Careful and in depth study of the home loan process will not only demystify it but also enable a potential borrower to get the best home loan he possibly can. When you decide to get a home loan to finance your dream home, there are a few procedures that the lender will require you to comply with. You will need to provide the lender with various documents as proof of your financial soundness and ability to repay the loan on a regular basis. These documents could include tax returns, salary statements, employment verifications, bank statements and such.
The underwriter will go over all relevant documentation and the loan application with a fine toothcomb. The loan agent will be your means of communication with the underwriter. The underwriter will take a week or ten days to complete the initial appraisal, after which he can ask for further documentation or even disapprove the loan if he feels you are a bad investment. If the initial documents have been approved, provide further documents and wait a few more days.
The entire loan process can even take a month to complete. In case of people with bad credit history or self-employed people, the process can even take longer. If the loan has been conditionally approved by the underwriter, it is then sent to your attorney or the title company. Either of these two parties will add to the list of documents, any further information that is needed.
Once all the papers are in place, you will be called for an interview with your attorney or the title / escrow company. You will be given a copy of all the relevant papers to study and then the original will need to be signed. A couple of days after the documents have been signed, the home loan amount will be transferred to your account and once it is recorded with the county, the transaction is complete and you can proceed with purchasing your home.
Getting a home loan with poor credit rating can be difficult or even at times impossible. Unscrupulous lenders will exploit people’s desperation to own a new home and give them a home loan even with poor credit at high rates, fees and penalties. Very often, these people will end up being unable to pay the home loan over and above their other loans and lose the home to foreclosure. Those who have bad credit and still want to get a home loan can avoid these pitfalls by taking a few sensible precautions.
Some of these precautions are:
• Check credit rating with credit bureau – a rating of below 620 is bad credit.
• Raise credit score by paying off overdue debts and credit card dues.
• Consider exactly how much you can repay comfortably by way of a home loan.
• Save for sometime to get enough to make a large down payment.
• Bad credit will attract higher interest rates, so check these.
• Track all extra costs like points, closing costs, penalties etc.
• Get someone with good credit rating – parent – to cosign the loan.
• Do not get ARM where mortgage amounts can increase drastically over time.
• Search for a good FRM with fair fees and lowest possible interest rates.
Those who have a good credit rating and enough confidence and finances to opt for an adjustable rate mortgage can use a mortgage calculator meant solely to calculate ARM rates. Apart from helping you calculate adjustable rate mortgage figures, the ARM mortgage calculator can even help you compare these figures against those of a fixed rate mortgage. The ARM calculator will ask inputs like interest rate, loan amount and period of ARM. Since with adjustable rate mortgages, the interest rates keep fluctuating depending on market trends, the figure entered for the calculator will be the initial interest rate.
While you will not know what future interest rates will be, you can still use ARM calculator and input different interest rates to check what your liabilities can be. Apart from the conventional figures the ARM mortgage calculator will ask for other details like period of initial interest, margin, index, lifetime cap and expected interest adjustment amount. If you do not know what these various parameters are, check with a real estate agent or the loan documents. Understanding the home loan process and using a free and dynamic tool like the mortgage calculator can help a person acquire his dream home.