Closing

Once the underwriting stage is complete, it will soon be time to close. Texas is one of many community property states. You should be aware that even if your spouse is not on the loan, most programs require the spouse be present at closing and to sign some of the disclosures. Your mortgage team will coach you through this process.

Closing Disclosure

This is a five page form that provides final details about your mortgage, including loan terms, the monthly payment, down payment amount, closing costs, pre-paid items, and any discounts or credits being provided.

Down Payment

This is a percentage of your home’s sale price, usually between 3.5% and 20%. The amount you bring will be discussed in detail by your loan officer to determine the best loan structure for your needs.

Closing Costs

These are generally fixed fees between the lender, title company and third-party vendors to originate and close the transaction. The first payment will likely be included in your closing costs.

Prepaid Fees

These are the amounts needed for accurate accounting of you loan and include the prepaid daily interest, homeowners’ insurance and establishment of the escrow account.

Escrow

When your monthly mortgage payment includes the taxes and insurance charges, the payment is considered to be escrowed. Each month, the escrow account provider will hold a portion of your payment for taxes and insurance. Once the taxes and insurance are due, the escrow account provider will distribute payments on your behalf. Having an escrow account is usually a client’s decision, however there are some programs that require an escrow account.

Closing Documents

• Driver’s license for everyone signing on the loan
• Funds to close (cashier’s check or money order)
• Survey
• Proof of required repairs (if applicable)
• Mortgage note
• Title insurance
• Deed

Closing Information

Closing typically take place at a title company office and lasts 1 ½ to 2 hours.

Adjustable Rate Mortgage(ARM)

A loan in which the interest rate changes periodically based on a standard financial index. Most ARM’s have caps on them as an interest rate may increase.

Amortization

The distribution of loan repayments into monthly installments, as determined by an amortization schedule. Each payment is applied to both principal and interest with a greater amount of the payment going toward interest at the beginning of the loan and more toward principal at the end.

Annual Percentage Rate (APR)

Standardized method of calculating the cost of a mortgage, determined as a yearly rate, which includes such items as interest, mortgage insurance and certain points or credit costs. Because it includes other charges, it is higher than the interest rate a lender will quote.

Appraisal

A written report by a qualified appraiser estimating the value of property.

Closing Costs

Expenses incurred as part of the loan closing. Closing costs normally include an origination fees, attorney’s fee, taxes, escrow payments, title insurance and sometimes discount points. Lenders must provide estimates of closing costs to prospective home buyers.

These are generally fixed fees between the lender, the title company, and third-party vendors involved in the origination and closing of the transaction.

Closing Disclosure (CD)

The Closing Disclosure (often referred to as the CD) is a 5 page form that provides the final details about the mortgage. This breaks down the loan terms, your monthly payment, and a detailed breakdown of fees associated with the loan. This is required to be signed and returned within 24 hours of receipt. Failure to provide the signed CD can result in an unnecessary delay in closing.

Debt-to-Income Ratio

A debit-to-income ratio is the comparison of your gross income (before taxes) to your monthly expenses, both with and without your housing expenses. Most programs require your monthly mortgage payment to be no more than 29% of your monthly gross income and the mortgage payment combined with other expenses should not exceed 41% of your income. These requirements vary so it is important to speak with an expert Loan Officer.

Down Payment

The amount of a property’s purchase price that the buyer pays up front and does not finance with a mortgage. Most mortgages require a down payment between 5-20% however, Prosperity Bank does have some 0% down payment options for those who qualify. When a down payment is less than 20%, most programs require Private Mortgage Insurance (PMI).

Escrow

Escrows (also called “impounds”) are when a customer has taxes and insurance included as part of the monthly mortgage payment. An account is established and when the taxes and insurance come due, the escrow provider will issue payment to these entities. Mortgage payments that include taxes and insurance are sometimes referred to as PITI payments (see PITI below).

Also: An account in which a neutral third party holds the documents and money in a real estate transfer until all conditions of a sale are met. (Ex: California is an Escrow state and requires the use of an escrow company to close on the purchase of a home).

Equity

Equity is the difference between the current market value of a property and the total debt obligations against the property. On a new purchase loan, the down payment represents the equity in your home.

FHA (Federal Housing Administration) Loans

FHA loans are loans insured by the U.S. Department of Housing and Urban Development (HUD). FHA loans are designed to make housing more affordable, particularly for first-time homebuyers. FHA loans typically permit borrowers to buy a home with a lower down payment than conventional loans or refinance with less home equity.

Fixed-Rate Mortgage

A home loan in which the interest rate will remain the same through the life of the loan, most often 15 or 30 years.

Foreclosure

The legal process by which a homeowner in default on a mortgage is deprived of interest in the property. This usually involves a forced sale of the property at a public auction with the proceeds of the sale being applied to the mortgage debt.

Funds to Close

The total amount required, including down payment and closing costs, to be brought to closing by the borrower. Your trusted Loan Officer will discuss this information in detail with you. This is also disclosed on the Closing Disclosure (CD) prior to closing to ensure there are no surprises when you get to the closing table.

Guideline Ratios

There are two guideline ratios used to qualify you for a mortgage. The first is called the front-end ratio, or top ratio, and is calculated by dividing your new total monthly mortgage payment by your gross monthly income. The second is called the back-end, or bottom ratio, and is equal to your now total monthly mortgage payment plus your total monthly debt divided by your gross monthly income.

Homeowner’s Insurance

An insurance policy that includes hazard coverage for the loss or damage to a property, as well as coverage for personal liability and theft.

Interest Rate

A basic mortgage payment is made up of principal and interest. The principal is the amount borrowed from the lender. The interest rate is the cost of borrowing that money, which is secured by the property. The amount of interest you owe the lender depends on the interest rate and loan amount – the lower the interest rate, the less interest you owe.

Jumbo Loan

Jumbo loans are mortgages larger than the limits set every January by government agency’s such as Fannie Mae (FNMA) and Freddie Mac (FHLMC). Current loan limits can be found on the FNMA site at:  https://www.fanniemae.com/singlefamily/loan-limits

Loan-To-Value

Loan-to-value (LTV) is the ratio of how much you borrow compared to the value of the home you’re borrow against. (Loan Amount / Appraised Value = LTV)

Margin

On adjustable rate mortgage (ARM), the margin is a fixed percentage rate that is added to an indexed rate to determine the fully indexed interest rate. While the margin does not adjust, the index can, therefore the fully indexed rate can adjust also.

Origination Fees

Loan origination fees are fees charged by a lender to cover the administrative costs of processing a loan. The origination fee is also used in the calculation of the annual percentage rate.

PI Payment (Principal & Interest)

PI (Principal & Interest) are the components of a monthly mortgage payment. Payments are split with a portion going to the principal balance of the mortgage and a portion going toward paying off the interest on the amount borrowed. The payment is typically more toward interest at the beginning of the loan and more toward principal toward the end of the loan.

PITI (Principal, Interest, Taxes, Insurance)

PITI (Principal, Interest, Taxes and Insurance) are the components of a monthly mortgage payment. Payments of principal and interest go directly toward repaying the loan while the portion of the PITI payment that covers taxes and insurance (flood/homeowner’s/mortgage, as applicable) go into an escrow account to cover the associated charges when they are due.

Points

Factored into the loan’s APR, a point equals 1 percent of the loan amount. ‘Origination Points’ are points charged on the loan that are paid by the borrower at closing, whereas ‘Discount Credits’ are points provided to the borrower as a credit toward closing costs on the loan.

Prepaid Closing Costs

These are the amounts paid at closing prior to being due to establish the escrow account. This includes taxes, homeowner’s insurance, flood insurance, private mortgage insurance, and per diem (daily) interest.

Principal

The amount of debt, excluding interest, left on a loan.

Private Mortgage Insurance (PMI)

An insurance policy that protects the lender against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure. PMI is usually required if the down payment is less than 20% of the sale price.

Term

The duration of the life of the loan.  For example, a 30-year fixed loan has a term of 30 years.

Title

The title is the actual document that indicates the rights of ownership and possession of the property. Individuals who will have legal ownership in the property are considered ‘on title’ and will sign the mortgage and other documentation. Before your closing, a title search will be conducted to ensure that a chain of ownership for the property is documented, and that it is not subject to any unacceptable liens.

Title Insurance

A policy that guarantees that an owner has title to a property and can legally transfer title to someone else. Should a problem arise, the title insurer pays any legal damages. A policy may protect the mortgage lender, the home buyer, or both.

Underwriting

Mortgage underwriting includes a review of the potential borrower’s credit and employment history, financial statements and a judgement of the quality of the property. The person who completes the underwriting service is called an underwriter.

First Steps

Once you’ve made the decision buy, build or refinance, create a new account in our Borrower Portal, submit a full application and upload your documents. In addition to the documents listed below, additional documents may be requested at any time throughout the loan process.

• Valid government, state or national issued photo ID
• 2 years personal tax returns including W2, K1, etc.
• 2 years business tax returns including P&L if applicable
• Most recent 30 days paystub for all borrowers if applicable
• Most recent full bank statement from the last 60 days
• Full divorce decree if applicable

Your Team of Mortgage Experts

Mortgage Loan Officer

– Your mortgage loan officer will work to select the right mortgage for you. They will take you through the various financing options and make sure you understand the mortgage process.

Loan Coordinator

– Your Loan Coordinator will complete the initial review of your loan, and request any documentation not already provided and ensure you receive your loan disclosures and order third party documentation (i.e. appraisal, title, etc.).

Processor

– Your processor will complete a full file review and submit it to underwriting. They will go through the process of collecting additional documentation and verifying all aspects of your loan.

Appraiser

– Your appraiser evaluates the inside and outside of the property, the neighborhood and other factors to determine the value of the property. This is an important step in the approval of your mortgage.

Underwriter

– Your underwriter carefully examines all aspects of the mortgage loan and verifies that all pieces of the application, documentation and appraisal are accurate and meet loan guidelines.

Title Company

– Your title company ensures the ownership of a property is valid and issues title insurance to protect you against claims on a title. A settlement agent will provide and explain your closing documents with you.

Closer / Attorney

– Your closer will review the file to prepare the closing documents. They will also provide a Closing Disclosure (CD) that requires a signature within 24 hrs. of receipt. The closer will then forward the closing documents to an attorney for review prior to sending to the title company.

What to Expect at Closing

– Once all closing documents have been reviewed and are ready to sign, the title company will schedule an appointment with you to review and sign your closing documents. This process typically takes 1 1/2 to 2 hours to complete.

Steps in the Home Buying Process

Looking for your first home can be overwhelming so we wanted to take a minute to explain the purchasing process for you. When you’re done, don’t forget to visit our Financing Process page to learn more about the financing of the mortgage!

• Pre-approval letter
• Select a realtor
• Search for a home
• Sign a contract
• Inspection / option period
• Title / survey
• Get keys to your new home!

Real Estate Agent

How do you choose an agent when there are so many available? Provide the pre-approval letter to your realtor who can guide you through the home search process and assist you when it’s time to make an offer and write a contract. Ask for referrals from family, friends or your loan officer.

• Choose the person, not the experience
• Chemistry is key
• Look for passion, conviction, and honesty
• Look for strong core values
• Find a compassionate agent who understands you

Pre-Approval

Most realtors and sellers prefer to work with clients who have already received a pre-approval from a lender. While a pre-approval does not guarantee a loan, it does help determine how much you can borrow.

Pre-Approval Steps:

•  Complete official mortgage application

  What to Expect

  Start to finish, the underwriting stage can take time depending on several factors. When you work with Prosperity Bank, we will keep you informed and let you know what to expect every step of the way.

  Following these guidelines, you can do your part to help ensure a smooth process and keep your closing on schedule.

  Credit Scores

  Your credit score can have a major impact on your mortgage. Borrowers with higher credit scores generally have more loan options at lower interest rates.

  While a credit score can range from 300 to 850, most are somewhere between 600 and 700. Several factors influence your credit score, including current and previous account information reported by credit card companies, lenders, banks, municipalities and collection agencies.

  • 35% On-time payment history
  • 30% Current credit card usage
  • 15% Credit history
  • 10% Recent credit inquiries
  • 10% Types of credit Accounts

  Timely Responses

  Throughout the loan process, our mortgage team may request additional documentation. In order to ensure your loan closes on time, please be sure to respond to these requests as quickly as possible.

  Do’s and Don’ts

  While your loan is in underwriting, be sure to follow these do’s and don’ts to ensure there is not a change in your approval status.

  Do:

  • Keep ALL accounts current
  • Keep copies of pay check stubs, bank statements, etc.
  • Keep records of any non-payroll related deposits
  • Contact your loan officer if you are unsure about a purchase
  • Notify your mortgage team of any changes in your status or situation

  Do NOT:

  • Make large purchases
  • Open new credit accounts
  • Change jobs without discussing with your loan officer
  • Switch banks, open new accounts, or transfer your money
  • Withdrawal from your retirement or brokerage accounts

   

What to Expect

Start to finish, the underwriting stage can take time depending on several factors. When you work with Prosperity Bank, we will keep you informed and let you know what to expect every step of the way.

Following these guidelines, you can do your part to help ensure a smooth process and keep your closing on schedule.

Credit Scores

Your credit score can have a major impact on your mortgage. Borrowers with higher credit scores generally have more loan options at lower interest rates.

While a credit score can range from 300 to 850, most are somewhere between 600 and 700. Several factors influence your credit score, including current and previous account information reported by credit card companies, lenders, banks, municipalities and collection agencies.

Based on the Fico Model

• 35% On-time payment history
• 30% Current credit card usage
• 15% Credit history
• 10% Recent credit inquiries
• 10% Types of credit Accounts

Timely Responses

Throughout the loan process, our mortgage team may request additional documentation. In order to ensure your loan closes on time, please be sure to respond to these requests as quickly as possible.

Do’s and Don’ts

While your loan is in underwriting, be sure to follow these do’s and don’ts to ensure there is not a change in your approval status.

Do:

• Keep ALL accounts current
• Keep copies of pay check stubs, bank statements, etc.
• Keep records of any non-payroll related deposits
• Contact your loan officer if you are unsure about a purchase
• Notify your mortgage team of any changes in your status or situation

Do NOT:

• Make large purchases
• Open new credit accounts
• Change jobs without discussing with your loan officer
• Switch banks, open new accounts, or transfer your money
• Withdrawal from your retirement or brokerage accounts