When applying for a mortgage loan, you’ll need to gather a lot of documents. While many of these documents are provided by the loan applicant, there are several that must be obtained from external providers, incurring costs for the borrower.
The documents required from external providers include:
1. Title Report – This document examines a property’s ownership history, active or canceled liens, and any outstanding debts associated with the property. In essence, it tells us who owned the property, if any of them owe money, how much, and whether the property is subject to any liens or legal claims. The title report also provides a description of the property and its boundaries. This document is crucial for ensuring that you acquire a property free from title issues or liens, as any problems identified can be addressed before closing.
2. Credit Report – In a mortgage transaction, all applicants must qualify, and this is where the credit report comes into play. Credit scores from three different sources are considered in the process, and they are used to formulate a consolidated figure, from which a representative average is derived. If your score doesn’t meet the minimum required for a special offer, you won’t qualify directly for it. In such cases, the bank will explore alternative options that align with each customer’s credit reality.
3. Flood Certificate – This certificate determines whether a property is located in a flood-prone area and whether flood insurance is necessary. If flood insurance is required and the property was built after 1978, an elevation certificate is also necessary. This elevation certificate tells us whether the property is at, above, or below sea level, something not easily discernible with the naked eye.
4. Payoff Statement – This document, provided by the current property creditor, informs us of the exact amount of money required to pay off the mortgage loan. The payment amount includes not only the outstanding mortgage balance but also any accrued interest and possible fees charged by the creditor. This document is essential to ensure that the promissory note is delivered to the property registry free from liens to the new owner. In the case of refinancing, the previous lien is also eliminated.
5. Plot Plan – This document must be prepared by a surveyor and is used to certify that the property’s measurements are correct, ensuring the property’s value is accurately assessed. It evaluates whether the property has encroached upon neighboring land or if neighboring properties have encroached upon the property to be sold. This survey requirement applies to all homes, even new construction. If the plot plan doesn’t match the information in the title report, a boundary correction, also a process conducted by a surveyor, may be necessary.
6. Appraisal – Appraisal is the process of determining a property’s value, which is crucial for establishing the amount the bank can lend, thus determining loan feasibility. Various factors are considered in property valuation, including its condition, land size, location, recent comparable property prices in the area over the past six months, among others. Appraisals also identify necessary repairs for loan approval and any additional repairs that may benefit the homeowners, even if they don’t affect loan approval.
7. Hazard Insurance Quote – Once the property has been appraised, a quote for hazard insurance covering fire, hurricanes, or earthquakes is requested. This quote is based on the cost of replacement. The borrower can request this quote directly from their insurance agent or have the bank request it from their insurance provider.
Providers of all this documentation are responsible for delivering the documents within specific timeframes, which vary by document type. It’s essential to emphasize the cooperation of the seller and/or the borrower in the mortgage transaction process to ensure that the necessary documents are obtained on time and that the appraiser and surveyor have access to the property for their assessments.
For more information about the mortgage loan processing process, contact your bank representative, who can address all your questions. At Oriental, we’re more than ready to serve you!
