The Loan Process

The Loan Process

Prequalification

Prequalification occurs before the loan process formally begins. The lender gathers financial information from the borrowers and makes a conditional determination about their qualifications for a loan. To start the prequalification process, click here.

Application

The application is the beginning of the formal loan process. The applicant completes a mortgage application with the Mortgage Professional and supplies all of the required information and documentation for processing. Various down payments and closing costs are discussed at this time and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) that itemize the rates, loan fees and associated costs for obtaining the loan. To contact an Omniscient Professional who can help you through the process, click here.

Processing

The lender reviews the documentation and provides a loan package for the loan underwriter.

Underwriting

An underwriter determines whether the information provided is acceptable to offer the applicant a loan. If more information is needed, the applicant is contacted to supply it.

Mortgage Insurance

For a conventional loan, mortgage insurance is required when the down payment is less than 20% of the loan amount.  FHA and VA loans also require mortgage insurance or similar protections.

Pre-Closing

During this period, title insurance is ordered, all approval contingencies are satisfied, and a closing date is scheduled for the loan.

Closing

At the closing, the lender “funds” the loan with a cashier’s check, draft or wire to the selling party in exchange for the property title. At this point, the borrower has completed the loan process and the transaction is closed.

Mortgage Checklist

Having your financial documentation in order will help get the process off to a good start.  Below are some documents you may need to provide to complete the loan application process:

For a Purchase Loan:

  • Signed Purchase Agreement
  • Tax returns for the last 3 years
  • W-2 forms for the past 3 years and current paystub
  • 12 months cancelled checks for rent/mortgage verification
  • Copy of personal bank statements (all pages) for the last 2 months
  • Most Recent Asset Statement (401K, Brokerage Accounts, Mutual Funds, Stocks, etc)
  • Signed loan application
  • Borrower’s signed authorization
  • Driver’s license and social security card

For a Refinance Loan:

  • Tax returns from the last 2 years
  • W-2 forms from the last 2 years and current paystub
  • Copy of personal bank statements (all pages) for the last 2 months
  • Asset Statement (401K, Brokerage Accounts, Mutual Funds, Stocks, etc)
  • Signed loan application
  • Mortgage statement or coupons/rental agreements
  • Borrower’s signed authorization
  • Driver’s license and social security card

Who Does What?

When you’re looking for a mortgage, you’ll probably speak with a number of different professionals. Here’s a quick overview of what each of them does, and how they may help you in the loan process.

Mortgage Professional

Omniscients Professionals are extensively trained to act as your primary guide throughout the mortgage process.  We will provide you with detailed information and options so that the lender can determine the loan that best fits your needs and we will coordinate all your loan paperwork.

Typically, Mortgage Professionals are responsible for:

  • Assembling all required paperwork for loan prequalification. This is the process of providing financial and other information (such as employment history) so that the lender to determine the loan amount the borrower may qualify for.
  • Preparing prequalification letters for you, which will show sellers how much you could qualify for and potentially provide you with an advantage when competing with other interested buyers who are not prequalified.
  • Gathering your income, expenses, assets and obtaining a copy of your credit report. It helps a lender determine whether or not a potential borrower is a good business risk.
  • Sending your information to a loan underwriter for review.
  • Providing qualified borrowers with a loan offer and loan disclosures.
  • Information given to consumers about their loans that explain loan fees, terms and conditions.
  • Working with title companies to schedule closing your loan.
  • Attending the loan closing. This is the time and place at which documents for your loan are signed, dated and notarized.
  • Keeping you informed throughout the process and ensuring you fully understand your mortgage.

Your Real Estate Professional

Your real estate professional will help you find properties for sale that fit your budget and your needs. Your real estate professional may also:

  • Write up your purchase offer and present it to the seller or seller’s real estate professional.
  • Guide you through negotiations with the seller and accompany you to the closing.
  • Work with your lender to get them information they need about the home you’ve contracted to purchase.
  • Help you understand the market you’re looking in and provide comparable homes to review.

The Seller’s Real Estate Professional

Sometimes also referred to as the “listing agent,” the seller’s real estate professional will work with your agent on the real estate offer, negotiations and loan closing.

Underwriter

The underwriter is the person who decides whether or not their lending organization will approve your application for a home loan. They make this decision based on the information they receive from your loan application and supporting documentation, including the home appraisal.

Typically, your Mortgage Professional will communicate with the underwriter on your behalf. Unless you experience unusual circumstances, it’s unlikely that you will be asked to contact the underwriter directly.

Inspector

An inspection is sometimes required by the lender to help determine the condition of a property. A third party conducts the inspection, which includes all major appliances and structural elements.

Appraiser

The appraiser provides a professional estimate of the fair market value of the property. The appraiser inspects the property for value-not for potential repairs-and reviews comparable sales information.

Title Company

The title company researches the title on the property. Before making a loan, a lender will usually require a title search or a title report to make sure the borrower will legally own the real estate. Based on the results, they will create a Title Report. This report lists current owners of the property and any unpaid debts or liens filed against the property.

Mortgage Glossary

Mortgage Glossary

Adjustable-Rate Mortgage (ARM): a mortgage with a variable interest rate, where payments or rates may adjust monthly, bi-annually, annually, or on some other basis.

Amortization: Paying off a loan over time in installments, including the amount applied towards interest and the amount toward principal each month.

Annual Percentage Rate (APR): the interest rate you pay on your mortgage, including loan fees, points, and other costs associated with the loan.

Appraisal: a report completed by an appraiser that determines the value of a given property.

Cap: a maximum figure that limits the amount or frequency an interest rate or payment can change on an adjustable-rate mortgage loan.

Certificate of Reasonable Value (CRV): an appraisal issued by the Veterans Administration (VA) that determines the value of a property. The loan amount may not exceed the CRV on a VA loan.

Closing: the final step in the loan process when loan documents are signed and become effective.

Conforming Loan: a loan that meets Fannie Mae and Freddie Mac guidelines, and is below a maximum loan amount.

Credit Report: a report used by a bank or lender to review your credit profile and your ability to carry and repay debt.

Debt-to-Income Ratio: the ratio of monthly liabilities and housing expenses divided by the gross monthly income of the applicant or borrower.

Delinquency: the failure to make a monthly debt or other payment on time.

Down Payment: an upfront payment to the seller of a property for a portion of the sales price. The sales price (sometimes plus closing costs) minus the down payment typically equals the mortgage loan amount.

Earnest Money: a deposit paid to the seller by the buyer as a pledge to complete the real estate transaction. If the seller accepts the offer, the deposit is typically held in escrow and applied to the down payment when the transaction is completed.

Equal Credit Opportunity Act: a federal law that prevents lenders from discriminating against applicants based on race, religion, national origin, sex, age, marital status or participation in public assistance programs.

Equity: the value of a property less any existing liens.

Escrow Agent: a third party intermediary who holds and allocates funds, including taxes and insurance in a mortgage transaction. Often, a substitute term for a closing or settlement agent.

Federal Home Loan Mortgage Corporation: one of the largest purchasers of conventional mortgages on the secondary market. Also known as Freddie Mac.

Federal National Mortgage Corporation: a publicly owned, government-sponsored corporation that purchases conventional mortgages on the secondary market. Also known as Fannie Mae.

FHA Loan: a federal government program that allows applicants to qualify for mortgages by providing loan insurance to mortgage holders as long as they fit certain criteria set forth by the Federal Housing Administration.

Fixed Rate Mortgage: a mortgage with an interest rate that does not change over time.

Hazard Insurance: insurance protecting a property owner and lender from damages caused by fire, severe weather, or other events.

Home Equity Line of Credit (HELOC): a loan that allows a borrower to obtain revolving credit (similar to how a credit card works) using their home as collateral.

Impound Account: oftentimes called an escrow account, an account established by the lender to collect and automatically pay a borrower’s property taxes and insurance premiums when payments are due.

Jumbo Loan: a loan amount above “conforming” or maximum loan limits that is set each year by Fannie Mae and Freddie Mac.

Lien: a claim against a property by a lender or other creditor to secure repayment of a debt, often in the form of a mortgage.

Loan-to-Value Ratio: the percentage of the appraised property value that is borrowed from a lender. For example, a loan of $80,000 on the property that is appraised at $100,000 would have a loan-to-value ratio of 80%.

Margin: an amount specified by the lender which, when added to the accompanying mortgage index, sets the interest rate for an adjustable-rate mortgage.

Mortgage or Deed of Trust: a pledge of property or security instrument given by an applicant or borrower to a lender, recorded in public records as a lien on the subject real estate.

Mortgage Discount Points: amount paid by borrowers at closing to reduce the interest rate on a home loan.

Mortgage Professional: a professional trained to guide applicants through the mortgage loan process.

Mortgagee: the mortgage lender.

Mortgagor: the borrower or homeowner.

Note: a written promise to repay the loan amount plus interest upon the specified terms and provisions.

Origination Fee: a percentage of the loan amount charged by the lender or mortgage broker for completing the loan process and for having the lender grant the borrower a loan.

PITI: the monthly housing expense, expressed as principal, interest, taxes, and insurance.

Prepayment Fee: a fee charged by the lender if a loan including a prepayment fee provision is refinanced or repaid prior to a specified date as agreed upon in the loan documents.

Prequalification: the process of providing financial and other information (such as employment history) by a prospective borrower in order for the lender to determine the loan amount the borrower may qualify for to purchase a home.

Prime Rate: the lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers. Also called prime interest rate.

Principal: the balance of the outstanding debt, not including interest.

Private Mortgage Insurance: required insurance on a mortgage if the down payment is less than a specified amount (typically 20% on a conventional loan).

Refinance: the act of replacing your existing loan(s) with a new loan on the same property.

Right of Rescission: a federal law which allows a homeowner to rescind or cancel a contract to refinance their primary residence within three days of signing loan documents.

Short Refinance: a cross between a short sale and a rate and term refinance, in which an old loan is replaced with a new one, but with a lower loan balance.

Short Sale: the sale of a property for less than the amount of the mortgage balance as a means for a mortgage lender to reduce its losses.

VA Mortgage: a mortgage loan guaranteed by the Veterans Administration providing veterans and/or their surviving spouses with a federally guaranteed loan, often without a down payment requirement.

FHA Loans

The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), provides various loan programs that make getting a home loan easier for those with limited credit experience, a small down payment, limited funds to make monthly payments and/or for those who may not qualify for other types of loans.

These loans are offered through Omniscient, and are insured by the FHA. FHA loans typically offer more flexible underwriting guidelines than conventional loans.

ATTENTION: The federal government just reduced Mortgage Insurance Premiums on FHA loans. You may be able to qualify for more home, or enjoy reduced payments on a mortgage for the same home. Contact a loan officer today.

Features:

  • Lower credit scores are acceptable
  • Owner occupied properties only
  • Up to 30-year fixed rate term
  • Down payment as low as 3.5%
  • Refinance with limited equity
  • 100% gift funds may be used for down payment and closing costs
  • No pre-payment penalties
  • An effective refinancing option for current high-cost mortgages
  • Non-occupant co-borrowers acceptable

FHA 203K

  • FHA 203k Streamline – The FHA 203k Streamline allows borrowers to finance the purchase or refinance an existing home and make improvements or upgrades up to $35,000 ($5,000 minimum repair costs required.)
  • FHA 203k Full – The FHA 203k Full program allows borrowers to finance the purchase or refinance an existing home and complete major renovations, rehabilitation or improvements, including structural repairs.
    • Make improvements or upgrades up to 50% of the “subject-to” appraised value*
    • The minimum total repair cost is $5,000
    • Considers the “after-improved” value of the property
    • Work is completed after loan closing
    • An escrow account holds the funds until repairs are completed

Check with your Omniscient Real Estate proffesional for more information. The following mayexcluded: manufactured homes, cash-out refinance, non-traditional credit, non-occupant co-borrower and down payment assistance programs.

*Requires a HUD-approved Consultant on all transactions.

Conventional Loans

Omniscient Real Estate Finance has a variety of conventional loan programs available with features, terms and benefits to meet our customers’ specific needs.

Features:

Maximum loan amounts (may vary by location):

  • One family $417,000
  • Two family $533,850
  • Three family $645,300
  • Four family $801,950

Terms:

  • 30-year fixed-rate*
    • Monthly principal and interest payment never changes
    • Safety and security in knowing what your payment will be in the future
  • 15-year fixed-rate*
    • Monthly principal and interest payment never changes
    • Safety and security in knowing what your payment will be in the future
    • Loan will be paid off in half the time as a 30-year fixed-rate loan
    • While the monthly payment is higher than a 30-year fixed-rate loan, the interest rate is typically less

*Note: A Omniscient Mortgage Fixed-Rate Loan may be the right choice for a refinance if:
– The interest rate on your current loan is higher than what is available now
– The interest rate on your current loan is adjustable and a fixed rate loan is preferred

Jumbo Loans

A Jumbo Mortgage is a mortgage with a loan amount above conventional loan limits established by Fannie Mae and Freddie Mac.

The current limit on Fannie Mae and Freddie Mac is $729,750 depending on the location of the property.

Highlights:

  • Loan amounts from $417,000 up to $2.5 million
  • Finance up to 80% of the value of your home
  • Purchase, rate/term refinance, and cash-out refinance options for primary residences
  • Purchase and rate/term refinance options for second homes

Eligible Property Types:

  • 1-2 unit properties
  • High rise condos

VA Loans

Veterans Administration (VA) loans are guaranteed by the U.S. Department of Veterans Affairs and are designed to provide housing assistance for armed services members, veterans and their families who are looking to purchase homes. The guarantee allows active duty military, veterans, service personnel, some members of the selected reserve and certain categories of spouses to obtain home loans with favorable terms, usually without a down payment.

Features:

  • No down payment is required in most cases
  • No mortgage Insurance required
  • Owner-occupied properties only
  • Terms: 30-year fixed rate
    • Limit on the amount of origination fees, appraisal fees and closing costs
    • No pre-payment penalties

Down Payment Assistance Programs

Down Payment Assistance (DPA) programs help home buyers fund the down payments and closing costs associated with their home loans. Down Payment Assistance programs are available in conjunction with many state housing authorities to help meet borrowers’ needs for affordable housing.

These programs may be useful for first-time home buyers, borrowers with moderate incomes and those attending homeowner counseling.

Highlights:

  • The DPA programs assist with the greatest barrier to owning a home, the down payment

Eligible Property Types:

  • Eligibility varies by city and county

Realtors, please call 1-866-439-8491 or click here to schedule an appointment.

USDA Loans

USDA loans are primarily used to help low-income individuals or households purchase or refinance homes in rural areas.

USDA Loan Program features:

  • No down payment for qualified borrowers
  • Specifically for low income borrowers looking to purchase homes in elgible rural areas
  • Funds can be used to build, repair, renovate or relocate a home

For USDA Refinances:

Low minimum credit score requirements:

  • Minimum 550 credit score
  • Minimum 500 credit score if your loan is currently serviced by Omniscient Mortgage Services

Program detail:

  • Available only in certain states*
  • Maximum loan amount is determined by county maximum limits and pay off amount