• Enough money for the down payment and closing costs. (At least 3 month's bank statements are needed to show sufficient cash).
• Stable employment worked for at least two years in the same job or capacity.
• Two years of W-2 earning statement will be needed.
• Good credit rating with other creditors.

Step 4
Also to process your loan, the bank must prove the home is worth what the bank is lending. The bank establishes the homes value by ordering an appraisal. The banks loan amount is based on whether there is value in the property to support the amount of the mortgage loan requested. The bank considers the Loan to Value, the value being established by the purchase price of $60,000 or appraisal value, whichever is less, divided by the loan amount. The value of the property must be greater than the bank's loan.

Step 5
After the bank reviews all of the information you provided on your personal financial history and information on the home appraisal, if everything is satisfactory to the bank's credit guidelines, the bank will approve your mortgage loan and issue a commitment letter. The commitment letter should be reviewed by your attorney. You must sign the commitment letter agreeing to the banks terms and return the commitment to the bank in order to proceed to closing.

Step 6
Once the bank has issued a commitment, and all the banks terms have been agreed to, the bank is ready to go to closing of the real estate transaction and the issuance of the mortgage. The players involved at the closing (or settlement) are your attorney, the bank's attorney, the seller, any realtors involved, and yourself. Your attorney should prepare your closing.

Step 7
Collect your keys and move in.



Rates and Points and Terms

When you begin to look at current interest rates in the newspaper or on the web you will notice that a lender offers a range of interest rates and a range of points. Let's say a home buyer needs to borrow $70,000 for a house purchase. The buyer finds current interest rates in the Rochester Democrat & Chronicle .

This mortgage lender's highest interest rate for qualified buyers for a 30 year mortgage is 6.63%. This is, if that buyer pays the lender 0.00 points, or no extra fees. If, on the other hand, a buyer pays 4.25 points (or 4.25% of $70,000 = $2,975) when applying for the loan, the lender will lower the interest rate for the life of the loan to 5.75%

In the first instance (6.63%), the buyer eventually must repay the bank $161,441 for this loan. In the second case, after paying 4.25 points on the loan, the borrower ends up repaying $147,060. So the borrower in the second case pays $14,381 less for the $70,000 mortgage, but pays $2,975 more upfront. Unless you plan to stay in your house for a long time, it doesn't make sense to pay very many points on your loan.

You can use this mortgage payment calculator to try different values for interest rates and terms, or length, of loan (30 and 15 years are the most common).



Avoiding Predatory Lenders

Most lenders are trustworthy, but unfortunately, some are not. Predatory lenders are those that direct a borrower away from loans with more affordable interest rates and instead work to convince a borrower that they only qualify for a loan with very high interest rates, unnecessary fees (see a list of expected closing costs) and extra charges.

A predatory lender may be a large company with a name you know or a small company or loan broker you've never heard of, but predatory lenders have many of the same traits. Here are some warning signs. They:

• offer loans based solely on the equity in a home, not on the borrower's ability to repay.
• charge unusually high interest rates.
• add excessive points to a loan without lowering the interest rate.
• include excessive fees.
• tack on unnecessary costs, such as life insurance premiums.

Many people who end up victims of predatory lenders could have gotten a fair mortgage from a reputable lender, but they did not try. To protect yourself from predatory lenders check with several mortgage lenders on your ability to get a mortgage. Avoid loan offers that are unsolicited, are very high-pressure or encourage you to borrow more than you need for the home you are buying. Ask your lender to give you a written statement showing each payment that will be due and the total amount you will repay the lender. If you are still unsure about whether or not your lender is above board check with:

• Consumer Credit Counseling Service of Rochester, Inc. (585) 546-3440
• The Housing Council at (585) 546-3700.
• www.stopmortgagefraud.com/

The Mortgage Application

When you have decided which mortgage lender you would like to borrow from you will need to take the necessary steps to complete an application. Before you make an application appointment, be sure to ask the lender to "lock" the rate and point combination they have quoted you and ask them for how long they can guarantee you this locked price.

You will need to take these documents to the mortgage application appointment.

• Social Security Number - for borrower and co-borrower
• Employment History - employment for two years; dates and addresses; salary; current pay stubs or W-2 forms
• Check and Savings Accounts and Certificates of Deposits - location of bank accounts, account numbers and balances; address of bank if out of town and be prepared to provide the last 3 months statements
• Stocks, Bonds, and Investment Accounts - broker's name and address, description of stocks, bonds, etc. and the last 3 month's statements or copies of stock certificates
• Life Insurance Policies - insurance company, policy number, face amount, cash value, if any
• Retirement Plan - approximate vested interest value, copy of latest statement
• Automobiles - make and model of automobiles, their resale value if possible
• Other Assets - market value of personal and household property
• Liabilities and Other Non-Mortgage Debt - creditors names, addresses, account numbers, monthly payments, and balances

Step 7 - Legal Considerations