LENDING

Simple, Lending Basics
The Loan Process
Just a Few Mortgage Terms

Simple, Lending Basics

Purchasing a home is one of the most important financial decisions you’ll ever make. A home can be an excellent investment because most houses increase in value over time. Just as important, the type of home you purchase, its location, and the monthly mortgage payments can shape your future.

As a future homebuyer, you will find knowledgeable and attentive loan specialists here, at The Arlington Bank, who will work with you every step of the way…from preapproval and application to the day your loan closes.

The Arlington Bank hopes to outline a few basic steps that you will need to take to select the type of mortgage that best fits your needs. Please contact one of our experienced lenders today and you will be on your way a lot sooner than you think.

We make it simple…because that’s exactly how a bank should work.

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The Loan Process

Step One – Getting Prequalified and Preapproved

Before you begin looking for a home to buy, it is wise to determine what homes are within your price range. This can be accomplished through the prequalification process. To prequalify, you and our lending specialist use financial information that you provide to estimate the maximum mortgage you should be able to obtain. The process does not guarantee that your mortgage application will be accepted, but it does help you narrow your search to homes you can afford.

Preapproval is more formal than prequalification and takes a bit longer. To obtain preapproval, you provide the same information you will be asked when you make a formal loan application. This will likely include your credit history, employment, and down payment, all of which will be verified.

Just remember that a preapproval is not a mortgage contract. You cannot obtain the mortgage until The Arlington Bank can appraise the property and perform a title search. These steps occur after your offer to purchase a home is accepted.

Step Two - Loan Application

After your home offer has been accepted, it is time to submit a formal mortgage application with The Arlington Bank. We will let you know what information is required to make the loan process go as quickly as possible. Please be sure to provide accurate information. Otherwise, the loan may be delayed or even denied. To begin filling out your loan application, open our loan application and print onto your printer for you to fill out.

Quite a bit of information is needed at the time you apply for the loan. The following is a list of items you should be ready to provide.

• Picture identification.
• Proof of Social Security number/s.
• Residence address/es for the past two years.
• Names and addresses of each employer for the past two years.
• W2s and the last two pay stubs.
• For each checking and savings account: name of financial institution, address, account number, and balance; last two months’ statements.
• For each current loan: name of lender, address, account number, balance, and monthly payment.
• If you are self-employed: last two years’ tax returns; year-to-date profit and loss statement prepared by an accountant.
• Loan information and address/es of real estate owned.
• Estimated value of furniture and personal property.
• Deposit for credit report and appraisal.

Step Three – The Steps to Closing

The Arlington Bank will send you the following information soon after we receive your application, along with other helpful documents.

1. A Truth in Lending Disclosure. This statement provides information about the proposed loan such as annual percentage rate, total finance charges, amount financed, total payments, schedule of payments, late payment charges, prepayment penalty (if any), and assumption options, which indicate our willingness to allow a future buyer to assume your original loan.
2. A “Good Faith Estimate” of closing costs. This is an estimate of the approximate amount of money you will need at closing. This estimate will give you an idea of the fees you will incur. Fees will include application fee, points, appraisal and credit report fees, and closing and settlement fees.
3. A booklet from the U.S. Department of Housing and Urban Development (HUD) to help you understand closing costs and truth in lending disclosures.

Before your closing, take time to review all of your loan documents and your purchase agreement. Be prepared to pay the remaining closing costs and down payment at closing. Payment should be by a certified or cashier’s check rather than a personal check.

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Just a Few Mortgage Terms

Fixed Rate Mortgage

The interest rate on this type of mortgage agreement stays the same for as long as you hold your mortgage, no matter how interest rates change in the financial markets. With this type of mortgage, you know exactly how much you will pay in principal and interest on your home each month.

Adjustable Rate Mortgage (ARM)

This is a type of mortgage loan in which the interest rate periodically changes according to terms and conditions specified in a mortgage note. The changing interest rate is based upon the upward and downward movement of an index, such as the current U.S. Treasury Securities, and a fixed margin above that index.

Closing Costs

These are costs paid by a buyer or seller or both in order to purchase, sell, or transfer real property.

Escrow

The holding of funds and documents of buyers and sellers by a disinterested third party until contractual conditions, specified by a purchase agreement, are satisfied.

Homeowner’s (Hazard) Insurance

Insurance protecting a house against certain hazards including loss from fire, certain natural causes and vandalism, and guaranteeing payment to the insured in cases of such loss.

Points

A one-time charge used to “buy down” the interest rate on a loan. Each point is equal to 1% of the mortgage amount. For example, if a lender charges one point on a $90,000 loan, this amounts to a charge of $900.

Private Mortgage Insurance (PMI)

This is insurance the buyer carries to guarantee that the lender is paid off if the buyer fails to pay on a mortgage. This is different from homeowner’s insurance and is generally required for all mortgages with less than a 20 percent down payment.

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