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Loan Process

Step 1: Find Out How Much You Can Borrow

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. Pre-qualification is not the same as pre-approved. A pre-approval means that your credit has been verified, along with your income, assets and liabilities. 

America's Local Lender can help you with either a pre-qualification or a pre-approval. Having a pre-approval letter on a purchase transaction helps borrowers  to:

  1. Have more certainty about the maximum amount you're eligible to borrower
  2. Be in a better position when negotiating with the property seller because they know you're approved
  3. Close your loan faster

More on Pre-Qualification

     LTV and Debt-to-Income Ratios
     Credit Score
     Source of down payment

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 trasnaction. Lenders are usually prepared to lend a higher percentage of the value 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.

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Credit Score
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. Credit 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. 

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.

Step 2: Select The Right Loan Program

Home loans come in many shapes and sizes. Deciding which loan makes the most sense for your financial situation means understanding the benefits of each.  Whether you are buying a home or refinancing, there are 2 basic types of home loans. Each has benefits depending on your unique situation. 

1) Fixed Rate Mortgage

Fixed rate mortgages can last for different terms - 10, 15, 20, 25 and 30 years. Throughout those years, the interest rate and monthly payments remain the same.  You would select this type of loan when you:

  • Plan to live in home more than 7 years
  • Like the stability of a fixed principal/interest payment
  • Don't want to run the risk of future monthly payment increases
  • Think your income and spending will stay the same

2) HYBRID ARMs

Hybrid Adjustable Rate Mortgages (ARMs) typically last for 30 years. But during those years, the interest rate is fixed for a determined timeframe and then adjusts annually thereafter. Monthly payments increase or decrease during the adjustable period.  You would select this type of loan when you:

  • Plan to stay in your home less than 5 years
  • Don't mind having your monthly payment periodically change (up or down)
  • Comfortable with the risk of possible payment increases in future
  • Think your income will probably increase in the future

We can help you evaluate the benefits and risks of the mortgage products we offer. Call us to learn more.

Step 3: Apply For A Loan

Step 4: Loan Processing

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:

Income/Employment Check
Is your income sufficient to cover monthly payments?  Industry guidelines are used to evaluate your income and your debts.
 
Credit Check
What is your ability to repay debts when due?  Your credit report is reviewed to determine the type and terms of previous loans. Any lapses or delays in payment are considered and must be explained.
 
Asset Evaluation
Do you have the funds necessary to make the down payment and pay closing costs? 
 
Property Appraisal
Is there sufficient value in the property? The property is appraised to determine market value. Location and zoning play a part in the evaluation.
 
Other Documentation
In some cases, additional documentation might be required before making a final determination regarding your loan approval.

In order to improve your chances of getting a loan approval:

  1. Fill out your loan application completely. You may use our online forms to expedite the process.
  2. Respond promptly to any requests for additional documentation especially if your rate is locked or if your loan is to close by a certain date.
  3. Do not move money into or from your bank accounts without a paper trail. If you are receiving money from friends, family or other relatives, please prepare a gift letter and contact us.
  4. Do not make any major purchases until after your loan has closed.  Purchases cause your debts to increase and might have an adverse affect on your current application.
  5. Do not apply for new credit (other than your home loan application). Inquiries impact your credit score.
  6. Do not go out of town around your loan's closing date. If you plan to be out of town, you may want to sign a Power of Attorney.

Step 5: Close Your Loan

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.

Your loan will normally close 24 hours 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.