The first step in obtaining a loan is to determine how much money you can borrow. In case of buying a home, you should determine how much home you can afford even before you begin looking. By answering a few simple questions, we will calculate your buying power, based on standard lender guidelines.
Click here to Pre-Qualify.
You may also elect to get pre-approved for a loan which requires verification of your income, credit, assets and liabilities. It is recommended that you get pre-approved before you start looking for your new house so you:
More on Pre-Qualification
LTV and Debt-to-Income Ratios
FICO™ Credit Score
Self Employed Borrower
Source of down payment
Loan-to-Value (LTV) and Debt-to-Income (DTI) Ratios
LTV or Loan-To-Value ratio is the amount of the loan as a percentage of the value of the home. For example a $120,000 home value, with a $100,000 loan is 83.33% LTV. All loan programs have a maximum LTV allowed and some go as high as up to 100% LTV to creditworthy borrowers.
Debt-To-Income or DTI is another ratio used by lenders to determine your maximum purchase price. The DTI is a ratio, expressed as a percentage of your monthly debt payments (auto, personal loans, and new mortgage payment) to income. Loan programs typically have maximum DTI which can go as high as 55%. However loan programs consider both the total, or back-end ratio, and the percentage of the monthly payment relative to income, or front-end ratio, which is a lower percentage such as 45%.
FICO™ Credit Score
FICO™ Credit Scores are widely used by almost all types of lenders in their credit decision. It is a quantified measure of creditworthiness of an individual, which is derived from mathematical models developed by Fair Isaac Company. FICO™ scores reflect credit risk of the individual in comparison with that of general population. It is based on a number of factors including past payment history, total amount of borrowing, length of credit history, search for new credit, and type of credit established. When you begin shopping around for a new credit card or a loan, every time a lender runs your credit report it adversely effects your credit score. It is, therefore, advisable that you authorize the lender/broker to run your credit report only after you have chosen to apply for a loan through them.
Self Employed Borrowers
Self employed individuals often find that there are greater hurdles to borrowing for them than an employed person. Documenting a self employed persons income can be done using one or two years taxes, depending upon the loan program. It can also be done using 12-24 months bank statements. A mortgage lender that has worked with numerous self employed borrowers previously can be a real asset in helping self employed borrowers get qualified.
Source of Down Payment
Lenders expect borrowers to come up with sufficient cash for the down payment and other fees payable by the borrower at the time of funding the loan. Generally, down payment requirements are made with funds the borrowers have saved. If a borrower does not have the required down payment they may receive “gift funds” from an acceptable donor with a signed letter stating that the gifted funds do not have to be paid back.
Home loans come in many shapes and sizes. Deciding which loan makes the most sense for your financial situation and goals means understanding the benefits of each. Whether you are buying a home or refinancing, there are 2 basic types of home loans. Each has different reasons you'd choose them.
1) Fixed Rate Mortgage
Fixed rate mortgages usually have terms lasting 15 or 30 years. Throughout those years, the interest rate and monthly payments remain the same. You would select this type of loan when you:
2) Adjustable Rate Mortgage
Adjustable Rate Mortgages (often called ARMs) typically last for 15 or 30 years, just like fixed rate mortgages. But during those years, the interest rate on the loan may go up or down, and are reflected in increases or decreases in the monthly payment. You would select this type of loan when you:
By carefully considering the above factors and seeking our professional advice, you should be able to select the one loan that matches your present condition as well as your future financial goals.
Although lenders conform to standards set by government agencies, loan approval guidelines vary depending on the terms of each loan. In general, approval is based on two factors: your ability and willingness to repay the loan and the value of the property.
Once your loan application has been received we will start the loan approval process immediately. Your loan processor will verify all of the information you have given. If any discrepancies are found, either the processor or your loan officer will troubleshoot to straighten them out. This information includes:
In order to improve your chances of getting a loan approval:
After your loan is approved, you are ready to sign the final loan documents. You must review the documents prior to signing and make sure that the interest rate and loan terms are what you were promised. Also, verify that the name and address on the loan documents are accurate. The signing normally takes place in front of a notary public.
There are also several fees associated with obtaining a mortgage and transferring property ownership which you will be expected to pay at closing. Bring a cashiers check for the down payment and closing costs if required. Personal checks are normally not accepted. You also will need to show your homeowner's insurance policy, and any other requirements such as flood insurance, plus proof of payment.
Your loan will normally close shortly after you have signed the loan documents. On owner occupied refinance loan transactions federal law requires the lender provide you with a 3 day right of recession, after the closing and before the loan funds, to review the documents before your loan funds.