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How does the application
process work?
Cynthia E. Brodrick
You have your paperwork together, your questions answered
and your ducks are in a row. Time to fill out the application. This
can take anywhere from 30 to 90 minutes, says Anderson. Once that
application is filled out, you wait for the lender or the broker
to do the rest ... Sorta.
On that application, you've made yourself look like
Joe Credit. Even with that sweet honest face of yours, the lender
is still going to check you out. He'll be calling your bank, your
employer and your insurance company to make sure you are the legit
and solid citizen you claim to be. Most of this will happen behind
the scenes. And unless there's a problem, you'll never know about
it. Essentially, the lending office is making sure you have shown
an ability to make money and the ability and willingness to pay
back loans, says Anderson.
So now you have a promise to loan you money. Your
job is to find something in particular to use that money for --
preferably something with a roof, four outer walls, a door and maybe
a garage. This house you buy with the lender's money will be the
collateral on the loan.
Once you've found your dream home, its time to call
the lender. Unless you've done something silly like put in a bid
on a house that costs a lot more than the lender said it would give
you, the process should be pretty smooth sailing from here.
"Now we need to order an appraisal," says Anderson.
The appraisal is to protect the lender ensuring that the collateral
(the house) is worth what you are buying it for. Typically, buyers
pay the mortgage lender for the appraisal and the lender pays the
appraiser. Remember, you have a right to a copy of the appraisal
since you paid for it.
This is also when you can "lock in" the interest rate.
That means you get to keep a certain rate for a certain amount of
time (usually for as many as 60 days, according to Anderson). He
explains that the lender will usually charge you to lock in a rate
for more than two months -- which can be an issue if you're building
a house. Make sure you get a copy of the lock-in agreement.
Currently, mortgage rates are slowly creeping upward,
so you might want to lock in a rate now, rather than risk seeing
that rate shoot up when the deal closes a couple of weeks or months
from now. Anderson compares it to buying a stock -- it's a commodity.
At the big day known as the closing, the lender may
come to the table or be represented by the title company. In the
process of signing your name a few dozen times on a dizzying stream
of paperwork, you're actually doing two closings: one for
the loan and one for the real estate. This is where you pony up
the last fees for the mortgage -- as well as the down payment and
a little something for the lender to make it worth the lender's
while to let you use his money for the time being.
"Read everything you're getting into. Get a copy of
everything you sign," says Anderson. He explains that the government
requires tons of disclosures -- "overly protects the consumer,"
he opines. So many disclosures that people tend to sign without
reading all the fine print. Consider getting a copy of all the paperwork
the day before the closing -- you have that right -- and read it
over the night before. Or have your lawyer read it over for you.
-- Posted: Aug. 26, 1999
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