Want to Get Pre-approved? Looking to Buy a Home or Refinance?
Getting a pre-approval is not difficult and can vary depending on the lender, bank, or broker – some lenders may have an overlay. Get pre-approved today for a refinance or purchase by applying online or calling a loan specialist.
Step 1: Find Out How Much You Can Borrow
First step to obtaining a loan is to figure out how much you can borrower.
It is important to figure out how much you can borrower before looking for a home.
An experienced Loan Originator will look at income, credit, assets, and liabilities.
It is recommended that the Loan Originator properly pre-approves a borrower by running the automated underwriting system (AUS) to determine risk and see if the result is an automated approval (approve/eligible) or if the loan is refer/eligible to see if a manual underwrite is possible.
Getting properly pre-approved will allow a borrower to:
Know how much they can borrow.
Be in a position to negotiate with the seller and execute a sales contract before another offer is submitted to the seller.
Close the loan in 30 days.
More information on getting pre-approved for a loan
Loan-to-Value and Debt-to-Income Ratios
Loan-to-Value (LTV) is a percentage of a loan amount by dividing the loan amount by the appraised value or sales price.
There are loan programs that allow borrowers to borrower up to 100% LTV: VA loans and USDA loans will allow 100% financing.
When it comes to lending at a higher LTV, creditworthiness and the loan program play a huge role.
Major considerations to approving a higher LTV has to do with the loan program and debt-to-income (DTI) ratios.
DTI is a percentage that takes revolving debt payments: student loans, auto loans, personal loans, minimum payment on credit card.. etc and divide it by income.
DTI is also a major factor when it comes to calculating maximum loan amount and maximum mortgage payment.
FICO Credit Score
FICO credit scores are used by all lenders, brokers, and banks to determine the approval decision.
When the initial documents pass loan setup, the underwriter will review the documents.
A loan conditional approval or loan commitment will be sent with a list conditions, which are documents that are needed to be signed to receive a clear to close.
The underwriter will review all the documents and clear the conditions.
Once all the conditions are cleared, the underwriter will issue the clear to close by determining the borrower’s ability to repay along with other conditions on the property.
An experienced Loan Originator should have already reviewed the documents and updated the automated approval system in order to determine these factors, which include:
The income will need to suffice to meet lending guidelines for the loan program.
Loan program guidelines are set and are risk based, which will take the income and debts into consideration.
What are the revolving debts?
What is the credit score?
A credit report will be reviewed in order to determine the debt-to-income ratios and any lapses or delays in payments, which will have to be explained.
Necessary funds for a down payment, fees, and reserves are required.
The property will need to appraise for the sales price and be in acceptable condition.
An appraiser will determine the market value and condition.
In most cases, additional documentation will be required for a loan to be approved.
It is important that cooperation and completion with all tasks during the loan process are done in a timely manner in order for a loan to close on time. Some tips to close a loan on time:
Put detail into the application and send legible documents with all pages of the documents being requested.
Response time should be prompt with any requests for additional documentation – especially when the rate is locked or if you have a deadline on the sales contract to meet.
Sourcing money is important, to not move money around, and always having a paper trail of deposits. If there is a gift, ask your loan originator for a proper gift letter and acceptable sources.
Do not make any major purchases until the loan is closed or finance anything during the process. Ask your loan originator about major purchase decisions. If there are new revolving debts, it can affect the debt-to-income ratios and have an adverse affect on the loan process.
Going out of town is not the best decision during the loan process, but if you have to go out of town, talk to your Loan Originator to figure out how you can work through the process.
Step 5: Close Your Loan
Once the clear to close is issued, scheduling for closing will take place.
Once a closing date is set and the final closing disclosure is issued, the closing will take place in front of a notary.
It is important to go over the final closing disclosure with your Loan Originator before closing and make sure the final closing disclosure matches at closing.
A cashier’s check or money order is required for the cash to close (if applicable).
After the signing is completed, the funds will disburse with authorization and documents will be recorded
All loans are subject to credit, underwriting and property approval guidelines. Offered loan products may vary by state. There is no guarantee that all borrowers will qualify. Restrictions may apply. This is not a commitment to lend. Terms, conditions and programs are subject to change without notice. Nationwide Mortgage & Realty, LLC is not acting on behalf of or at the direction of HUD/FHA or any government agency. CO: Check license status of your mortgage loan originator atwww.dora.state.co.us/real-estate/index.htm. Also licensed in: FL. VA, and TX: NMLS ID 276777. Illinois Residential Mortgage License | MB. 6760210. WA: Consumer Loan License MB-276777. GA: Georgia Residential Mortgage Licensee 60857