Loan programs come in many forms and come from many sources. Just as the loan structure, like a 30 year fixed rate mortgage, can affect your interest rate and monthly payments, the source of funding for your loan can also affect your rate and payments. The source of funding can also affect the amount of your down payment and closing costs.
If you have at least 10% of the loan amount to use as a down payment, you may consider the most common type of loan, a conventional loan.
Which type of loan fits your particular needs? If this will be your first home or a "transitional home" -- one you plan to own for a short time, an ARM may be the best type of loan. If it's going to be your dream home or one you plan to raise a family in, then you may want the stability of a fixed rate mortgage. If you choose an ARM, the index should be based on the Cost of Funds Index if rates are increasing, and Treasury Bills if they are decreasing. The COFI's are less volatile over time than T-Bills; make sure the teaser rate is understood and what the real rate would be.
- You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage lenders.
- You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.
- You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.
- You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.
- You have the RIGHT to ask your mortgage lender to explain exactly what the mortgage lender will do for you.
- You have the RIGHT to know how much the mortgage lender is getting paid by you for your loan.
- You have the RIGHT to ask questions about charges and loan terms that you do not understand.
- You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.
- You have the RIGHT to know the reason if your loan was turned down.
The loan approval process generally begins with an initial interview where you and the mortgage professional meet to discuss the potential loan. You will need to bring information to verify your income and long term debts.
To complete the 1003 Mortgage Application, you will need to gather:
- A purchase contract for the house (if you have one)
- Your bank account numbers and the address of your bank branch, along with checking and savings account statements for the previous 2-3 months
- Pay stubs, W2 withholding forms, tax returns for two years, or other proof of employment and income verification
- Credit card bills for the past few billing periods, or canceled checks for rent or utility bill payments, to show payment history and amount of revolving debt
- Information on other consumer debt such as car loans, furniture loans, student loans and retail credit cards
- Balance sheets and tax returns, if you are self-employed
- Any gift letters, if you are using a gift from a parent or relative or other organization to help pay the down payment and/or closing costs. This letter simply states that the money is in fact a gift and will not have to be repaid
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