FAQs: the Loan Process Explained

Since we launched our previous website redesign in 2012, we have published thousands of articles that provide insight into the mortgage process, the housing market, the economy, and more. With the newest redesign in 2015, we have done our best to organize this information below. Research to your hearts content, but remember that we are just a phone call (805.543.5626) or an email (click here) away and happy to answer any questions!

Guide to Qualification

The cost of obtaining a home loan includes bank fees, title and escrow fees, appraisal fees, and closing costs. Your baseline home loan begins at $3,000 with adjustments based on the selected mortgage rate. READ MORE.
Here is a rundown of the basic paperwork you will be asked to provide for your loan to file. READ MORE.
Through the qualification process, lenders dig through all aspects of the borrower’s financial situation and attempt to assess their ability to repay the loan. The underwriting process builds evidence by looking at all income sources, outstanding debt, and credit history, among other factors. The complete guide for credit qualification (including minimum debt-to-income and credit score). READ MORE
To navigate the real estate market, buyers must carefully build their proposal to give themselves the best chance of winning their bid. READ MORE.
The pre-approval is the end product of the loan application process, after the borrower has submitted all proof of income, assets, liabilities, and received “underwriting” approval from the lender. READ MORE.
Underwriting can occur the same day, or take up to 30 days. This depends a lot on the loan program, the bank, and how many conditions on the loan need to be addressed. The underwriter usually takes 24-48 hours to review conditions. READ MORE.
This report is done by the home appraiser, who will do an interior and exterior inspection of the subject property to determine the value of the home to make sure it is adequate collateral for the loan. READ MORE.
On May 1 2009, Fannie Mae and Freddie Mac adopted the Home Valuation Code of Conduct (HVCC), which they created jointly with the Federal Housing Finance Agency and the New York State Attorney General.  The HVCC was designed to insulate appraisers from lender coercion. And while the appraisers are now insulated, just about everybody is frustrated by the process –borrowers, realtors, mortgage brokers, lenders, and appraisers. READ MORE.
Once all the conditions of the loan are satisfied, you will be required to sign a series of loan documents that legally bind you, the property and the bank in a contact together. READ MORE
An escrow impound account is a trust account held by the lender of your new loan to facilitate the collection and payment of your property taxes and/or home owners insurance. Impound accounts are not generally required unless you have less than 10% equity in your home. READ MORE

 

Down Payments

Buyers can pay as little as 0% down to purchase a home. In this article, we will go over the down payment options for borrowers in San Luis Obispo County, the Central Coast, and California. READ MORE.

Gift payments can be a useful tool for borrowers to meet closing cost fees and down payment expectations. However, gifts are carefully regulated by lenders. In this article, we will go through gift-giving guidelines for conventional, FHA, USDA, and VA financing, four of the most popular loan programs. READ MORE

Central Coast Lending offers first-time homebuyers loans for up to 3% of the purchase price to assist with completion of down payment and closing costs in the California Homebuyers Down Payment Assistance Program. The low-interest rate loan is placed in junior position and repayment is “deferred” until the first loan is repaid, the home is sold, or the home’s title is transferred. READ MORE.

 

Mortgage Insurance

In general, borrowers who put less than 20% of the sales price down as payment on a home, or do not have at least 20% equity in the home they are refinancing, are often required by the lender to take out mortgage insurance. Certain government loan programs require mortgage insurance regardless of the down payment. READ MORE

There are situations when it is possible to refinance your home loan and eliminate the mortgage insurance charge early. Even as mortgage rates have increased, the savings from eliminating mortgage insurance can justify the higher rate. READ MORE

The conventional loan is the most common choice for people looking for a purchase or refinance loan. This “go to” loan program has three different mortgage insurance payment options to suit different financial situations. READ MORE

The VA and USDA loans are extremely user-friendly, and offer affordable, low-cost mortgage insurance options. READ MORE.

As part of the loan structure, the FHA requires both an annual “mortgage insurance” payment (MIP) and an “upfront insurance premium” (UFMIP). READ MORE

 

Guide to Mortgage Rate Selection

One of the most misunderstood parts of the mortgage process is the pricing. In this guide, we attempt to clearly (and quickly) explain how the mortgage pricing works. READ MORE.

When investors want to buy “safety” or when the Federal Reserve guarantees billions in MBS purchase per month, mortgage rates drop. READ MORE

Explaining the historical relationship between the 10-year Treasury bond yield and the 30-year fixed mortgage rate… a quick and dirty way to track expected mortgage rate movement. READ MORE

After you shop around for an interest rate and commit to a lender, a loan, and a rate, you will be asked to “lock” the rate. A rate lock is a contract between you and the bank for a given interest rate, and it commits to a period of time in which you will get the process completed. READ MORE.

Typically when you lock a rate, you get what you get. That is to say, the rate is locked in for good (rates worsen) or bad (rates improve). However, with the floating rate lock, you are sometimes able to take advantage of improvements. READ MORE.

With interest rates continuing to fall and lower and lower rates becoming available, I often hear the question: should I pay extra points for a lower rate? The issue is this: every interest rate has a cost (points) associated with it. The lower rates may now be available, but they may have a high cost associated with them. Today, we will give you an example to help you determine a course of action in this Rate vs. Points debate. READ MORE.

You may have heard the terms “APR” and “Truth-in-Lending,” but what exactly do these concepts mean? And how does this information apply to you as a consumer and borrower? READ MORE

 

Troubleshooting and Special Offers

Getting your credit back together takes a combination of new accounts and time. Here is a step-by-step guide for improving your credit score. READ MORE

We are in a new time of loan processing. In years past lenders required less documentation, allowed for substitutions of required forms, and readily made exceptions.  Today, we find that lenders are the exact opposite – lenders require fully documented files and rarely make exceptions. Following are few tips to avoid documentation troubles. READ MORE.

One significant step that buyers can take to get a leg up on the competition is to sort out the mortgage financing ahead of time, obtain pre-approval from the lender, and then waive the financing contingency. By doing so, the buyer would be guaranteeing that they are eligible and able to buy the home, and that they wouldn’t back out of the contract due to any financing-related issue. READ MORE.

The loan qualification process requires documentation of income to gauge how large of a home loan the borrower can afford. In most cases, the borrower must submit two years of tax returns to determine the maximum loan qualification.

In situations where the borrower’s income spiked in the most recent year, the two-year standard might limit the loan amount that he or she can afford today. READ MORE

Lenders will accept properties with non-permitted additions and alterations, but there isn’t a single set of rules to follow for obtaining financing for such properties. What works for one loan, might not work for another. READ MORE.

By taking out a second mortgage on their home, borrowers can turn existing equity into cash to consolidate debt, fund home improvement projects, contribute to an investment home purchase, or build a secondary unit. READ MORE.

Homebuyers who have not owned a home in the past three years are eligible to claim the Mortgage Credit Certificate and receive a dollar-for-dollar reduction against their federal tax liability for 20% of their yearly mortgage interest payments. READ MORE.

The home purchase process is rarely simple. Every borrower is unique, and every loan is different. To meet the needs for every borrower that comes through our doors, we make sure to continually expand our loan program portfolio. READ MORE.

The “Section 1031 Exchange” is a process by which a property owner can “defer” a capital gains tax bill from sold property by using the proceeds to purchase new property. READ MORE.

 

Home Loans After a Negative Credit Event

We have put together a guide below to help people who have recently had a foreclosure, short sale, bankruptcy, deed in lieu, or loan modification to figure out the timeline for when they are next able to purchase a home. READ MORE

Borrowers who underwent a foreclosure, short sale, or other negative credit events are able to obtain a home loan just 12 months later under the FHA “Back to Work” program. READ MORE

The first thing a returning buyer needs to determine is the date of the foreclosure. This can be a bit confusing. The foreclosure process includes a notice of default, a notice of trustee sale, the actual trustee sale, and the move-out notice. READ MORE

Here are general guidelines for how long a borrower must wait to obtain financing after a short sale. READ MORE

Here are general guidelines for how long a borrower must wait to obtain financing after a Chapter 7 Bankruptcy. READ MORE

Here are general guidelines for how long a borrower must wait to obtain financing after a Chapter 13 Bankruptcy. READ MORE

Here are general guidelines for how long a borrower must wait to obtain financing after a loan modification. READ MORE

Here are general guidelines for how long a borrower must wait to obtain financing after a deed in lieu. READ MORE