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CLOSING or PASSING PAPERS
Once you have entered into a purchase agreement you will need to finalize your mortgage and begin preparing for the closing. If you have not been pre-approved or have decided to apply for a loan from a different lender than the one who pre-approved you, you will need to complete the application process. Note: make sure that if your purchase agreement has a time specification for you to apply for a loan that you comply with it, you never want to put the agreement and subsequently your downpayment funds at risk.
Items You Will Need To Supply To Your Lender:
Income verification:
Your last 2 (or 3) years 1040s and W-2s, a recent pay stub
Downpayment Verification:
2 months bank statements verifying your downpayment funds.
Housing Payment History:
Your last 12 months canceled rent or mortgage checks.
The Appraisal Process:
Your lender should do an appraisal to verify the price you are paying is in fact the market value. Some Automated Underwriting systems are starting to use statistical analysis to determine the market value. This is not the same as sending a licensed appraiser to the property, it is highly recommended that you pay the $250-500 for an appraisal. As with the inspection this is not a place to cut costs, thousands of dollars are at stake.
The Approval or Commitment
Once your lender has verified you financial information, obtained a credit report and appraisal they will issue an approval or commitment letter. This is a legal document and outlines not only the details of your loan but outlines any actions that need to be completed by both you and the lender. These are usually referred to as "conditions".
Typically the commitment letter will detail a set of conditions that you must satisfy prior to closing. They could be as simple as bringing a certified check for a specified amount to the closing to more complicated items such as providing the source of a large deposit into your bank account (this might be needed to verify that the downpayment funds are in fact your savings and not gifts).
Make sure you review these conditions with your Loan Officer to determine what actions you will need to take to satisfy them.
The Closing
The closing is sometimes referred to as passing papers. It is the transfer of the title. Traditionally you are required to bring a certified check to cover the funds needed to close. The funds needed could range from just the closing costs or be to cover the closing costs as well as any addition downpayment funds not placed on deposit earlier.
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