Mortgage & Financial

Mortgage valuation?

i’ve just been told by my mortgage broker that the property valuation has been instructed. what does it mean? who instructed what and when would it be carried out? how long does it usually take to get mortgage offer after it’s been done? thanks for any info!

Here are the answers to your questions…

MORTGAGE VALUATION is probably better known as the property appraisal (it’s also known as “Collateral Valuation” since the property is the collateral for the loan). Before a mortgage company will loan you $100,000 for a property selling for $110,000, they want to make sure that the property really IS worth $110,000. If the property turns out to be worth only $90,000, it would make no sense for them to loan you $100,000. If you default on the loan, then they would lose $10,000 right off the bat. Therefore, the appraisal valuation is critically important to the mortgage process.

THE VALUATION (APPRAISAL) HAS BEEN INSTRUCTED. The appraiser (the person performing the appraiser) is supposed to be certified and utterly objective. If the appraiser is bribed by the seller of the house, then he might appraise a $90,000 house at $110,000 house. Obviously, this is dishonest and illegal. In an effort to keep the appraiser completely objective, he cannot receive any kind of communication that might influence him in his valuation. If the valuation was “instructed,” this means that the appraiser (somehow or another) received or was exposed to some information that might have prejudiced his valuation decision. What this means to you is that another appraisal will need to be ordered and executed with another appraiser who has not been compromised. As far as who instructed him or what exactly the information was, I would have no way of knowing that. The broker should be able to find out the details for you if you’re really interested.

HOW LONG DOES IT TAKE TO GET THE MORTGAGE OFFER? After you submit your loan application to your broker, you can expect to close the loan (finalize the loan where it’s actually your property) in about 30 days. If everything goes smoothly, it could be less than 30 days. Or it could take longer if there are setbacks or issues (such as the appraisal).

Here what happens behind the scenes (in a nutshell)…

1. You submit your loan application to your broker (and they submit it to the mortgage company who will make the decision on the loan).

2. The “Loan Processor” looks over your loan file and identifies missing documents, tasks that need to be performed, etc. They make sure that the appraisal is ordered and received. They verify how much money you make. They order your credit report and verify your payment habits and how much debt you have. They verify your assets (such as cash in a bank account).

3. The Underwriter (the person who actually makes the decision as to whether you get the loan or not) looks at all of the numbers and documents (how much money you make, how much the property is worth, etc., etc.). They may ask the Processor for more information in order to make their decision. If everything is in order, they should be able to make the decision relatively quickly. The Underwriter will either Approve, Deny or Counteroffer. In the case of a counteroffer, it may be that they would approve the loan if a little more cash was put forth in the downpayment (for example).

4. If the loan is Approved, then it moves on to the final phase which is “Closing.” There is usually another person called the Closer who ensures that the final loan package is prepared (that is, the Closer ensures that all of the legal documents and disclosures are in order and included in the loan file). The Closer also sets up a meeting between you (the Borrower) and another party known as a Closing Agent (or “Escrow Agent” or “Title Agent”). You will usually go to the office of a Title Agency (where the Closing Agent works). At the office, you will meet with the Closing Agent and he or she will go through the legal documents and make sure you understand everything (especially the interest rate and payment information). They will also have you sign all of the legal documents. After you sign these documents, the loan is considered “closed.” At this point, you now owe $100,000 (or however much you borrowed) to the Mortgage Company.

One other important thing to note about the Closing (when you meet with the Closing Agent) is that you will need to bring a certified check. The Closer will make sure you know exactly how much money you need to bring with you to the Closing. They refer to this as “Cash to Close.”

One last thing that surprises some borrowers… There’s a very good chance that your loan might be sold to another mortgage company very quickly. You have no control over whether your loan is sold or not. It does not change anything about your loan. The only change for you is where you send your payment. If your loan is sold, you will receive a “Welcome Letter” that gives you a new address to send your mortgage payments. If a big mortgage company (like Countrywide) is giving you the loan, they will probably maintain the “Mortgage Servicing Rights” (which means that you will continue to send your payments to them). If you get your loan from “Little Bitty Mortgage Company”, then you can count on the loan being sold within a few weeks of closing. The mortgage company giving you the loan is supposed to disclose the likelihood of your loan being sold to another mortgage company. Again, you have absolutely no control over whether it’s sold or not.

Hope that all makes sense.

Good luck!

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