Waiting to Close

With the GFE, 1003, and TIL all signed sealed and delivered, you will simply provide the required documentation to the loan officer/broker (copies only) to complete their loan package. The days to follow are waiting to close and making certain the details of getting ready for your new home are progressing. You and the loan officer or broker will agree on how soon you will be able to or want to close the loan.

If the lender requires additional information or if there is a problem with the appraisal, you will get a call very quickly.

Some loans can close in as little as a week from start to closing on existing or new homes, while others may take up to 45 days for new construction loan projects.

Loan-to-Value (LTV)

Another major factor in the cost of borrowing money is the loan-to-value (LTV) from the appraisal. You calculate the LTV by dividing the loan amount by the appraised amount. Assuming the loan being sought is $70,000 and the home appraised for $100,000 the math looks like this: $70,000 div. by $100,000 = 70% LTV.

The lower the LTV, the lower the lenders risk in the loan, and the lower your interest rate.

If your LTV is 80% or less, you do not have to have mortgage insurance for your loan. That will keep your monthly payment amount lower. FHA loans are the same as conventional loans in this regard. Lenders rate the total deal on the LTV.

If your loan is conventional, the insurance is called Private Mortgage Insurance or PMI
If your loan is an FHA/VA, the insurance is called Mortgage Insurance Premium or MIP

Some lenders will suggest you do two loans to avoid the PMI by doing a 1st mortgage for 80% of the value of the home. Then they’ll secure you a second mortgage for the entire 20% of the balance. The 2nd mortgage will come at a higher interest rate because that lender is second in line to get paid and if you default on your 1st mortgage the group holding the 2nd mortgage looses his money as well. In fact, there is a rule in real estate that states 1st in time, 1st in rights. Meaning, who ever records their lien first they get first rights of ownership if there is any dispute as to who is entitled to the property.

Look carefully at any 80/20% loans closed and you will always see the time stamped in by the Clerk of Court or the Registrar of Deeds is later for the 2nd mortgage if only by seconds.