In the last few years the economy has worsened and the average credit score has dropped into the 660s. More paperwork and verifications are required to ensure that borrowers will be able to pay back the mortgage amount they have borrowed.
It's important to remember that you aren't borrowing $5 from a friend - you are borrowing ten to hundreds of THOUSANDS of dollars from a government institution!
1) Prequalification vs. Preapproval
a. Prequalification – taking borrower information and pulling credit to determine an estimate of loan eligibility
b. Preapproval – Verifying all borrower information provided and approving a loan prior to formal underwriting
2) Formal Application
a. Sitting down with a personal loan officer – providing documented verifications of information discussed in Prequalification, Asking questions, discussing potential issues.
3) Processing
a. Sending all signed application documents, credit supplements and income information into the Processor.
b. Verifications of credit, employment, rent, child support, income, etc are correct
c. Appraisal is ordered and verified that house is more than amount of mortgage. Title is ordered and verified no additional liens are on the property.
4) Underwriting
a. All verified information is sent to the Underwriter who determines, based on borrower’s payment history and probability of repayment, loan approval.
5) Rural Development/OHFA
a. Down Payment assistance organizations must also approve the application for zero money down/assistance grants.
6) Closing Preparation
a. The Closer, together with the Title company, prepare deed, HUD-1 settlement statement, other closing documents a minimum of 48 hours before closing.
7) Closing
a. Sitting down with the Seller, Title Agent and Realtors to sign official loan/sale documents such as the Note and Deed.
7) Closing
a. Sitting down with the Seller, Title Agent and Realtors to sign official loan/sale documents such as the Note and Deed.
Items that may be needed for document verification
• Driver’s License
• Social Security Card / Alternate form of ID
• 60 days of bank statements
• 30 days of pay stubs
• Two years of tax returns (Three for Down Payment Assistance)
• Two years of W2s (Three for Down Payment Assistance)
• Child support order
• Divorce decree
• Bankruptcy petition and discharge
• Credit collection explanations
• Judgment proof of satisfaction
• Other items at Loan Officer discretion
