The Loan Process

Applying for a new home loan is not a linear process. Many of the steps happen simultaneously. At different points throughout the process you'll be expected to pay certain fees. The following information will give you an overview of what the loan process involves.

Pre-qualification
This simple process will give you a much clearer idea of how much of a loan you can expect to obtain and help you set realistic home-shopping or savings goals.
You can fill out a Duxford Financial Services Application and submit it online here.

Find Your Home
If you didn't already have a home in mind, now's the time to go shopping. You know how much you can borrow and you have your Dream Home Wish List. Have fun. Keep in mind that you may be able to include options and upgrades as part of a loan for a new home, and shop accordingly.

Sign Purchase and Sales Contract
You've found your dream home. It's time for some paperwork. You'll need to bring your completed loan pre-qualification form, the last two years of tax returns, your two most recent paycheck stubs and your two most recent bank statements. If your purchase will involve a co-borrower or a co-signer, these people will also need to supply the same documents. You'll also need a deposit check, usually in the form of a cashier's check (issued by your bank), to open escrow.

Escrow
You are "in escrow" from the time your signed contract and deposit are sent to the escrow company until your home sale has closed and the title has been transferred from the seller to you. An escrow company is a neutral third party that holds documents and funds for incremental disbursement as each of the various conditions of your sales contract are met.

Applying for a Loan
You have 45 days from the time you signed your contract to apply for and secure loan approval. Exactly how long your approval process will take depends on the loan product you have selected and other variables. Your Duxford Financial Services loan consultant will be able to give you an approximate time frame. Approval will be based on your creditworthiness, your income, your debt load, the appraised value of your home and the amount of your down payment. Depending on your financial standing, you way be able to include upgrades and options as part of your loan.

A word of caution: Consult with your Duxford Financial Services loan consultant e before you make any other major credit purchases such as an automobile or boat at any time throughout the process. It could have a negative impact on your debt-to-income ratio and creditworthiness.

Fees Paid When You Apply for a Loan
These fees are collected by your lender to pay for services provided by third parties. They include:

• Appraisal Fee - The fee charged by an appraiser to determines and confirms the value of the home you're buying.
  
  

Good Faith Estimate
Application fees, appraisal fees, recording fees, inspection fees -- first-time buyers are often surprised by the hidden costs that call for extra cash. By law, your lender or broker must provide a written Good Faith Estimate within three days of time you apply for a loan. This document estimates the total costs involved in getting a loan. It includes lender and broker fees, loan-related fees and third-party fees such as title insurance and appraisal. Most of these fees must be paid at closing. Remember, this is only an estimate. Delays caused by you or the lender can increase the costs.

Pick a Loan Program
Great news. You're approved. Now it's time to finalize your purchase price and loan amount, confirm your program and lock in your interest rate. The time frame is usually 30 to 60 days before closing. The final decision about rates is yours alone; it cannot be done without your personal involvement and consent.

Arrange for Homeowners Insurance
Escrow must have information about your homeowners insurance policy 30 days before the close of escrow, including the insurance company's name and phone number, before loan documents can be ordered.

Closing
Closing is a multi-step process leading up to the moment when you take actual ownership of your home. Your Duxford Financial Services loan consultant will advise you along the way to help prevent unnecessary delays.

The actual closing process usually includes:

• A review of the final loan documents with a closing agent. A representative of a escrow/title company fills this role. The final loan document details all the final costs involved in the home purchase.
  
  
• You sign all the loan documents including the mortgage, Truth in Lending statement, etc. Be sure to bring valid proof of identity.
  
  
• You give the closing agent a cashier's check or wire transfer to cover the down payment and closing costs.
  
  
• Your lender gives the closing agent the funds for the amount of the home loan.
  
  
• Once all closing conditions are satisfied and documents have been signed, the instructions and documents are returned to the lender for final review. When the lender is ready to fund the loan (usually in a day or two), the closing agent records all the documents and closes escrow.
  
  
• You receive the keys to your new home and copies of all the closing documents.
  
  

Fees Paid at Closing
You will have already had a good idea of what would be required when you received your Good Faith Estimate. Fees paid at closing fall into two categories: Pre-paid amounts required by the lender and Fees for Closing and Services.

• Pre-Paid Amounts Required by the Lender These charges cover such items as the interest on your loan until your first payment comes due. They can include:
  
  
  • Interest - If your loan is finalized before the last day of the month, you will have to pre-pay interest on the loan to cover the time between the day the loan is funded and the first day of the next month.
    
    
  • Private Mortgage Insurance - If your down payment is less than 20% of total cost, your lender will usually require you to carry Private Mortgage Insurance. This protects the lender should you be unable to repay the loan.
    
    
  • Homeowners' Insurance - You will have to pay for one year of this coverage to protect you and the lender in case the property is damaged by fire, etc.
    
    
  • Reserve or Escrow or Impound Account - The lender sets up this account for you and holds it in trust to pay for property taxes, homeowner's insurance and Private Mortgage Insurance. At closing, it is typical to deposit at least two months' worth of these items. The lender will draw on the account to pay these items for you. Your monthly mortgage payment includes money deposited into this account. Not all loans require this type of account.
    
    
  • Home Owner Association Fees - These are the fees charged by some developments to cover the cost of maintaining common areas such as landscaping, recreational areas, etc. In the case of townhomes or condominiums, the HOA may also cover upkeep to exteriors such paint, roofing, decking and fencing. You may be required to include these fees in your pre-paids.
    
    
• Fees for Closing and Services These fees are usually paid on the day your home purchase is final. If you want to keep more cash on hand, you may be able to include your closing costs in your loan. While this will lower your upfront cash requirements, it will increase your loan amount and you'll be paying interest on the costs. Your Duxford Loan Consultant will help you decide what is right for you.
  
  
  • Real Estate Agent Commission - This is what you've agreed to pay an agent or broker when you buy a house. It's usually a percentage of the home price.
    
    
  • Origination Fee - The lender's charge for processing your loan.
    
    
  • Points - Equal to 1% of the amount of money you're borrowing. You may be able to get a lower interest rate by agreeing to pay points.
    
    
  • Closing Fee - The fee paid to the closing agent to finalize your loan and home purchase as an independent third party.
    
    
  • Title Insurance Fees - Title insurance assures that your home is free of encumbrances, liens or other legal claims. To issue title insurance, government and other records have to be searched. A title insurance binder and an insurance policy are also required. You may be charged separately for these costs or pay an all-inclusive fee. The title insurance policy you are required to buy protects your lender. You may want to buy your own, separate title insurance policy to protect you.
    
    
  • Property Taxes - Local property taxes must be paid yearly. If you purchase your home in the middle of the year, you may be required to share some of the year's taxes with the seller. The closing agent will prorate the amount you owe.
    
    
  • City, County and State Charges - Various local governments may charge taxes and fees to record and stamp deeds, loan paperwork and other documents.
    
    
  • Survey - This covers the cost to survey your property to determine your lot size, boundaries and easements.
    
    
  • Pest Inspection - If an appraiser notices signs of infestation or if your area laws require it, a pest inspection must be conducted and a report issued.
    
    
  • Flood Check Fee - The law requires lenders to check Federal Flood Maps to determine if your home needs flood insurances. This fee covers the map check and the cost to issue a certificate.