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For many homebuyers, the period of time between the submission
of the loan application and receipt of the lender’s commitment
letter is one of uncertainty and concern. However, if you
understand the process, waiting for approval will be far less
worrisome.
After your loan application has been completed, your lender
will begin the work of verifying all the information you’ve
provided. This process can take anywhere from one to six weeks,
depending on the type of mortgage you choose, whether you are
buying a home outside your local community, and other factors.
Your loan officer should be able to give you an idea of the
processing time for your application.
Within three business days after completing the application,
the lender must give you an estimate of your closing costs. It
will show costs associated with the loan settlement, such as
origination fees, mortgage insurance, title insurance, escrow
reserves and hazard insurance.
You’ll also get a statement that shows, among other things,
your estimated monthly payment. The total cost of all finance
charges on your loan is also shown, stated as an Annual
Percentage Rate (APR). The APR represents the dollar amount of
finance charges you pay either up front or over the life of the
loan, converted to an annual interest rate.
During this "waiting" period, it is important to
keep the lines of communication open. You should be accessible
if the lender needs additional information or documents during
processing. Quick response to lender requests helps keep the
process on schedule.
After the lender approves the loan, you will usually receive
a commitment letter which sets out the terms of the loan and the
length of time for which those terms are offered. You usually
must accept the commitment by returning a signed copy to the
lender within five to 10 days. The commitment may contain
conditions that you will still have to satisfy, so you should
read it carefully.
If the lender decides not to approve your loan application,
the lender has 30 days from the acceptance of your completed
application to notify you. This notification must also include
the reasons for rejection.
Once the commitment letter or approval has been received, you
are assured the financing you need to complete the purchase of
your home and you need to turn your attention to completing the
details required for settlement.
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