In order to begin the actual process, it is necessary to complete a loan application. The form is called a 1003 - Uniform Residential Loan Application. It can take anywhere from 30 minutes to an hour or more depending on the amount of information that you will be providing to the Loan Originator. (By that I mean- the more accounts you have, income sources, real estate holdings etc. the longer it may take to complete)
In today's age of technology, Loan Originator's have access to software that allow us to input your information into the system and pull credit as well as run Automated Underwriting all while taking a phone application. It is convenient and provides almost instant feedback to the customer if they are willing to spend the time with the LO.
The application doesn't lock you into any programs or interest rates, its purpose is to show intent on your part to complete the loan process with the LO and to provide the LO with the ability to make a sound credit decision on your behalf. Normally, a fee is associated with taking a pre-approval and/or application. The fee is to cover the costs of pulling credit, running AUS, etc. It in no way provides the LO with any income. If they are charging you more than $25-$50 and you haven't decided on a program or agreed to an appraisal then be careful (they may be taking you for a ride). However, once a loan program is agreed upon and the initial disclosures are signed the fee may be higher. Again it allows us to cover the costs of the appraisal, credit, AUS, and is credited back to the borrower at closing.
For example: If there is a solid deal in the works, then I may charge $350 to get the ball rolling. This is a good faith payment from you that you are willing to do the loan with me and that I can go ahead and order the appraisal. If you are specifically asking for a pre-qualification/pre-approval for the purchase of a new home then I will more than likely collect the $50 fee and when you are ready to go collect the remainder of the upfront fee for the application.
In a nutshell, you will be asked about income, debts, assets, credit history, schooling, dependents, social security number, address, job, race, nationality, real estate, and much more. This will provide a solid base and give the LO the chance to provide a sound credit decision with regards to your file. There are two fees, either pre-qualification/pre-approval or an application fee.
Once you are ready then the next step begins, deciding on the program and terms. Stay tuned for more information next week on programs and terms.
Have a safe and wonderful weekend.