Mortgage Loan Process:
Get Pre-Approved:
Have a mortgage consult with a lender. Be ready to submit an online application, and get your credit pulled(FICO score). In order for your lender to get accurate calculations on your debt to income ratios, you will need to provide financial documentation to support application submitted. Once approved you can obtain your pre-approval letter confirming how much you can borrow.
Search for Homes
Get with a Real Estate Agent to assist with your search, in order to start making offer on home
Go Under Contract
Once you get your offer accepted and contract executed, you will officially be under contract
Send your Purchase Contract to your lender and work on completing your earnest money deposit
Underwriting
This is when your lender will order the appraisal and title documents. Work with your lender on providing any extra documents requested from underwriting.
Clear to Close
Once the underwriter clears all items (buyer documents, title, appraisal, etc. your loans will officially be approved)
Schedule your closing and get ready to move into your new home!
More on Pre-Qualification:
LTV and Debt-to-Income Ratios
LTV or Loan-To-Value ratio is the maximum amount of exposure that a lender is willing to accept in financing your purchase. Lenders are usually prepared to lend a higher percentage of the value, even up to 100%, to creditworthy borrowers. Another consideration in approving the maximum amount of loan for a particular borrower is the ratio of monthly debt payments (such as auto and personal loans) to income. Rule of thumb states that your monthly mortgage payments should not exceed 1/3 of your gross monthly income. Therefore, borrowers with high debt-to-income ratio need to pay a higher down payment in order to qualify for a lower LTV ratio.
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 and Company in San Rafael, California. 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.
Financial solutions for all:
Self Employed Borrowers
Self employed individuals often find that there are greater hurdles to borrowing for them than an employed person. For many conventional lenders the problem with lending to the self employed person is documenting an applicant's income. Applicants with jobs can provide lenders with pay stubs, and lenders can verify the information through their employer. In the absence of such verifiable employment records, lenders rely on income tax returns, which they typically require for 2 years.
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.