandable and more manageable when you break it down into steps. Though the minutiae of the steps can vary as conditions vary, here are the typical major steps in applying for a mortgage in Los Angeles (as well as what comes after because that’s the completion of the process):
Your first step in applying for a mortgage in Los Angeles will be to get pre-approved. “Pre-approval is when a lender reviews your financial situation (particularly your income, assets, and debts) to determine if you’re a good candidate fora loan. They’ll also tell you how much they are willing to lend to you and provide you with a pre-approval letter to that effect.”
And getting that pre-approval letter is a critical first step. First of all, it will save you time and effort because you can narrow your search to houses within your already determined price range. In addition, sellers will see you as a serious buyer, and the pre-approval letter will give you more negotiating leverage.
2. PURCHASE AGREEMENT
Now, with your pre-approval letter in hand, you’re ready to go househunting. You’ll have both more confidence and more bargaining power. Once you’ve found a possibility and have made an accepted offer, the next step (actually the next pre-step) in applying for a mortgage in Los Angeles is to draw up a purchase agreement. Your lender isn’t involved yet, just you and the seller. (Consult your local agent about how to make an offer. Call 562-881-9811.)
3. LOAN APPLICATION
This next step in applying for a mortgage in Los Angeles is where your lender does get involved – the actual mortgage loan application. “This is a straightforward step in the process because most lenders use the same standardized form. They use the Uniform Residential Loan Application (URLA), also known as Fannie Mae form 1003.” During the completion of this form as the initial step in the actual application process, you will have to provide information about the property, the kind of loan you want, and your financial information.
Again, your local real estate agent can help you navigate this part of the process. She can help in preparing and gathering all the pertinent information and documents. (To find out more, just call 562-881-9811).
4. MORTGAGE LOAN PROCESSING
Once the mortgage loan application is completed, the process moves on to the next step – processing of your loan application. In the first stage of this step, the loan processor will “collect a variety of documents relating to you, the borrower, as well as the property being purchased” – including “bank statements, tax records, employment letters, the purchase agreement, and more.” Then, they “will review the file to ensure it contains all of the documents needed for the underwriting process.”
Your lender/loan processor will also likely order additional credit reports and will verify your income and assets and then have an appraisal done. Be aware, though, that the exact aspects of this step can vary from company to company and according to the kind of mortgage loan. Still, the basics hold in nearly every case.
Next comes underwriting. The underwriter, the key decision-maker in the approval process, will examine documentation provided by the underwriter to ensure that it meets and complies with all pertinent lending guidelines and requirements. So the underwriter has the power to reject the loan if all the key criteria aren’t met.
Basically, the underwriter is assessing the amount of risk involved in the loan. And they do this by examining three key elements:
- Capacity – Are you able to financially handle the loan payment and your other financial obligations and debt?
- Credit – Is your credit and debt-repayment history good enough to warrant granting the loan?
- Collateral – Is the property’s market value high enough that it can serve as collateral for the loan?
If the underwriter determines that all three are adequately met, then you’re in. If, however, there are some issues, you may be granted conditional approval, which means you’ll have to resolve the issues before getting full approval and underwriting.
6. APPROVAL AND CLOSING
Although this final step comes after applying, it remains part of the process of applying for a mortgage in Los Angeles because it is the culmination of and so an integral part of the process. Here’show it typically works:
“Once the loan is approved, the file is transferred to the closing and funding department. The funding department notifies the broker and closing attorney of the approval and verifies broker and closing fees. The closing attorney then schedules a time for the borrower to sign the loan documentation.” This last part is your final goal – closing.
At closing, all the necessary documents are signed, and money changes hands. Then, the mortgage note and deed of trust are recorded at the appropriate county office, and all final fees are paid. And then, finally, you are a happy homeowner.
But Don’t Try It Alone . . .
Although we’ve made applying for a mortgage in Los Angeles a little more understandable, it remains, nevertheless, a legally and financially complex process. It really isn’t something buyers should try to navigate on their own.