What to Expect about The Mortgage Process in Colorado
Whether you are a first time homebuyer or looking to move into your next home, the mortgage process could be overwhelming. From financial figures to ideal locations, there is a lot to consider regarding the mortgage process in Colorado. Fortunately, many organizations and individuals are available to answer your questions and protect your interests. Here is what to expect when buying a home in Colorado or other states throughout the country.
Major steps in the mortgage process in Colorado
Trusted organizations such as Fannie Mae, Freddie Mac, your Realtors and loan officers can help guide you through the mortgage process in Colorado. The first step of the mortgage process in Colorado is to calculate how much you can afford. Ideally, your mortgage should be no more than 28 percent of your gross monthly income.
Be sure to educate yourself throughout the mortgage process in order to protect your finances by using the following tips from Freddie Mac:
- – Say no to easy money. (Beware of offers that seem too good to be true, be sure to work with reputable organizations, – read between the lines, and review any and all documents carefully before signing them.)
- – Shop around.
- – Find out about prepayment penalties. (Some agreements penalize borrowers for paying off a loan early.)
- – Make sure documents are correct.
- – Make sure documents are complete.
- – Ask about additional fees.
- – Understand the total package.
- – Work with legitimate credit counselors.
- – If you’re not sure, don’t sign.
People involved in the mortgage process
Individuals or organizations involved in the mortgage process include a loan officer, real estate agent, loan processor, mortgage underwriter, real estate appraiser, home inspector, title/escrow company (aka the closing agent), and quite possibly community based housing agencies such as the Colorado Housing & Finance Authority (aka CHFA)
- – Loan officers are mortgage specialists. They will use your credit, financial and employment information to see if you qualify for a mortgage and then come up with financing options.
- – Real estate agents can help you find the kind of home you want in the neighborhood you want that are most ideal for you and your budget.
- – A loan processor’s job is to prepare your mortgage loan information and application for presentation to the underwriter.
- – The mortgage underwriter is the professional authorized to assess if you are eligible for the mortgage loan you are applying for.
- – A real estate appraiser’s job is to examine the property you are purchasing and determine its worth.
- – A home inspector looks through the property to make sure it is in good condition and uncovers defects that could cost you a lot of money and problems in the future.
- – A title/escrow officer oversees and coordinates the closing, records the closing documents, and disburses money to the appropriate individuals and organizations
Mortgage lenders look at four main categories
Mortgage lenders look at four main categories when underwriting.
- – The first category is credit. Credit scores and credit history tell lenders a lot about your past performance when it comes to borrowing money and ultimately is a large factor to determining credit?worthiness.
- – The second category is income. Lenders need to know how much income you have to ensure you can afford the payment and that you will be able to repay the loan. Not only do lenders look at how much money you make, lenders also need to pay attention to how you make your money. Job stability and history is just as important as how much you earn.
- – The third category is assets or down payment. Regardless of the amount you are putting down, lenders are tasked to ensure that they know where the money is coming from. Lenders need to account for any large deposits into your accounts, gift funds, and anything else that is being used to purchase a home. Consult with your realtor or loan officer regarding deposits into your account during the course of the mortgage process.
- – The fourth category is collateral or property. Since the mortgage will be secured against the property you are buying (collateral), lenders need to ensure that the property meets certain requirements. An appraisal will be ordered to ensure you are not overpaying for the home, and properties like condos have additional requirements that need to be met to ensure the HOA is in sound financial status.
Sections of the mortgage loan application
The 10 sections in a mortgage loan application are the type of mortgage and terms of the loan; property information and purpose of the loan; borrower information; borrowers’ employment information; borrowers’ income and expense information; borrowers’ assets and liabilities; details of the transaction; declarations regarding any legal problems or other factors that could influence your financial situation; acknowledgement and agreement; and information for government monitoring purposes.
Once the application is complete, your loan officer will review it with you, pull a copy of your credit report, ask for supporting documentation, and send out a pre-qualification letter.
Additional documents and steps in the mortgage process
Other documents involved in the mortgage process include the Loan Estimate which summarizes your loan, interest rate, charges/fees, and total cost of your loan. The appraisal disclosure; and the Closing Disclosure – the final document – that discloses the actual dollar amounts you will pay for fees and services associated with the closing of your mortgage loan. Documents you will be asked to sign at the closing include the mortgage note, the deed of trust, the warranty deed, and affidavits and declarations