Buying a home is often the single largest investment you will make. It can seem complicated, full of paperwork, and you are faced with an endless array of terms that may be hard to understand. That’s why we are here every step of the way to help you process your options and answer any questions or concerns you may have.
Our goal is to help you find the right mortgage that fits your personal needs. Take some time to read through our overview of the Mortgage Process and how it works. You can also visit our FAQ’s for additional information on everything from loan types to finding the right home for you. Don’t see an answer or have a question not listed? Send it to us on our Contact Us page.
The right mortgage can save you thousands of dollars, while the wrong mortgage could possibly put your house in jeopardy. With all the mortgage products available and the market in a state of fluctuation, it is more important than ever to understand real estate financing.
Making Sense of Mortgage Options
Start by simply understanding your options. People with average credit ratings or better should be able to secure a fixed mortgage for a traditional 30 year term. This essentially means you pay the same mortgage payment monthly for the entire loan period. Alternatively, you also have the option of choosing a 3, 5, 7, or 10 year Adjustable Rate Mortgage (ARM). These mortgages adjust to the market rate after 3, 5, 7, or 10 years. This could be up or down, depending on how interest rates move. Essentially, this means you could either be paying more or less when your rate lock period ends. Rates traditionally don’t move significantly, so don’t expect any major surprises. However, over the course of a 30 year loan rates could change significantly.
People without credit or with troubled credit should expect higher rates on these standard products. Importantly, when evaluating these loans, ensure there is no penalty for prepayment. Your major goal should be to pay off these loans as soon as possible or refinance to a lower interest rate when your credit improves. EVOLVE BANK & TRUST DOES NOT PARTICIPATE IN THE LENDING OF SUBPRIME MORTGAGE LOANS.
Many other products exist. Options such as reverse amortization and interest only offer a variety of payment terms, while increasing the cost (and sometimes the risk) to the buyer. Unless you have alternative investments, traditional mortgages provide the best option for purchasing a home. Regardless of the mortgage you choose, understand the payment schedule, fees, penalties, and ways the interest rate can be adjusted. Always remember that it is in everyone’s best interest for you to pay off your loan on time.
The Down Payment and the Interest Rate
The two most important parts of the mortgage are the down payment and the interest rate. There are two schools of thought when it comes to paying down a mortgage. Some people suggest paying down your mortgage as soon as possible, while others suggest making minimum payments to maximize your tax advantage. Bottom line, if you are an active investor (401k, real estate, stocks, etc.) it is probably best to pay as little down as possible.
Understand that everything in this process is flexible. Your goal should be to minimize the down payment and the interest rate. Typically, the higher the down payment the lower the interest rate and vice versa. Shop around using a mortgage banker to save yourself some time and legwork.
Finally, decide on the right mortgage for you. You should be able to comfortably make the payments and have enough in savings to cover at least three months of payments. This provides a buffer in case of layoff or any other possible tragedy that might occur during the homeownership. Additionally, make sure you get to know your loan officer. A good relationship with your banker could save your house. Banks can be far more flexible than most people think. While a mortgage is simply a tool to purchase a house, managing this tool properly can save you thousands.
When you start your search for a new home there are many things to consider. The mortgage loan you choose is always important but deciding on a home may be the hardest part of all. Many homebuyers start by determining what are “needs” versus what are “wants.” Below we have listed a few points you may want to consider when looking to find the right home for you and your family.
Location Location Location
Whether it’s across the street, across town or across the country, the first decision in buying your new home is deciding on the location you would like to live. Often this is the first decision you make but be sure to take into consideration all of your options.
BELOW IS A LIST OF A FEW FACTORS YOU MAY WANT TO EXPLORE.
- Do you want to be in the city or in a suburban area?
- Do you want to live in a quiet rural area or be close to grocery stores, schools, restaurants, and other activities?
- How far is the neighborhood from your workplace and/or schools?
- What will your commute be?
- Does the area fit your lifestyle?
- Can you afford the cost of living?
Be proactive! Get a map of the area and drive around to see what may interest you, drive from your potential home to your workplace and most of all, look at surrounding neighborhoods.
Before you finalize your location to call home, take time to explore the area neighborhoods. Sometimes the locale you wish to move may not have the neighborhoods you find appealing. Try to determine which neighborhoods offer you and your family the most, you may want to take into account such factors as the quality of nearby schools and the proximity to shopping or your workplace. After seeing what different neighborhoods have to offer, compare the pros and cons of each area you are considering to determine the best location for your family.
Once you have decided on a neighborhood, it’s time to look at houses! Many of the basics, such as how many bedrooms, bathrooms, yard size etc., you have already decided. Make a list of your “wants” and “needs” and refer to them often as you look at houses. As you walk through your potential home, you may realize you like something you had never considered before. Perhaps a two story home, 10 foot tall ceilings or a marble floor vs. a vinyl floor. Be prepared to compromise, it is very unlikely that you will find a home that has everything on your list.
A FEW ITEMS TO KEEP IN MIND AS YOU SEARCH ARE:
- Does the home allow for growth of the family? Are the rooms big enough?
- How old is the home? Does it require little work or is it a “fixer-upper?”
- Does the home have “curb appeal” such as attractive landscaping, lighting and a well maintained exterior.
- Will it be easy to resell?
Needs vs. Wants
If you find a home that meets all your needs but is lacking a few of your wants, you may not want to pass it up. You may just find the perfect home in a neighborhood or location you never thought to consider, even a different floor plan that you originally set out to find. Try not to limit yourself too much and remain open to compromise. You might even find a great home with special features you never thought you could afford – like a pool, a spa or an extra fireplace.
Submit the sales contract for approval
In order to alleviate any potential problems with the sales contract on your home, you should formally submit it to your lender for review. When the lender receives the contract, it will be carefully evaluated for details such as sales price, loan program, closing date, seller contributions, title issues, repair issues, and deadlines.
Getting your contract reviewed by the lender as quickly as possible will help contribute to the “flow” of the transaction, and can make the process of closing your loan faster and more efficient.
Submit Additional Documents
Once you have submitted the contract on the home that you wish to buy, you may need to submit personal documents to qualify for your mortgage. If you’ve already been pre-approved, you will be ready to undergo final underwriting, but some documentation will be needed. If you have not been pre-approved, documentation will be required so that Evolve can conduct a formal evaluation of your ability to repay the loan.
ITEMS YOU WILL BE REQUIRED TO SUBMIT WILL INCLUDE, BUT MAY NOT BE LIMITED TO:
- Recent pay stubs
- W2s and/or tax returns
- Your most current bank statements
- Information on your places of residence for the last two years, including the names and phone numbers of your landlords (if applicable)
- Contact information for your employers for the past two years
- Information on all loans that you have open – this should include names of creditors, your account numbers, your monthly payments, and loan balances
- Divorce decree (if applicable)
- Bankruptcy discharge papers (if applicable)
- A listing agreement or sales contract for the sale of your current property (if applicable)
YOU MAY ALSO NEED TO INCLUDE PAYMENT FOR A HOME APPRAISAL. AN EVOLVE LOAN PROFESSIONAL WILL PROVIDE YOU WITH DETAILS ON THIS.
If you are refinancing your current property instead of buying a new home, you will need to supply to following:
- A copy of the deed of trust and the warranty deed
- A copy of the declaration page of the homeowner’s policy
- Your most recent mortgage payment statement.
YOU MAY ALSO NEED TO ORDER A TERMITE INSPECTION – YOUR MORTGAGE PROFESSIONAL WILL INFORM YOU IF THIS IS NECESSARY.
Once you have submitted all the required information, Evolve’s processing department will take steps including (but not limited to) the following:
- Verify employment with your employers
- Verify bank statements with your banks
- Verify your liabilities by ordering a credit report
- Order an appraisal to verify the value of the property that you wish to purchase
- Verify legal ownership of the property that you wish to purchase
- Verify other liquid assets if needed.
Lock your rates
You may lock-in your interest rate at any time after the sales contract has been accepted by the seller. By locking-in an interest rate, you are guaranteed that interest rate for a specific timeframe despite any market fluctuations that may occur.
Interest rates are locked for a determined period of time. Typically, the longer a lock period is, the higher the interest rate may be. The lock period must be long enough to extend past the anticipated closing date. It is also a good idea to give yourself extra time for your lock period to insure against any delays with your closing, especially if you are selling your current home before you close on your new house, or if you are building a house.
Sometimes factors such as weather (for those building a new home) and complications with the buyers of your current home can delay your closing beyond the anticipated date. If you aren’t prepared for these eventualities, your interest rate lock may expire. If this occurs you may be subject to an increase in your interest rate (if interest rates have increased since the date of your lock-in).
When you lock-in your interest rate, you and your lender are obligated to that interest rate. If the interest rates increase after you lock-in, the lender must provide the locked-in interest rate. If rates decrease after you lock-in, you are obligated to close at the locked-in interest rate.
A form that you and your lender both sign confirms the terms and conditions of the lock-in.
Your interest rate lock-in is tied to your social security number and the address of the property you are buying. If you lock-in to a rate for a specific property and you don’t end up buying that property, you will lose your interest rate lock-in. The rate lock-in cannot be transferred to another property.
NOTE: In some cases borrowers choose to float an interest rate. By doing so, they are exposed to any movements in the market. If interest rates increase after they agree to float the interest rate, they receive the higher interest rate. If interest rates decrease after the date they decide not to lock-in, they receive the benefit of the lower interest rates. This is more risky than locking in your interest rate.
YOUR APPLICATION WILL THEN GO TO EVOLVE’S UNDERWRITING DEPARTMENT, WHICH WILL TAKE THE FOLLOWING STEPS:
- Evaluate the loan package
- Verify that both the loan and the property meet guidelines
Based upon the underwriting evaluation, your loan may need more verification, and may go back to the processing department. Your Evolve mortgage professional will inform you if this is the case.
Once your application has cleared the processing and underwriting departments, it will proceed to the closing department and you will be ready to close your loan and purchase your new home.
Once your financing has been secured and you have completed all of the necessary preliminary steps, you are ready to close on your new home.
Closing is the formal transfer of ownership of the property – the point when you actually take possession of your home. At closing the actual transaction takes place. The proceeds of your loan helps pay the seller a portion of the agreed purchase price, and you can officially move in.
Depending on where you are located and the type of property you are purchasing, closing costs and procedures vary depending greatly. In some states, the process is transacted by a settlement agent selected by the buyer, lender and/or seller. In other states, a third party attorney oversees the process and may be selected by one or more of those parties.
ALTHOUGH THE PROCESS VARIES, HERE IS A BASIC CHECKLIST THAT WILL HELP STEER YOU THROUGH IT:
Set a closing date
- Make sure the date gives you enough time to get ready for your move.
- If you currently rent an apartment or house, think about whether the closing is near enough to the end of your lease so you won’t pay unnecessary rent
Choose a closing agent
A third party agent is needed to prepare the required documents and perform the transaction. An attorney, title company or closing agent can do the job.
Obtain title insurance
- Title insurance is required on just about all mortgages, including both purchases and refinancing loans.
- A title company will review the history of ownership on your new home to make sure that there are no claims on the property. Title insurance is needed when you close on a home because it covers you in case there is a title dispute.
- This task of obtaining title insurance is not the buyer’s responsibility; your closing agent should coordinate this with your lender.
Obtain homeowner’s insurance
Most mortgage companies require homeowners insurance. This type of insurance protects your home and your possessions from disasters and theft. Depending upon where you live, additional hazard or flood insurance may also be needed.
Make a Final Walk-Through
This is your last chance to inspect your new home and to make sure that the seller has made all the repairs and met the conditions indicated in the purchase agreement.
Finalize all details
Before the closing, you’ll want to go over all details of the transaction with your closing agent. Important items include finding out what method of payment that you will need to use to pay the seller at closing and making sure that you have all the necessary documents ready. You will also need to find out the exact location and time of the closing at this point.
Perform the Transaction
On the day of the closing, you will meet your realtor, the seller, the seller’s realtor and the third party agent performing the transaction at a specified location. At this point your closing agent will lead you and the seller through the transaction.
You will be required to sign all documents making the sale of the property an official transaction. You will also sign all the official documents pertaining to the mortgage itself.
As the buyer/borrower, you will be responsible to pay the amount of money needed to execute the transaction covering your down payment and closing costs minus any earnest money that you supplied during the bidding process and/or seller or lender’s contributions towards your closing costs.
DURING THE CLOSING PROCESS EVOLVE’S CLOSING DEPARTMENT WILL PERFORM THE FOLLOWING STEPS:
- Verify the closing time and date
- Evaluate the title insurance policy
- Conduct a search on the real estate taxes due on the property
- Evaluate the homeowner’s policy
- Prepare formal documents for closing
Reverse Mortgage Process:
Education: Meet with a qualified Reverse Mortgage Professional to learn about your specific numbers, what you can qualify for and an analysis of your particular situation.
Counseling: HUD counseling is mandatory for all Reverse Mortgage borrowers.
Application: Our Reverse Mortgage loan officer will consult and guide you through the application process.
Appraisal: Upon receiving your HUD counseling certificate, we will contact you to arrange the appraisal of your property.
Processing: Evolve Bank & Trust will being to process your paperwork which may include checking the balance of any liens/mortgages or title report.
Underwriting: Your loan package file is sent to the underwriter to be reviewed for approval and will work to satisfy requirements needed to close the loan.
Closing & Funds Disbursement: Once underwriting has approved your file, your loan officer will contact you to arrange for the signing of your final loan documents.
DO NOT HESITATE TO CALL YOUR LOAN OFFICER TO ASK QUESTIONS OR WALK INTO OUR OFFICE TODAY. AT EVOLVE BANK & TRUST, WE ARE DEDICATED TO YOUR INDIVIDUAL NEEDS AND UNDERSTANDING OF THE ENTIRE MORTGAGE LOAN PROCESS.