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Closing The Deal Back
The closing is the final step in which the home is transferred to you. Once your loan is approved, a closing date is set.  The purpose of the closing is to make sure the property is ready to be transferred to you from the seller.  This article reviews the closing process and prepares you to take the final step in purchasing your new home.
What is a Mortgage

A mortgage loan is a loan used to buy a home. The home is the collateral for the loan and acts as a guarantee that the loan will be repaid.

There are many mortgage choices available to you. Selecting the right one that fits your needs is important.

  • Fixed-rate loan. The interest rate is set for the full length of the loan. Because the monthly payment for principal and interest stays the same for the life of the loan, it's easier to plan a budget.

  • Adjustable-rate loan. An adjustable rate mortgage (ARM) usually starts with a lower initial interest rate than traditional fixed rate loans. After a set initial payment period (usually 1, 3, 5, 7 or 10 years), the interest rate may change periodically based on market conditions. As the rate changes, your monthly payment changes. ARM loans feature an adj...

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How mortgages are approved

There are several factors involved in the approval process of your mortgage application.

  • Income. When you're qualifying for a loan, lenders usually use your gross income (all the money you earn before taxes) to determine the monthly mortgage payment you can afford. Gross income may also include the average of overtime pay and commissions, and child support or alimony, if you wish to have them considered.

  • Monthly mortgage payment as a percentage of your income. In general, lenders require that your total monthly mortgage payment — principal, interest, property taxes, mortgage insurance, hazard insurance and any homeowner association dues - be no more than 28% to 33% of your monthly gross income.

  • Your total debt situation. You may have car loans, st...

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Reviewing Your Credit

Credit involves the borrowing of funds with the intent to repay the lender at a later date, such as credit cards, car loans and student loans.  Lenders review your credit report to help determine if you are capable of repaying the ammount applied for.

  • Credit report. After receiving a loan prequalification request or application, the lender will request a credit report from the credit bureau. The credit bureau collects and organizes information about people who have credit. The information generally goes back seven to 10 years. This report includes your name, address, employer, length of employment and previous credit history. Credit history includes account types, balances remaining, payment status, collection information and inquiries.

  • Lack of credit history. Most traditional mortgage loans generally require some kind of established credit history. Some lenders offer f...

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Applying For Your Loan

When applying for a loan, be prepared.  Gather your information together to allow for a smooth application process.  Information you may need to provide to apply for a mortgage:

  • Employment information. Names, addresses and telephone numbers of all your employers for the last two years.

  • W-2s.These are the forms you get from your employer every year to file your income tax returns. Usually you will need to provide copies of your W-2s for the two most recent years. You may also provide other income information, such as social security, pension, interest or dividends, rental income, and child support or alimony, if you choose to have them considered. Self-employment income may also be considered.

  • Pay stubs. Provide your pay stubs that cover the 30...

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Once all the required documentation has been gathered, your application is submitted to underwriting. Underwriting is the process of reviewing all of the information and making a decision as to whether a borrower qualifies for a loan. Underwriters evaluate your ability to repay the loan (income), your willingness to repay the loan (credit) and the value of the property that you've identified (collateral).

  • Loan application. The information provided on your application helps the lender answer basic questions such as:

    • What is the source of your income, and is the source stable?

    • Is your income adequate to cover the expense of the new mortgage payment?

    • How...

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