Shopping for Mortgage Money

 
Competition among lenders is lively these days, and smart borrowers shop around to find the home financing that best suits their needs. Generally, it takes 15 to 30 days to approve a conventional mortgage, and 30 to 45 days to approve a VA or FHA mortgage. In some cases, loans may be approved more quickly.  When you are ready to shop around, check out some of the following types of resources:

Financial Institutions - Mutual savings banks, savings and loan associations, insurance companies, and some commercial banks are the traditional sources of mortgage loans. Savings and loans often grant favorable terms to their own account holders.

Mortgage Lenders - Mortgage lenders issue mortgages to borrowers. They then process and sell the mortgages to large investors or into the secondary mortgage market.

Mortgage Loan Brokers - These individuals or groups charge a fee to match borrowers with lenders. Sometimes they make direct loans. An advantage of working with mortgage brokers is that they often represent many investors and can provide you with many more financing alternatives, usually at the same price as the mortgage lender.

Private Lenders - Individuals (often home sellers) and groups (sometimes sellers’ employers—if the seller is being transferred) lend money. This source is especially helpful in arranging second mortgages, but can also assist with other mortgage plans.

Credit Unions - Federal credit unions can write 30-year conventional and government insured mortgages. Some will even make loans.

Finance Companies – These companies compete with the more traditional lenders and often promise quick service. Some do not charge mortgage points or pre-payment penalties.

Information Lenders Will Need to Process Your Loan

  • The amount of money you wish to borrow and the length of time you will need the money.
  • Your current address and any other addresses in the past 24 months.
  • Your social security number.
  • Your current employer’s name, address and phone number and the same information for any other employers in the past 24 months.
  • Your gross monthly income including documentation: most recent pay stub, final pay stub for any job you may have left in the current year and previous year’s W-2 form(s).
  • Complete account statements (all pages) for any bank, credit union, retirement, or brokerage accounts.
  • Your assets including real estate, personal property, stocks and bonds, and life insurance with cash value.
  • A complete list of your debts including account numbers, balances and minimum payments.
  • A copy of the sales contract.
  • A written account of any problems concerning your application and supporting documentation.
With this information in hand, the lender will take the following steps to process your application:
  1. Verify the facts.
  2. Get a credit report.
  3. Make a home appraisal.
  4. Review your application.
  5. Decide whether or not to make the loan.
Questions You Should Ask Lenders
  • Are both fixed-rate and adjustable mortgage loans available?
  • What is the interest rate?
  • What are points?
  • How long can I lock-in the financing at the current interest rate?
  • What are the other fees you may charge in conjunction with my loan?
  • Are funds for a second mortgage available?
  • On adjustable loans:
    • How often will the interest rate be adjusted?
    • Is there a maximum limit on each rate change?
    • How often will the monthly payment be adjusted?
    • Is there a ceiling on payment adjustments?
    • Can the term of the loan be extended?
  • Is there a pre-payment penalty clause?
  • Is there an open-end clause?
  • What is the payment grace period?
  • What is the payment late fee?
  • What will happen if a payment is missed?
  • If I sell my house, will the new buyer be able to assume the mortgage at the same interest rate?
  • Do I have to pay points to get a new mortgage?
  • Will you require mortgage insurance?