Loan Process

The journey to securing a loan begins with determining how much you can borrow. If you’re buying a home, it’s essential to evaluate how much you can afford before starting your search. By answering a few simple questions, we can calculate your buying power based on standard lender guidelines.

Click here to Pre-Qualify.

Alternatively, you may choose to get pre-approved for a loan, which involves verifying your income, credit, assets, and liabilities. Pre-approval is highly recommended before house hunting because it helps you:

• Focus on properties within your budget.
• Strengthen your position when negotiating with sellers, as they’ll know your loan is already approved.
• Speed up the loan closing process.

More on Pre-Qualification:

• Loan-to-Value (LTV) and Debt-to-Income Ratios
• FICO™ Credit Score
• Borrowing as a Self-Employed Individual
• Down Payment Sources

Loan-to-Value (LTV) and Debt-to-Income Ratios

LTV, or Loan-to-Value ratio, represents the maximum loan amount a lender is willing to offer based on the property’s value. Creditworthy borrowers may qualify for loans covering up to 100% of the property’s value. Another key factor in determining loan approval is the debt-to-income (DTI) ratio, which compares monthly debt payments (e.g., auto loans) to income.

As a general rule, your monthly mortgage payment should not exceed one-third of your gross monthly income. Borrowers with a high DTI may need to provide a larger down payment to qualify for a loan with a lower LTV.

FICO™ Credit Score

FICO™ Credit Scores are widely used by lenders to assess an individual’s creditworthiness. These scores, developed by Fair Isaac Corporation, are based on factors such as payment history, total debt, credit history length, recent credit inquiries, and types of credit.

Each time a lender checks your credit report during loan shopping, your score may slightly decrease. To protect your credit, authorize lenders or brokers to run your credit report only when you’re ready to apply for a loan.

Borrowing as a Self-Employed Individual

Self-employed borrowers often face unique challenges in documenting their income. While traditionally employed individuals can provide pay stubs and employment verification, self-employed individuals must typically supply at least two years of income tax returns as proof of income.

Down Payment Sources

Lenders expect borrowers to provide sufficient funds for the down payment and any associated fees at the time of loan funding. Typically, these funds come from personal savings. If necessary, borrowers may use “gift funds” from an acceptable donor, accompanied by a signed letter stating the gift does not require repayment.

Understanding Home Loans

Home loans come in various forms, each designed to suit different financial situations and goals. Whether you’re buying a home or refinancing, there are two main types of home loans to consider. Each option offers unique advantages depending on your needs.

1) Fixed-Rate Mortgage

Fixed-rate mortgages typically have terms of 15 or 30 years. During this time, both the interest rate and monthly payments remain constant. This type of loan is ideal if you:

• Plan to live in the home for more than 7 years.
• Prefer the stability of consistent principal and interest payments.
• Want to avoid the risk of future payment increases.
• Expect your income and spending to remain steady over time.

2) Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages also typically have terms of 15 or 30 years. However, unlike fixed-rate mortgages, the interest rate and monthly payments can fluctuate over time, depending on market conditions. This type of loan is suitable if you:

• Plan to stay in your home for less than 5 years.
• Are comfortable with periodic changes in your monthly payment.
• Are willing to accept the risk of potential payment increases.
• Expect your income to grow in the future.

By evaluating these factors and consulting with our team of professionals, you can choose the loan option that aligns with your current situation and future financial goals.

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Loan Approval Process and Tips

While lenders adhere to government agency standards, loan approval guidelines can vary depending on the loan terms. In general, approval is based on two main factors: your ability and willingness to repay the loan, and the value of the property.

Once we receive your loan application, the approval process begins immediately. Your loan processor will verify all provided information, resolving any discrepancies with your help. The key areas reviewed include:

1. Income/Employment Verification
We ensure your income is sufficient to cover monthly payments, using industry guidelines to evaluate your income and debts.

2. Credit Check
Your credit report is reviewed to assess your ability to repay debts. Past loans, payment history, and any delays are considered and may require explanation.

3. Asset Evaluation
We confirm you have the funds for the down payment and closing costs.

4. Property Appraisal
The property’s market value is assessed through an appraisal, factoring in location and zoning.

5. Additional Documentation
In some cases, further documentation may be required before finalizing the loan approval.

Tips to Improve Loan Approval Chances

• Complete your loan application thoroughly. Using our online forms can speed up the process.
• Respond promptly to requests for additional documents, especially if your rate is locked or the loan must close by a specific date.
• Avoid moving funds in or out of your bank accounts without proper documentation. If receiving funds from friends or family, prepare a gift letter and contact us.
• Refrain from making major purchases until after your loan is closed, as they can increase your debts and affect your application.
• Stay available around your loan’s closing date. If you plan to be away, consider signing a Power of Attorney to avoid delays.

Once your loan is approved, it’s time to sign the final documents. Before signing, carefully review them to ensure the interest rate and loan terms match what was promised. Also, confirm that your name and property address are accurate. The signing typically takes place in the presence of a notary public.

At closing, you’ll be responsible for paying fees associated with the mortgage and property transfer. Be prepared to bring a cashier’s check for the down payment and closing costs, as personal checks are generally not accepted. You’ll also need to provide proof of homeowner’s insurance, and if required, flood insurance, along with evidence of payment.

After signing the documents, your loan will usually close shortly thereafter. For owner-occupied refinance loans, federal law grants you three days to review the documents before the transaction can officially close.