Applying for a Mortgage (Part 2)

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The Actual Application
By now you're exhausted by paperwork but guess what--you haven't even started yet. The actual mortgage application is enormous. Filling a loan application out online is stupid. Avoid this like the plague. You'll have dozens and dozens of hungry no-name lenders calling you non-stop. For all intents and purposes, the mortgage application is very similar to the pre-qualifying application in terms of questions but with a lot more random forms. Within a few days of completing it your broker will get a good-faith estimate which he/she will pass on to you essentially letting you know if you were actually approved. If your credit is good, this process is very short--I got mine in about three days.

The Appraisal
The bank doesn't want you to waste their money, so they send out an appraiser to make sure you're not spending a half-million dollars for a 400 square foot dump in Bismark, ND (it might be ok in NYC though). There are three ways your future house can be appraised. The first method to value is the Cost Approach. This approach determines the cost to replace the existing improvements as of the date of the appraisal, minus any physical deterioration, functional obsolescence, and economic obsolescence. The second approach is the Comparison Approach, which uses similar properties (in quality and location) that have recently sold to determine the current value. Finally, the Income Approach appraises rental properties and has little use in the determining of single family residence. This method provides an objective estimate of what a savvy investor might pay based on the net income the property can produce.

Closing
After the loan gets approved, the bank moves it into the "funded" phase. All you have to do is talk to the loan attorney to figure out when you're going to come in order to sign your life away. Don't forget to bring the following items to your closing:
·Cashier's Check: For the down payment AND a second one for the closing costs. They will NOT accept a personal check...at least they didn't for me. Maybe they saw my long hair and got nervous though.
·Double-check all of the paperwork. I heard second-hand some unscrupulous lenders change the terms of the loan between the application and the closing. Make darn sure your numbers are right because your recourse is much less powerful once your name is on signed on the document.
·Bring your driver's license or some other form of ID. It will be photocopied and placed in your file. You also should bring proof of insurance.
Finally, the loan is closed and the attorney will register with the county. Once that's done, you will get a HUD-1 Settlement form and receive the money.

You Win! You're a Home-Owner!