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What should you know about obtaining a home mortgage? Massachusetts’s law requires that this Guide be provided to you when you obtain a mortgage loan applications, or it may be obtained upon request from any lender at any time. It is designed to help you understand the home mortgage application and approval process and the practices common to mortgage lending in the Commonwealth of Massachusetts. Words and terms in bold print are defined in the Glossary. The lender will also provide a Real Estate Settlement Procedures Acts (RESPA) Booklet entitled “Settlement costs”, a one-page worksheet which will allow you to calculate easily all the charges and fees your are likely to incur when securing your mortgage; and, if applicable, the “Consumer Handbook on adjustable Rate Mortgages’ (ARMS). A good faith estimate of all costs involved in a mortgage transaction may also be requested from the lender. Filing a mortgage application A common option is a rate-lock/interest rate commitment. You must keep in mind that lending practices vary from lender to lender and some terms and procedures may not apply to the refinancing of an existing mortgage. When filling out an application, it will be helpful for you to have supporting documents and information, such as the signed Purchase and Sale Agreement, account numbers for each of your deposit accounts, information on income, outstanding loans, real estate holdings and any other information the lender may require. An application fee, which is often non-refundable, may be required. The mortgage approval process Your ability to repay the loan - This is determined by evaluation the information you furnish on your application and verifying your place and length of employment, your deposit accounts and other assets, your income from employment and other sources, and your rental income and expenses, if any. Your willingness to repay the loan - This is determined by checking your credit history through a credit bureau, your loan references with other creditors, and the history of your residency and mortgage and rental payment. Whether the value of the property is sufficient to secure the loan - This is determined by obtaining an appraisal of the property; by confirming that the loan-to-value ratio requirements are met; and, in the case of a construction loan, by approving the plans. You may request a copy of the appraiser’s report. In addition, a lender may require that the terms and conditions of the loan satisfy secondary mortgage market requirements. As further conditions for approval, the lender may require that you obtain private mortgage insurance and title insurance. You may also be required to pay your taxes, betterment’s and/or insurance into an escrow account. When the lender has a completed application, you may be sent a letter offering you a mortgage loan on the terms you requested or on somewhat different terms. The latter is known as a counter-offer. If the application is approved and you find the terms of the commitment letter acceptable, you must accept those terms in writing. However, the lender may send you a letter denying the mortgage loan. If the application is denied, the lender must give you a specific and accurate reason(s) for denial. Time periods for notices and disclosures Within three business days of the application, you will be given the Truth-in-Lending credit disclosure, and, if applicable, the RESPA disclosure. The lender must inform you of the status of your application no later than 21 business days from the date of application. By that time the lender must either: 1) Approve or deny your application. In this case, you will be given no further notices on the status of your application; or, 2) Mail or deliver to you an oral or written statement that your application is not substantially complete and indicate the following; what verification information it requires to make a decision on your application; what information has been received but is not complete; and what information has not yet been received. If you receive this type of notice, then, after the lender receives the missing or incomplete information, you will receive a notice that your application is complete or be informed of the lender’s decision on your application. This may be an approval, a denial, or a counter-offer; or, 3) Give you written notice informing you that your application is substantially complete but that more information may be required by certain third parties. If you are sent this type of notice, you will receive within 30 days a letter informing you of the lender’s decision on your application. This may be an approval, a denial, or a counter offer. If the application is denied, the Equal Credit Opportunity Act requires and adverse action notice to be sent within 30 days of the completed application stating a specific and accurate reason(s) for the action taken. A counter-offer that is not accepted by the borrower extends the notice period to 90 days. You will also be notified upon denials to whether you may appeal the decision to a Mortgage Review Board. Other notices The Closing Links |