Home Mortage Loan

By: EconomyWatch Content   Date: 17 December 2009

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A mortgage loan is obtained by a homebuyer to make the full payment of a home to the seller. The homebuyer is then required to repay the loan, with interest and fees, to the lender through monthly payments. Until the homebuyer pays off the loan amount, the rights to the property stay with the lender. A lender may sell the property in case of default on the loan. So, it is important for homebuyers to understand the processing of a mortgage loan to deal with different possible situations.

 

Home Mortage Loan: Process

Ideally the first step of home loan processing is pre-approval. This may take only half an hour if performed over the phone or online. All a borrower needs to do is answer a few questions asked by the loan officer. This enables borrowers to know the range of loan they should expect. Pre-approval also acts as a testament for a borrower’s willingness to buy a home.

Once the borrower selects the property he wants to buy, a mortgage application must be filled and the following documents submitted to the loan officer:

·        Tax returns of the previous year

·        Recent pay stubs

·        Statements of bank transactions

·        Details from other creditors

·        Copies of credit report

Borrowers who are self-employed are required to submit proofs of their tax returns for the past three years. Once the mortgage application is completed, the details are counterchecked by the loan agency to determine the risk involved in lending.

A borrower whose application is approved is given a set of documents to review under the Truth in Lending Act. This provides the borrower the right to demand an explanation for the following:

·        Total loan amount

·        Total number of payments

·        Annual Percentage Rate (APR)

·        Associated finance charges

·        An estimate of settlement costs

If the mortgage application of a borrower is denied, the Equal Credit Opportunity Act of the Fair Credit Reporting Act provides you the right to ask for more information behind the denial.

A borrower should consider his payment capacity and the amount he can afford towards his monthly housing payments. Financial conditions of borrowers do not affect the calculation process implemented by lenders. So, ensure your ability to make the timely monthly payments before signing the loan documents.


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