Preparing For Mortgage Process In Illinois


Preparing For Mortgage Process In Illinois

This BLOG On Preparing For Mortgage Process In Illinois Was Written By Gustan Cho

Preparing For Mortgage Process In Illinois is different than other states. Illinois is not a community property state which means that a spouse’s debt is not counted if the spouse is not on the mortgage loan nor is the spouse’s credit. Preparing For Mortgage Process In Illinois is also different because most home buyers and home sellers are represented by real estate attorneys where other states like California, Florida, Texas, and most other states, the title company handles the real estate closing and buyers and sellers are not represented by real estate attorneys. Illinois is also different because property taxes are paid in arrears and home buyers can use property tax prorations towards their down payment on their home purchase.

First Step In Preparing For Mortgage Process In Illinois

Once you have decided that you are going to become a homeowner, the first step is to get qualified by a lender and see what type of loan program you qualify for and the amount of mortgage loan you qualify for. The Mortgage Qualification Process is the most important stage of the Mortgage Process . Over 75% of the borrowers who contact me are borrowers who either are going through a stressful loan process with a different lender or have just gotten a last minute mortgage denial. The main reason why these folks contact me is because they are under contract with a property and have a set closing but are going nowhere with their current lender. The only reason for a stressful mortgage process or mortgage denial is because the borrower was not properly qualified by their loan officer. The key to a solid pre-approval is being properly qualified. A loan officer should do his or her due diligence and not issue a pre-approval letter until the loan officer is not just ready to close the mortgage loan, but close the loan on time and without any stress. All pre-approvals are not created equal.

Preparing Documents And Getting Organized

Once you have completed your mortgage loan application and your loan officer has run a tri-merger credit report and you have an automated underwriting system approval, your loan officer will get you a list of Documents Requirement To Start Your Mortgage Process . Here are tips when preparing the documents required:

  • Take this process seriously
  • When your loan officer request bank statements, tax returns, divorce decree, bankruptcy paperwork, foreclosure paperwork, and other documents, make sure that it is legible and that you include all pages including blank pages
  • Copies drivers license and social security card should be legible
  • Any missing pages will cause delays in processing your loan
  • Return all phone calls and/or emails promptly

Processing Of Your Mortgage Application

Once you have submitted the documents required to process your mortgage loan, a mortgage processor is assigned to your mortgage loan application. The mortgage processor will make sure that the documents that you have submitted are complete. Remember that any missing items or incomplete documents can hinder and delay your mortgage process. A great experienced mortgage processor will not submit an incomplete file to underwriting. Here are the documents that mortgage processors will need from you to process your loan and submit it to the underwriting department:

  • 2 year of employment history starting with the name of your most current employer and back tracking the past two years including gaps of employment
  • Phone and street address of your employer or employers for the past two years
  • Length of time at current employer and the past employers you had for the past two years
  • What is the title of your current employment as well as all of your employment in the past two years
  • Your salary: Need to provide two years W-2s and 30 days of most recent paycheck stubs
  • Profit & Loss statement is required if self-employed
  • Asset Information such as IRA, Pensions, Social Security Awards Letter
  • Public assistance if applicable
  • Child support paperwork if applicable
  • Alimony if applicable
  • 60 days bank statements
  • Investment accounts such as securities
  • Debt documents such as current mortgages
  • Liens
  • Alimony and/or child support

Letter Of Explanations On Derogatory Credit Items On Credit Report

You do not need perfect credit to qualify for a home loan. You can qualify for a mortgage with the following:

  • You can qualify for a mortgage with outstanding collections and charge offs without having to pay them off
  • You can qualify for a mortgage with bankruptcies and foreclosures
  • You can qualify for a mortgage with late payments
  • You can qualify for a mortgage with judgments and tax liens

However, you will need a good letter of explanation for any extenuating circumstances and a mortgage underwriter will want a letter of explanation if situations above applies to you. Your loan officer will prepare the letter of explanation to you during the mortgage qualification process.

Mortgage Underwriting Process

A great experienced mortgage processor will not submit a mortgage loan application until the file is complete with no missing documents and no missing pages on the documents submitted. Once a processor deems it ready, the file is assigned to a mortgage underwriter. A mortgage underwriter can underwrite a completely nicely packaged file in couple of hours and issue a conditional loan approval. If the file is slopping and are missing documents and pages, the file can get dozens of conditions or can just get kicked back altogether which means possible delays in the mortgage process which can delay the closing. Once a conditional loan approval is issued, the file goes back to the mortgage processor.

Clearing Conditions For A Clear To Close

Once the mortgage underwriter has issued a conditional mortgage loan approval, the file goes to the mortgage processor where the processor will gather the conditions. Here are examples of conditions on a conditional mortgage loan approval:

  • Updated bank statements
  • Updated paycheck stubs
  • Verbal Verification Of Employment
  • Updated real estate contract extension
  • Proof of cash to close
  • Other outdated or missing documents requested by the mortgage underwriter

Once the mortgage processor has gather all the conditions, the processor will submit the file back to the underwriter for a clear to close. A clear to close is when the lender has signed off on the loan and has given the green light to prep closing docs and fund the loan.

Preparing For Mortgage Process In Illinois With Cash To Close

Illinois property owners pay their property taxes in arrears.  What this means is that if you are a home buyer in Chicago or any other area of Illinois, the home seller will owe you one year’s property taxes as a credit at closing.  Lets use this case scenario:

  • Home buyer pays $100,000 home with a FHA Loan in Schaumburg, Illinois
  • Property Taxes are $3,000
  • FHA requires 3.5% down payment so the amount he needs to show for the 3.5% down payment is $3,500
  • Home buyer only needs $500 because the home seller will owe $3,000 property tax prorations credit to home buyer and home buyer can use the property tax prorations for down payment. Home buyers cannot use sellers concessions for down payment. Sellers concessions is only for closing costs and cannot be used for down payment.

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