Loan Process Overview

Application, Process, and Closing

What happens when you apply, through processing and closing on your loan?

Applying for your loan is the first step in the mortgage financing process.  This starts with completing a mortgage loan application.  You can provide this information to your Mortgage Consultant in a variety of ways: in person, by fax or even apply on-line.

Your Mortgage Consultant will use this information to determine the type and amount of loan you qualify for. This will help you select a loan program and rate that meets your needs.

Things to know about choosing a loan program:

  • Do you want a fixed rate or adjustable/ARM loan?  ARM loans offer lower rates but the monthly
  • payments will move with interest rates.
  • Are you eligible for a government loan program such as FHA or VA?  If not, you will be doing conventional loan.
  • Are you looking for a loan over $417,000?  If so, you will need a jumbo loan program.
  • What is the amount you want to put down as down payment? On conventional loans, if you put less than 20% of the purchase price of the home down as down payment, you may need private mortgage insurance.  Another way to think of this is if you have greater than an 80% loan-to-value, you will get to put less down but will most likely need private mortgage insurance.
  • How much are you comfortable paying each month on your mortgage?  You can use our powerful Mortgage Calculator to estimate the maximum amount for which you qualify and how much payments on that amount would be. Ultimately, you need to decide on an amount that is right for you.

Contrary to popular belief, the lowest rate is not always the best for all buyers.  The best rate is defined by your unique situation.  Here are some things to think about: Discount Points or Points are fees paid up front that allow you to lower the interest rate.  They are expressed as a percentage of the loan balance.  Thus, 1 point on $100,000 loan equals $1,000.  Instead of paying higher interest every month, you almost pre-pay it in the form of points. Points often make sense for buyers who are going to stay in the house for a period of time.  If you know you won’t stay in the house very long, then you may want to take a higher rate and avoid points.  Our Mortgage Consultants can help you with this process or our Breakeven on Mortgage Calculators is a handy tool you can look at right now.

Mortgage interest is tax-deductible. Thus, some borrowers don’t mind a slightly higher rate because it shelters their income. To learn more about this go to our Tax Savings Calculator.

Processing and Underwriting

One of the first steps in this phase involves sending the necessary disclosures. You will receive disclosures within 3 business days after we receive your application.

Disclosures you will receive include:

  • Good Faith Estimate: an estimate of all the fees associated with getting your loan.
  • Truth-in-Lending: a detailed description of the loan you have chosen.

Columbia Mortgage uses automated underwriting systems for most of it’s loans. These AU systems allows us to take your application data and generate loan approvals within 24 hours. These approvals are called “conditional” because they will ask for documentation to support the information on your application. For example, one of the conditions could be for your last two months bank statements so we can verify your assets in the bank. Processing your loan is taking this documentation and checking to make sure they support the numbers originally completed on the application.

Next, an underwriter will review the automated
underwriting feedback, your submitted documentation on income and assets, your credit reports along with an appraisal of the property. Common jargon used by underwriters include: LTV, ratios, reserves, and PITI. Our glossary can help you better understand all of these terms.

During this process, a title search will be ordered to determine if there are any liens against the property that need to be repaid.

Once the above steps are successfully completed, you will receive a final loan decision.

Closing your Loan

Closing your loan is the final step in getting your mortgage. In the industry, it is often called settlement.

Purchase Transactions:

  • Your “cash to close” will include your down payment and all other closing costs.
  • The settlement company will pay the sellers’ mortgage lender the remaining balance, any fees and then disburse the remaining amount to the Seller.

Refinance Transactions:

  • If the loan is a “cash-out” refinance, then you will get money back from the transaction. There is a three-day waiting period, or “right of recession” before your funds are available on any refinance.
  • Closing is more than just money changing hands; it is where you will sign all your final loan documents, including the Mortgage Note and Deed of Trust.

You made it- no hassle or stress when using Columbia Mortgage!