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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.
You may also elect to get pre-approved for a loan which requires verification of your income, credit, assets and liabilities and it is recommended. For that we will need to look more in debt in the following categories:
LTV and Debt-to-Income Ratios
FICO Credit Score
Self Employed Borrower
Source of down payment
LTV or Loan-To-Value is the maximum amount that the lender will consider loaning to you as a percentage of the value of the property. Generally, a high LTV ratio indicates a high level of lending risk. However, the loan terms will likely include higher interest rates and will require the purchase of private mortgage insurance (PMI) if the LTV is over 80
A debt-to-income ratio (DTI) is a personal finance measure that compares the amount of debt you have to your overall income. Lenders, including issuers of mortgages, use it as a way to measure your ability to manage the payments you make each month and repay the money you have borrowed. They are getting the DTI ratio by dividing all your monthly debt payments by your gross monthly income.
Lenders use borrowers’ median FICO scores along with other details on borrowers’ credit reports to assess credit risk and determine whether to extend credit. FICO scores take into account data in five areas to determine creditworthiness: payment history, current level of indebtedness, types of credit used, length of credit history, and new credit accounts. The better the credit score the better the rate could be!
Self-employed mortgage borrowers can apply for all the same loans ‘traditionally’ employed borrowers can. There are no special requirements that make it harder for self-employed people to get a mortgage. You’re held to the same standards for credit, debt, down payment, and income as other applicants.
The part that can be tough is documenting your income. Proving your cash flow as a business owner, contractor, freelancer, etc can require more paperwork than for W-2 employ
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 would choose them explained below.
Adjustable Rate Mortgages (ARMs) typically last for 15 to 30 years, just like fixed rate mortgages. But during those years, the interest rate on the loan may go up or down. Monthly payments increase or decrease. You would select this type of loan when you:
Adjustable Rate Mortgages (ARMs) typically last for 15 to 30 years, just like fixed rate mortgages. But during those years, the interest rate on the loan may go up or down. Monthly payments increase or decrease. 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.
Next step would be to do your online application in order to be able to processed with steps 4 and 5.
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 2 factors: your ability 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. The loan processor will verify all the information you have given. If any discrepancies are found, either the loan processor or the loan officer will work on straighten them out. This information includes:
Is your income sufficient to cover monthly payments? Industry guidelines are used to evaluate your income and your debts.
Do you have the funds necessary to make the down payment and pay closing costs?
In some cases, additional documentation might be required before making a final determination regarding your loan approval.
Is there sufficient value in the property? The property is appraised to determine market value. Location and zoning play a part in the evaluation.
Is there sufficient value in the property? The property is appraised to determine market value. Location and zoning play a part in the evaluation.
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 that you have 3 days to review the documents before your loan transaction can close.
Mortgage process simplified
Pioneer Mortgage Funding Inc
142 W Platt St, Tampa FL 33606
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Personal NMLS # 2045806 | Branch NMLS # 2211728