Understanding the Home Mortgage Loan Process

After spending many weekends visiting open houses and looking online for just the right place, you’ve found a new home to buy. You’ve done the negotiating dance and have finally signed the sales contract, which is contingent on approval of a mortgage loan for you, the buyer.

Now it’s time for your Eaton Federal Savings Bank mortgage loan expert to get to work to make the new home yours. To help you understand what to expect during the loan application process, we’ve outlined the most common steps on the path to closing.

Getting Started

First, you’ll want to have a talk with one of our mortgage loan experts to select the type of mortgage loan that is best for your financial situation. If you need more information on the various types of loan programs, be sure to read the Mortgage Financing article in our Learning Centre.

Locate or gather the following pieces of information to make completing the loan application faster.

Home and work telephone numbers of the seller and agent

Copy of sales contract for the property

If a condo complex: Information on the development; i.e. number of units, number of units owner-occupied, etc.

If new construction: Cost of land, acquisition date, market value, and cost of construction

Names, addresses, telephone numbers of your current and previous employer(s)

Account numbers and balances of your checking, savings and investment accounts and the institutions' addresses and telephone numbers

All pages of the last 60 days of all bank and/or credit union statements (actual statements work best because they have the financial institution name, customer name, account number, and transaction history)

List of all credit cards, instalment loans, and other debt along with balances, required monthly payments and the name of the creditor

Pay stubs for the last 30 days including year to date totals

List of stocks, bonds, CDs, retirement funds, autos and their current values

All pages of your most recent investment account(s) statement.

Proof of other income sources (alimony, rentals, freelance income)

Value of your life insurance policy (is) both cash value and face amount

Divorce decree, alimony records

Tax returns for previous two or three years and any other proof of employment or income; be sure to include all schedules, W-2 forms and 1099 forms

Proof of real estate currently owned: address, market value, rentals, liens, taxes, etc.

The Application Process

Once you know the type of mortgage loan and have gathered the needed information, then you’re ready to complete the mortgage application. This can take a while to complete so you’ll want to block off sufficient, uninstructed time. You can apply for your home loan online for added convenience or make an appointment with one of our loan officers to complete the application together.

Your loan officer will provide a quick assessment of your financial information and credit report to make sure moving forward is prudent. Once the information is complete, we’ll submit the application for processing.

Now your loan application is in the hands of Eaton Federal and its team of mortgage professionals. To learn more about the final steps from application to closing, stay tuned for our upcoming Part 2 of this article, Understanding the Home Mortgage Loan Process.

[Source: http://www.eatonfed.com/blog/understanding-the-home-mortgage-loan-process-part-1]

Essentials of loan against property and should you go for it

Among a host of loan options provided by banks, a relatively popular product is the Loan against property or mortgage. The product clicks with borrowers because it generally allows one to borrow a relatively large sum of money for any need. It generally has easy documentation, speedy approvals and flexible repayment options.

According to the Transfer of Property Act, 1882, a mortgage, which is essentially availing a loan against property is "the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, and existing or future debt or the performance of an engagement which may give rise to a pecuniary liability.

This means one can apply for a loan from a bank by extending the property as a collateral or security. However, as the definition states mortgage only involves "transfer of interest" and the ownership of the property remains with the borrower. Ownership transfers to the bank only in the event of default on the loan.

Loan against property or a mortgage is popular because it has some perceptible benefits. Higher loan amounts are generally available for longer tenure when compared to conventional loans, and at a discounted interest rate. Most banks accept both residential and commercial properties for mortgage.

Its key benefits are:

Good when availing larger amounts

Interest rates are lower

Tenure is longer, which means lower EMI

Good tool for debt consolidation.

Funds can be used for business as well as personal needs.

To fulfill the eligibility criteria banks generally demand proof of residence, proof of identity, latest Bank Statement where you can show a salary / income for the past 6 months.

Loan eligibility as usual depends on the borrower's credit rating along with factors like income, age, qualification, number of dependents, spouse's income (if any), assets, liabilities, and continuity of occupation. Once the loan is approved is it either disbursed in full or in installments as instructed by the borrower? The borrower can often choose between fixed and floating rate of interest and generally there is an option for part and prepayment of the loan.

Who should opt for it?

Mortgage or loan against property is particularly popular when it comes to needing money for your business. While there is no restriction on using it for personal needs, however, if the amount is small, a personal loan can make much more sense.

While people use loan against property for education and even to buy/build a second property, most mortgage loans are taken for business purposes. This is especially helpful if the business ..

[Source: http://economictimes.indiatimes.com/small-biz/money/essentials-of-loan-against-property-and-should-you-go-for-it/articleshow/48523638.cms]

Meet your immediate financial need with a loan on property

Property has always been the most favored form of investment for the capital appreciation it offers as well as for its ability to be pledged as collateral in times of financial need. For the property owner having flat in any part of the country, loan against real estate is often the most convenient type of loan available in the market. Although there are various routes of availing cash such as a personal loan, a loan against property (LAP) is probably the best option for most people.

What is a LAP?

A loan against property (LAP) allows you to leverage your realty assets to gain funds in an urgent situation. A LAP gives the borrower access to a secured loan with a lower rate of interest and a longer repayment period. It can be used for a number of purposes from personal – marriage, sickness to commercial reasons such as investment in business, office expansion etc.

When you apply for a LAP you can get upto 70% of the value of the property or twice your annual income (whichever is lower) as a loan against your immovable property. It is available for a period of 1 year to 15 years and the rate of interest will be in the range of 12 – 16% p.a.

Alternatives to LAP

Personal Loan

Although emergency funds can be arranged through various routes such as a personal loan, a loan against property has lower interest rates and is easier to access than a personal loan.

Loan from family and friends

Another option is borrowing from family or friends but when the amount is large, people can be hesitant to help, or may not be able to procure the funds immediately to help you.

 Benefits of LAP

Lower Interest Rate

Currently the prevailing rate for personal loan varies from 14% to as high as 48% p.a whereas the rate of interest on LAP varies from 12 – 16% making a LAP far cheaper than a personal loan.

Longer Tenure

For a personal loan the maximum tenure is 5 years whereas for a LAP the tenure can extend up to 15 years.

Minimal documentation

Being a secured loan, a LAP has comparatively faster approvals with minimal documentation required.

Option to top-up loan

If the value of the property has risen during the tenure of the loan, the owners also have the option to avail a top-up on their existing loan. This is especially useful for the self -employed and entrepreneurs.

Reverse mortgage option available for senior citizens

Senior citizens can avail a reverse mortgage against their homes, through which they can get a loan, released in monthly or quarterly installments or as a lump sum payment immediately  against the security of the house they own and live in, thus ensuring them financial freedom in their retirement years.

Applying for a LAP                                                   

Any type of freehold  Loan on Property for apartments in any part of country , irrespective of whether it is rented out to a third party or self-occupied by the applicant,  is eligible for LAP. The only consideration is that the title of the property should be clear without any encumbrances.

In case of joint ownership of a property, all the co-owners should also be co-applicants on the LAP, to assure the bank that all owners are in agreement with offering the property as security for the loan.

The bank will then request for all the documents related to the title of the property, along with identity proof, address proof and income proof to be submitted to them.

The next step for the bank would be to check your repayment track record and your credit history through the Credit Information Bureau India Ltd (CIBIL). Once the bank is satisfied with your financial records, it will sanction the loan, which will typically range from 40-70% of the value of the property.

A LAP is one of the best ways to raise money in an urgent situation when large funds are needed. However the borrower must keep his repaying capabilities in mind as the bank can take complete possession of your mortgaged property if you fail to make your payments.

Source: http://loan-against-property-india.weebly.com/blog/meet-your-immediate-financial-need-with-a-loan-on-property

Personal loan or loan against property: Which one is better?

What is personal loan? Personal loan as the name suggests, is an unsecured loan that you can raise from bank for your personal use. 

There are no restrictions on the proceeds of the loan amount – you can use it to pay off your debt, construct a house, set up your business or even for your wedding etc. What is loan against property? A loan against property (LAP) is a secured loan disbursed against the mortgage of the borrower’s property. It can be residential property (either self-occupied or a rent), commercial property or even a piece of land.

Just like a personal loan, there is no restriction on using the proceeds of an LAP. You can use the LAP proceeds to finance your child’s education and wedding, to build a home for yourself, to meet medical expenses, to buy personal or commercial vehicles and even to finance your business. How to choose between the two?

Processing time: As a loan against property is obtained by mortgaging the borrower’s property, the lender has to verify related documents before disbursing the loan. The lender may also undertake technical study to confirm the ownership of the property and find out its market value. In addition to this, you will be asked to submit documents supporting your income to judge your loan repayment capacity.

This entire process can take anywhere between 15 to 30 days and hence, Loan against Property is not suitable for those seeking quick disbursal of loans. Personal loans on the other hand, do not require any collateral. Lenders usually judge your application on the basis of your monthly income and credit score and hence, your application may get approved within 7 days.

Interest rates: Being a secured loan, the interest rates of LAP is usually lower than that of personal loan. This can be anywhere between 11% and 16%. In comparison, interest rates of personal loan can be as high as 24%.

The main factor determining the interest rates in personal loans is the borrower’s credit score. LAP will suit those who are unable to get a good personal loan deal because of poor credit scores.

Tenure of loan: In case of LAP, the loan tenure can be as high as 15 years whereas the upper limit of personal loan is usually around 5 years. 

The longer tenure of loan repayment brings down EMI payouts, which increases the affordability of big-ticket loans. However, the flip side is that the longer tenure would also result in higher interest payout.

[Source: http://www.moneycontrol.com/news/loans/personal-loan-or-loan-against-property-which-one-is-better_6365581.html]