Loan Process

The first step towards a home purchase is getting pre-qualifed for a loan.  We will review your financial information and determine how much you are qualified to borrow.  As a pre-qualified buyer, your offer on a home is more likely to be accepted.

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More on Pre-Qualification
     LTV and Debt-to-Income Ratios
     FICO Credit Score
     Self Employed Borrower
     Source of down payment

LTV and Debt-to-Income Ratios
LTV or Loan-To-Value ratio is the maximum amount, expressed in a percentage, that a lender is willing to finance on a property.  For example, if the program you are interested in requires 5% down, then the maximum LTV is 95%.  A few conventional programs will allow you to finance up to 97%, and if you are eligible for VA financing you may be able to finance 100% of the purchase price.  Another consideration in approving a loan is the debt-to-income ratio.  This is the ratio of monthly debt payments (such as auto, credit cards and student loans) to gross income. Depending on the type of financing you are applying for the debt to income ratio may be higher or lower.

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.

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.

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